STRATEGIC HUMAN

RESOURCE MANAGEMENT
CHAPTER 1

Syllabus coverage
HR Scenario a at the International
LevelThe Scene in USA (SHRM USA)
The New HR Agenda-- HRM in India--
Emerging HRM Paradigms in the
knowledge economy globally
---case studies in HR transformation

STRATEGY
The determination of the basic longterm goals and objectives of an
enterprise and the adoption of courses
of action and the allocation of
resources necessary for carrying out
these goals.
- Alfred Chandler

Strategic HRM means formulating and

executing human resources policies and
practices that produce the employee
competencies and behaviors the company
needs to achieve its strategic aims

What is strategy ?
The determination of the basic longterm goals and objectives of an
enterprise and the adoption of
courses of action and the allocation
of resources necessary for carrying
out these goals.
Alfred Chandler, Strategy and Structure, (MIT
Press, 1962),

The Strategic-Management Model

Where are we now?

Intended versus Emergent

Strategy
List the factors that may prevent an organisation
realising its intended strategy
Changes in the external environment

E.g. Increased competition / loss of market share

Crisis e.g. September 11th
Tsunami
BP oil spill
Other?

Changes in the internal environment

E.g. Product failure / Quality problems
Industrial unrest
Other?

Stages of Strategic
Management
Strategy formulation

Levels of strategy
Corporate level
Determine overall scope of the organisation
Add value to the different business units
Meet expectations of stakeholders

Business level (SBU)

How to compete successfully in particular
markets

Operational / Functional
How different parts of organisation deliver
strategy

Levels of strategy contd..

Corporate Level:
Expansion
Diversification
Turnaround
Retrenchment

Business Level
Differentiation
Cost leadership
Niche

Functional level
Marketing
Finance
HR
Logistics

Strategic HRM
Systematically linking people with the
firm.

Strategic HRM
Strategic HRM is about how the
employment relationships for all
employees can be managed in such
a way as to contribute optimally to
the organizations goal
achievement. Legge (2005)

PERSPECTIVES ON SHRM

The universalistic perspective / Best practices

The contingency perspective / Best Fit
The configurational perspective

(Delery and Doty, 1996)

BEST PRACTICE
Assumed is that there is a set of best HRM practices that are
universal in the sense that they are best in any situation.
Examples:
360 degree appraisal
Selective hiring
Team based pay
Leadership models
Workforce analytics
Self managed teams
Flat structure

BEST FIT / Vertical fit

The best fit approach emphasizes that HR strategies
should be congruent with the context and circumstances
of the organization.
Best fit involves vertical integration or alignment
between the organizations business and HR strategies
There are three models:
lifecycle ( start up, growth, maturity, decline)
competitive strategy, ( Cost leader, Differentiator, Niche)
strategic configuration ( prospectors , defenders , analysers,
reactors)

Often said that best fit is better than best practice but
best fit models can be unrealistic

BUNDLING / Horizontal fit

Bundling is the development and implementation
of several HR practices together so that they are
interrelated and therefore complement and
reinforce each other.
Example of a bundle:
Competency frameworks, which are used in
assessment and development centres and to specify
recruitment standards, identify learning and
development needs, indicate the standards of
behaviour or performance required and serve
as the basis for human resource planning.

OBJECTIVES OF STRATEGIC HRM

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

Facts about SHRM

Extent of application of SHRM would vary
between organisations
SHRM is practiced in only those
organizations
that
have
a
clearly
articulated corporate or business strategy
Organizations who do not have
corporate plan cannot have SHRM

In such organization HR personnel carry

out the traditional administrative and
service roles-not concerned with strategic

Linking HR to strategy

319

TRANSLATING
STRATEGY
INTO HR
POLICY AND
PRACTICE

Strategic HRM process

model

Copyright 2002 SouthWestern. All rights

reserved.

422

Copyright 2002 SouthWestern. All rights

reserved.

423

HRS STRATEGIC ROLES

Identify the human issues that are vital to
business strategy.
Help establish and execute strategy.
Provide alternative insights.
Are centrally involved in creating responsive
and market-driven organizations.
Conceptualize and execute organizational
change.

How HR helps form strategy

Formation of a companys strategy
=
identifying,
analyzing
and
balancing external opportunities
and threats with internal strengths
and weaknesses

HRs Strategy Formulation Role

HR helps top management formulate
strategy in a variety of ways by.
Supplying competitive intelligence regarding

the external environment

Supplying information regarding the companys

internal human strengths and weaknesses.

