STRATEGIC HUMAN RESOURCE MANAGEMENT: THREE-STAGE
PROCESS AND INFLUENCING ORGANISATIONAL FACTORS
Sandeep Krishnan
Personnel and Industrial Relations Area
D-18, Indian Institute of Management,
Vastrapur, Ahmedabad 380 015,
Gujarat, India.
Email:
Tel: ++91-79-26327816
Fax: ++91-79-26306896
Manjari Singh
Personnel and Industrial Relations Area
Wing 12-D, Indian Institute of Management,
Vastrapur, Ahmedabad 380 015,
Gujarat, India.
Email:
Tel: ++91-79-26324914
Fax: ++91-79-26306896
Abstract: A three-stage model for the process of strategic human resource management is developed in this paper. The three stages cover strategy formulation, implementation and evaluation. The inter-linkages in this dynamic model have been explored. The organisational factors that have enabling or deterring influence on the success of each of these three stages have been discussed. The paper highlights the key role played by HR professionals in these three stages.
STRATEGIC HUMAN RESOURCE MANAGEMENT: THREE-STAGE
PROCESS AND INFLUENCING ORGANISATIONAL FACTORS
Organisations are increasingly looking at human resources as a unique asset that can provide
sustained competitive advantage. The changes in the business environment with increasing
globalisation, changing demographics of the workforce, increased focus on profitability through
growth, technological changes, intellectual capital and the never-ending changes that
organisations are undergoing have led to increased importance of managing human resources
(Devanna, Fombrum, & Tichy, 1981; Wright, 1998). In this scenario, a human resource (HR)
department that is highly administrative and lacks strategic integration fails to provide the
competitive advantage needed for survival, thus losing its relevance. Huselid and Becker (1997)
found that there were noticeable financial returns for the organisations whose human resource
management (HRM) systems have achieved operational excellence and are aligned with business
strategic goals. According to Ulrich (1998), one of the four roles of HR personnel is to become
strategic business partner. Youndt and Snell (1996) find that firms employing HR practices
according to the stated strategy are regarded to have better perceptual performance.
In recent years a host of papers have been published which look into the strategic aspects of
HRM. Kazmi and Ahmad (2001) classify various definitions of strategic human resource
management (SHRM) based on strategy-focused, decision-focused, content-focused and
implementation-focused approach. According to the strategy-focused approach, which is
supported by authors like Mathis and Jackson (1985) and Beer, Spector, Lawrence, Mills, and
Walton (1984), HRM is strategic by its very nature and all its elements have strategic linkages.
The decision-focused approach formulated by Devanna et al. (1981) is based on three decisionmaking
levels, namely operational, managerial and strategic and considers HRM at strategic
4
level to be SHRM. According to content-focused approach that is proposed by Torrington and
Hall (1995), SHRM emerges when HRM elements match the organisation’s strategy. According
to the implementation-focused approach that is brought forward by Miles and Snow (1984),
SHRM is when HRM systems help in the formulation and implementation of business strategies.
However, it is the definition based on implementation-focused approach dealing with
alignment of HR policies and practices with business strategies that has gained momentum in the
works of various researchers (Brockbank, 1999; Delery and Doty, 1996; Devanna, Fombrun, and
Tichy, 1984; Golden and Ramanujam, 1985; Martell and Caroll, 1995; Truss and Gratton, 1994;
Wright and McMahan, 1992). Wright and McMahan (1992: 298) define SHRM as “the pattern of
planned human resource deployments and activities intended to enable an organisation to achieve
its goals”.
One-Way Vertical Fit
Aligning HRM systems to the business strategy can be considered as a one-way vertical fit
(Devanna et al., 1984; Dyer, 1984; Golden and Ramanujam, 1985; Martell and Caroll, 1995;
Mirvis, 1985; Schuler and Walker, 1990). This alignment has been conceptualised in various
ways. Brockbank (1999) conceptualises this as strategically reactive HR. Kesler (1995) considers
this alignment as the partnering role of HR where HR is highly integrated with business
processes. This alignment is also seen in the contingency approach of Delery and Doty (1996).
