SHRM fit

Index
Introduction
Horizontal fit and vertical fit
Individual, functional and organizational
level factors facilitating the fit
HR function related practices.
Firm level factors that influence horizontal
fit and vertical fit.

HRM/ SHRM/ SHRM FIT ? 1/4

Traditional HRM functions

Recruitment,
Selection,
Performance appraisal,
Training and development
Administration of compensation and benefits.

HRM/ SHRM/ SHRM FIT ? 2/4

SHRM
A strategic approach to manage human resources of an
organization.
Still considered a relatively new concept (despite three
decades of development (1981) .
No consensus yet on the exact definition of SHRM.
However broad agreement exists on SHRM basic
functions.

HRM/ SHRM/ SHRM FIT ? 3/4

Basic functions of SHRM
Combines HRM functions with business strategy:
Designing and implementing a set of internally
consistent policies and practices.
Ensure that human capital of a firm contributes to
the achievement of its business objectives
(Understanding Human Resource Management in the Context
of Organizations and their Environments S. Jackson & R .
Schuler 1995)

Helps the organization gain a competitive advantage

and achieve organizational goals.

HRM/ SHRM/ SHRM FIT ? 4/4

SHRM FIT
The interactive role of HRM practices and their
relationship with the organizational strategy.
Appropriate analogy of HRM and business
strategy is the SHRM fit (Strategic Management
and HRM Wright & McMahan 1992)

Fit indicates the utilization of human resources

to help with the achievement of organizational
goals.

Two types of Fit

1. Horizontal fit
Similarity of various HRM practices (Baird & Meshoulam
1988)
A critical step toward attaining the organizational goals
through initiating some human resource activities that are
associated with firm objectives.
Coordinates a variety of human resource practices.

2. Vertical fit.
Alignment of HRM practice with the strategic management
process of the firm (Schuler & Jackson 1987).
Essential while making good use of HRM resources.
It related with the compatibility between the HR practice
package and strategy of the firm.

THEORETICAL
BACKGROUND OF FIT

Both types of fit contribute to competitiveness of a firm

so it is important to arrange a variety of HR practices in
a systematic way.
Scholars argue that Resource based view (RBV) of the
firm HR systems aligned with its strategy helps create
competitive advantage (A resource-based approach to
performance and competition Barney 1986, 1991).
Basic assumption under RBV
Resource heterogeneity (i.e., resources that different firms own
are unlikely to be easily imitated by other firms).
These resources must be (1) Valuable, (2) Rare, (3) Inimitable,
and (4) Non-substitutable.

HORIZONTAL FIT-

THEORETICAL BACKGROUND

HRM effectiveness is likely to decrease if not enough

attention is paid to coordinating HRM practices.

For example, an excellent employee might find it quite difficult

to achieve high performance without good training compatible
with organizational goals and the work itself.
Similarly, lack of motivation for well trained employees may be
linked with their below par performance.

Therefore:
Adoption of effective technical HRM activities is key to
implementing a set of internally consistent HR practices.
Effective technical HR activities are necessary for
accomplishing the partial goal of SHRM (i.e., the horizontal fit
among those HR practices)..

VERTICAL FIT-

THEORETICAL BACKGROUND
Vertical fit, emphasizes the alignment of a series of HR
measures with the strategy the firm is pursuing.
Otherwise a firm will be challenged to acquire or create
the optimal package of human resources necessary for
its strategy and to enhance its overall performance.

DETERMINANTS OF
HORIZONTAL & VERTICAL
Achieving both types ofFIT
Fit is necessary for firms
effective performance.
Examination of relevant determinants / factors of Fit
helps to better understand the nature of SHRM as well
as its contribution to the organizational performance.
HR function factors influence the compatibility of a variety of
HR practices themselves.
Personnel factors, encompass the capabilities of employees,
managers, HR manager and top management.
Firm level factors are analyzed as major determinants for
matching HR activities with organizational strategy.
They generally apply to both horizontal and vertical Fit.