Showing how the firms HR activities can and do

contribute to creating value for the company.

How HR helps strategy execution

Functional strategies should support
competitive strategies- TCS downsizing
Value chain analysis IKEA value chain
analysis
Outsourcing : Microsof outsourcing cloud
computing projects to Aditi

Insourcing : Harman
Strategy Formulation : Succession plan TATA

good HR strategy:
Satisfy Business Needs
Is Founded On Detailed Analysis
Can Be Turned Into Actionable Programmes
Is Coherent And Integrated
Takes

Account

Of

The

Needs

Of

Line

Managers, Employees And Other Stakeholders

The Five Ps Model of SHRM

Philosophy
Statements of how organization values & treats
employees; essentially culture of the organization

Policies
Expressions of shared values & guidelines for
action on employee-related business issues

Programs
Coordinated & strategized approaches to initiate,
disseminate, & sustain strategic organizational
change efforts necessitated by strategic business
needs

The Five Ps Model of SHRM

Practices
HR practices motivate behaviors that
allow individuals to assume roles
consistent
with
organizations
strategic objectives
Three categories of roles:
Leadership
Managerial
Operational

The Five Ps Model of SHRM

Processes

Continuum of participation by all

employees in specific activities to
facilitate
formulation
&
implementation of other activities

The Five Ps Model of SHRM

Successful SHRM efforts begin with
identification of strategic needs
Employee participation is critical to
linking strategy & HR practices
Strategic HR depends on systematic
& analytical mindset
Corporate HR departments can have

DIFFRENCES BETWEEN TRADITIONAL HRM &

SHRM

Strategic humanTraditional
resource
HRM management
SHRM and
traditional HR functions differ in several
Responsibility for HR
Staff personnel in the HR
Line managers,all
ways(adapted
from
Mellow
2003)
programs
department
managers responsible for
people are HR managers
Focus of activities

Employees
relations,motivation,productiv
ity,compliance with laws

Partnerships with internal

and external customers

Role of HR

Reactive and transactional

Proactive and
transformational,change
leader

Initiative for change

Slow,piecemeal,fragmented,n
ot integrated with larger
issues

Fast,flexible,systematic,
change initiatives
implemented in concert
with other HR systems

by Prof. Mary Bodra

Traditional HRM

SHRM

Time horizon

Short term

Consider various time

frames as necessary
(short,medium,or long)

Control

Bureaucratic control through

rules ,procedures and policies

Organic control through

flexibility as few
restrictions on employee
behaviour as possible

Job design

Focus on scientific
management principlesdivision of
labour,independence and
specialization

Broad job
design,flexibility,teams
and groups and cross
-training

Importance investments

Capital ,products,technology
and finance

People and their

knowledge,skills and
abilities

Accountability

Cost centre

Investment centre

by Prof. Mary Bodra

Implications of SHRM
Successful SHRM efforts begin with
identification of strategic needs.
Employee participation is critical to
linking strategy and HR practices.
Strategic HR depends on a systematic
and analytical mindset.
Corporate HR departments can have
an impact on their organizations
efforts to launch strategic initiatives.

Advantages and disadvantages of

Strategic HRM

Benefits of SHRM
Facilitates development of high-quality workforce

through focus on types of people & skills needed

Facilitates

cost-effective

utilization

of

labor,

particularly in service industries where labor is

generally greatest cost
Facilitates

planning

environmental

&

uncertainty

assessment
&

organization to external forces

adaptation

of
of

Problems and Challenges of SHRM

Performance
appraisal
compensation based on current
performance

and

HR managers lack of ability to

understand
challenges
and
opportunities in other functional areas
Top management fail to realize the
overall contribution HR can make in
overall organization strategy (HR is
routine and inflexible job)

 Functional

managers

do

not

view

themselves as HR manager (concerned

with technical aspects of job)
Fail to quantify HR cost and benefits (Team
building)
Strategic HR need drastic changes in way
of doing job, practices, and culture etc
(people tendency to resist to change)