The appropriate HR strategy for the specific organisational and business strategies is
discussed in the literature. Miles and Snow (1984) have studied the differences in the HR
strategies according to the organisational types, namely defender, prospector, analyser and
reactor. They discuss “make” or “buy” HR strategies where HRM systems focus on building or
acquiring human resources. Schuler and Jackson (1987a) discuss the kind of HRM systems needed to align the human resources to three kinds of competitive strategies, namely innovation,
quality enhancement and cost reduction strategy. Cost reduction strategy demands workers to
work harder, innovation strategy requires workers to work differently and quality strategy needs
them to work smarter. HR practices follow entirely different patterns for different strategies. For
example, in case of innovation-based strategy, impetus is to be given for free thinking and
bringing in new ideas. Performance appraisal focuses on long-term results and has a long-term
focus. There are no clear-cut job descriptions and employees are given opportunity to learn
across functions. The compensation offers more variety in terms of benefits like stock options
and bonuses. Development of a cooperative culture is the aim.
Schuler and Jackson (1987b) have examined the HR practices followed by the firms
following three kind of generic strategies, namely dynamic growth, extract growth and
turnaround strategy. They have found that the HR practices vary according to these three
strategies. Smith (1982a) has explored the various HR practices followed at different stages of
organisational growth.
Two-Way Vertical Fit
Two-way vertical fit is when HRM systems not only align to the business strategy, but also
contribute in the strategy formulation (Golden and Ramanujam, 1985; Martell and Caroll, 1995).
The HR department’s role as a strategic partner emerges in the two-way vertical fit. Lundy
(1994) proposes a model for the entire strategy formulation and implementation process. In the
model, each of the functions contributes in the strategy plan formulation, which in turn leads to
the development of various functional strategies including the HR strategy. Brockbank (1999)
conceptualises this as strategically proactive HR that involves creating future strategic
alternatives. This includes activities like creating a culture change, identifying mergers and acquisition possibilities, tracking the market and proactively making changes. Hendry and
Pettigrew (1990) collate different works in the SHRM literature and point out that it is not
necessary that HR strategy always precede a given strategy but it can be proactive in contributing
towards the strategy formulation, understanding the linkages between structure, culture, HRM
and the strategy.
From India, Coimbatore
733PROCESS AND INFLUENCING ORGANISATIONAL FACTORS
Sandeep Krishnan
Personnel and Industrial Relations Area
D-18, Indian Institute of Management,
Vastrapur, Ahmedabad 380 015,
Gujarat, India.
Email:
Tel: ++91-79-26327816
Fax: ++91-79-26306896
Manjari Singh
Personnel and Industrial Relations Area
Wing 12-D, Indian Institute of Management,
Vastrapur, Ahmedabad 380 015,
Gujarat, India.
Email:
Tel: ++91-79-26324914
Fax: ++91-79-26306896
Abstract: A three-stage model for the process of strategic human resource management is developed in this paper. The three stages cover strategy formulation, implementation and evaluation. The inter-linkages in this dynamic model have been explored. The organisational factors that have enabling or deterring influence on the success of each of these three stages have been discussed. The paper highlights the key role played by HR professionals in these three stages.
STRATEGIC HUMAN RESOURCE MANAGEMENT: THREE-STAGE
PROCESS AND INFLUENCING ORGANISATIONAL FACTORS
Organisations are increasingly looking at human resources as a unique asset that can provide
sustained competitive advantage. The changes in the business environment with increasing
globalisation, changing demographics of the workforce, increased focus on profitability through
growth, technological changes, intellectual capital and the never-ending changes that
organisations are undergoing have led to increased importance of managing human resources
(Devanna, Fombrum, & Tichy, 1981; Wright, 1998). In this scenario, a human resource (HR)
department that is highly administrative and lacks strategic integration fails to provide the
competitive advantage needed for survival, thus losing its relevance. Huselid and Becker (1997)
found that there were noticeable financial returns for the organisations whose human resource
management (HRM) systems have achieved operational excellence and are aligned with business
strategic goals. According to Ulrich (1998), one of the four roles of HR personnel is to become
strategic business partner. Youndt and Snell (1996) find that firms employing HR practices
according to the stated strategy are regarded to have better perceptual performance.