HR function
factors

Personal
factors

Overall Fit

Firm level
factors

Firms performance
Horizontal
Fit

HR Policy

HR Managers
capabilites
Nature of
Firms
strategy

Vertical
Fit

HR Options

HR
Investment /
budget

Ability and
support of Sr.
Managers

Employees
Knowledge

Firms
Values &
culture

Employees
skills

HR FUNCTION FACTORS
1/2

HR policy

HR policy directs or emphasizes compatibility among various HR

practices and facilitates a fine tuning process within the system.
If certain functions are considered less important than others,
according to the HR policy, less resources/budget will probably be
given to these functions, making them poorly operated or less
effective, relative to other institutional functions.

Options of HR practices,
Uncertainties and risks associated with HR assets, cannot be
ignored.
Firms can manage these uncertainties through HR options
which in fact are the capabilities generated by certain HR
practices and their combinations.
the scope of choices for HR activities can be enlarged if there
are a series of options of them.

HR FUNCTION FACTORS
2/2

Investment or budget of HRM

Development of various HRM functions depends on resource

provision from the organization.
The amount of investment or budget devoted to HRM
represents the resources available to HR department.
This is critical if the HR department is to design or implement
high quality HR practices.
For example, some effective HR practices require the
involvement of outside experts or licensing expertise from
other organizations.

PERSONAL FACTORS 1/3

Personnel factors influence both horizontal and vertical
fit
Ability and skills are crucial for successful
implementation of organizational goals and strategies.
HR Manager Capability
Effectiveness of the design and implementation of a HRM
system.
Utilization of business knowledge to facilitate HR issues.
Ability to initiate changes or help employees to plan for
changes.
Capability to coordinate HR redirection corresponding to the
strategic changes of the firm

PERSONAL FACTORS 2/3

Ability and Support of Senior Managers
Skillfully influencing performance of the HR function through
the interaction of knowledge, skills and HRM practices.
Ability of top managers in business strategic process is key to
the competitive advantage.
Top managers can also play an important role in the
implementation of business strategy.
Consequently, they can influence various functional activities,
i.e. Design of HR system, based on their knowledge and
insights from both strategic and business perspectives.

The relationship between managers enactment of

strategy and functional performance reflects the
connection between strategy and the HR system, which
is vertical fit.

PERSONAL FACTORS 3/3

Employee Knowledge and Skill
Employees knowledge and skills affects both the
horizontal and vertical fit of HRM practices and firms
strategy.
Since the effects of design and implementation of HR activities
are processed by the employees, their knowledge and skills
directly affect the quality and performance of the HR system.
More knowledgeable and skillful employees have
competencies to understand and enact a variety of HR
practices.
Conversely, if their knowledge and skills are limited, it is likely
their behavior and performance will be adversely affected, and
acceptance of HR practices will be impeded.

Firm Level Factors 1/2

Some firm level factors, are relevant to firms seeking a
vertical fit.

Nature of Strategy
Different strategies have unique effects on HR practices,
and influence the achievement of vertical fit
Firms with cost focused leadership strategy may prefer to
formulate uniform and objective based criteria for
performance evaluation than firms using a differentiation
strategy.
Differentiation strategy calls for the development of products
or services offering unique attributes or are valued by
customers.

Cost focused strategy (minimizing the production costs)

needs little explanation as compared with the complexity and
uncertainty of objectives of differentiation strategy.

Firm Level Factors 2/2

Values and Culture
Values and culture of impacts on vertical fit.
Development of a strategy compatible with HR practices is
affected by corporate values and culture, partly because:
The HR system takes on an advisory
Consultancy role in the management structure of a firm.

If HR function is deemed as unimportant, it is difficult for HR

managers to design HR practices according to the corporate
strategy.
When a new strategy is formulated, the adjustment/
redesigning of the former system does not occur immediately.
However, values and the culture system emphasizing a quick
adherence to the new strategy will benefit the vertical fit
process, with an immediate adjustment toward designing and
adopting an optimal HR practice arrangement.

Thank you