BARRIERS TO STRATEGIC HR

HR ROLES IN KNOWLEDGE-BASED ECONOMY

Lengnick Hall Model
1. HUMAN CAPITAL STEWARD

Creates

an

environment

employees

&

culture

in

which

voluntarily contribute

skills, ideas, & energy

Human capital is not owned by organization

HR ROLES IN KNOWLEDGE-BASED ECONOMY

2. KNOWLEDGE FACILITATOR
Procures necessary employee knowledge &
skill

sets

that

allow

information

to

be

acquired, developed, & disseminated

Provides a competitive advantage
Must

be

part

of

strategically

employee development plan

designed

HR ROLES IN KNOWLEDGE-BASED ECONOMY

3. RELATIONSHIP BUILDER
Building Team work, Cross functional teams
Develops
culture

structure,

that

allow

work

practices,

individuals

to

&

work

together
Develops networks that focus on strategic
objectives

HR ROLES IN KNOWLEDGE-BASED ECONOMY

4. RAPID DEVELOPMENT SPECIALIST
Organizational culture and HR system that
are flexible enough to adapt to change
Creates fluid & adaptable structure &
systems
Global, knowledge-based economy
mandates flexibility & culture that
embraces change

Creating the Strategic Human Resource

Management System
Components of a
Strategic HRM
System

Human
Resource
Professionals

Human
Resource
Policies and
Practices

Employee
Behaviors and
Competencies

Three Main Strategic Human Resource System Components

Characteristics of
HPWS
multi-skilled work
teams
empowered front-line
workers
extensive training
labor-management
cooperation
commitment to
quality
customer satisfaction

346

Indian HR practices

Staffing Practices

Resumes seek strong educational background.

Employee referrals (predominantly used for

middle and senior management).

Succession planning (predominantly used for

middle and senior management).

Elaborate employment tests related to the job,

especially at entry level.

E-recruitment: Naukri.com was the first e-portal

established in 1998 (naukri means job in Hindi ).

Staffing Practices

Newspaper advertisements are used to brand

the company to potential applicants.

Newspaper advertisements will specify age and

gender requirements.

Personal questions will be asked in

interviews/resumes about:

Age
Marital status
Family plans (women planning to start a family)
Family background
Caste background
Photos to be included
Verification of educational certificates

Training Practices
Training (future orientation):

Education is extremely valued, and training is an

extension of it.
Entry point training programs (3 to12 months of
orientation).
Ongoing training programs.
Development programs (promotions involve training).
In-house training centers are a common feature in
Indian organizations.
Deductive learning style in training: Known as topdown approach where learning principles start with
general concepts and move toward specific
application.

Performance Appraisal

Cultural dimensions of collectivism and power distance

make objective appraisals a challenge.
Supervisors and subordinates develop close relationships.
Organizational loyalty is as important as work performance.
Employee promotions are frequently based on seniority.

Annual performance appraisals.

Supervisors provide performance ratings that are frequently
inflated due to personal relationships.
Employment at will does not exist in India. Employment
termination carries a social stigma.

Compensation and Benefits

In addition to a base salary, compensation

includes:

House rent allowance (HRA*).

Medical allowance.
Dearness allowance (DA*).
Leave travel allowance (LTA*).
Commuter allowance.

* These allowances are frequently referred by their

acronyms

Several categories of leave (vacation) exist:

Sick leave: 7 days (medical certificate required).

Casual leave: 7 days (for personal and family
emergencies, requires prior permission of boss).
Employees can take maximum 2 days at a time
Annual leave: 3 weeks (after one year of
employment).
Federal holidays: About 20 days.

Compensation and Benefits

Retirement age:
55-60 years (private sector);.
60 years (public sector).

Retirement Benefits: Employees receive two lump-sum payments

when they retire:
Provident Fund (similar to 401(k))
Typical contributions: 10-12 percent of base salary
(employer and employee).
Payable on retirement, voluntary separation, death.
Gratuity
Only employer contributes (15 days salary per year of
service).
Tax-exempt for employees.
Payable on retirement, voluntary separation, death.

Compensation and Benefits

Organizations are seen as an extension of the family.

Provide both short-term and long-term personal loans.
Personal loans for housing, car, home maintenance and family
emergencies.
Loan amounts vary by position and level in organization.
All employees after their probation (confirmation) period are
eligible.

Many medium and large organizations have cafeterias with

subsidized lunch facilities.

Compensation and Benefits

Executives receive special benefits to reflect status such as:

Club memberships.
Overseas training.
Company housing.
Company cars.

Provided with drivers.

International cars.
Operational and maintenance costs.
Phone bill reimbursements.
Organizations provide business and cell phones.