In recent years a host of papers have been published which look into the strategic aspects of
HRM. Kazmi and Ahmad (2001) classify various definitions of strategic human resource
management (SHRM) based on strategy-focused, decision-focused, content-focused and
implementation-focused approach. According to the strategy-focused approach, which is
supported by authors like Mathis and Jackson (1985) and Beer, Spector, Lawrence, Mills, and
Walton (1984), HRM is strategic by its very nature and all its elements have strategic linkages.
The decision-focused approach formulated by Devanna et al. (1981) is based on three decisionmaking
levels, namely operational, managerial and strategic and considers HRM at strategic
4
level to be SHRM. According to content-focused approach that is proposed by Torrington and
Hall (1995), SHRM emerges when HRM elements match the organisation’s strategy. According
to the implementation-focused approach that is brought forward by Miles and Snow (1984),
SHRM is when HRM systems help in the formulation and implementation of business strategies.
However, it is the definition based on implementation-focused approach dealing with
alignment of HR policies and practices with business strategies that has gained momentum in the
works of various researchers (Brockbank, 1999; Delery and Doty, 1996; Devanna, Fombrun, and
Tichy, 1984; Golden and Ramanujam, 1985; Martell and Caroll, 1995; Truss and Gratton, 1994;
Wright and McMahan, 1992). Wright and McMahan (1992: 298) define SHRM as “the pattern of
planned human resource deployments and activities intended to enable an organisation to achieve
its goals”.
One-Way Vertical Fit
Aligning HRM systems to the business strategy can be considered as a one-way vertical fit
(Devanna et al., 1984; Dyer, 1984; Golden and Ramanujam, 1985; Martell and Caroll, 1995;
Mirvis, 1985; Schuler and Walker, 1990). This alignment has been conceptualised in various
ways. Brockbank (1999) conceptualises this as strategically reactive HR. Kesler (1995) considers
this alignment as the partnering role of HR where HR is highly integrated with business
processes. This alignment is also seen in the contingency approach of Delery and Doty (1996).
The appropriate HR strategy for the specific organisational and business strategies is
discussed in the literature. Miles and Snow (1984) have studied the differences in the HR
strategies according to the organisational types, namely defender, prospector, analyser and
reactor. They discuss “make” or “buy” HR strategies where HRM systems focus on building or
acquiring human resources. Schuler and Jackson (1987a) discuss the kind of HRM systems needed to align the human resources to three kinds of competitive strategies, namely innovation,
quality enhancement and cost reduction strategy. Cost reduction strategy demands workers to
work harder, innovation strategy requires workers to work differently and quality strategy needs
them to work smarter. HR practices follow entirely different patterns for different strategies. For
example, in case of innovation-based strategy, impetus is to be given for free thinking and
bringing in new ideas. Performance appraisal focuses on long-term results and has a long-term
focus. There are no clear-cut job descriptions and employees are given opportunity to learn
across functions. The compensation offers more variety in terms of benefits like stock options
and bonuses. Development of a cooperative culture is the aim.
Schuler and Jackson (1987b) have examined the HR practices followed by the firms
following three kind of generic strategies, namely dynamic growth, extract growth and
turnaround strategy. They have found that the HR practices vary according to these three
strategies. Smith (1982a) has explored the various HR practices followed at different stages of
organisational growth.
Two-Way Vertical Fit
Two-way vertical fit is when HRM systems not only align to the business strategy, but also
contribute in the strategy formulation (Golden and Ramanujam, 1985; Martell and Caroll, 1995).
The HR department’s role as a strategic partner emerges in the two-way vertical fit. Lundy
(1994) proposes a model for the entire strategy formulation and implementation process. In the
model, each of the functions contributes in the strategy plan formulation, which in turn leads to
the development of various functional strategies including the HR strategy. Brockbank (1999)
conceptualises this as strategically proactive HR that involves creating future strategic
alternatives. This includes activities like creating a culture change, identifying mergers and acquisition possibilities, tracking the market and proactively making changes. Hendry and
Pettigrew (1990) collate different works in the SHRM literature and point out that it is not
necessary that HR strategy always precede a given strategy but it can be proactive in contributing
towards the strategy formulation, understanding the linkages between structure, culture, HRM
and the strategy.
From India, Coimbatore
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Strategic hrm.ppt
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