Strategic human resource management

1 Strategic human resource managementJohn BrattonChapter twoStrategic human resource management is the process of linking the human resource function with the Strategic objectives of the organization in order to improve performance. If a global company is to function successfully, strategies at different levels need to inter-relate. 1 An organization s [ human resource management ] policies and practices must fit with its strategyin its competitive environment and with the immediate business conditions that it faces. 2 The [ human resources business strategy] alignment cannot necessarily be characterized in the logical and sequential way suggested by some writers; rather, the design of an HR system is a complex and iterative process. 3 chapter outlineChapter objectivesAfter studying this chapter , you should be able the meaning of Strategic management and give an overview of its the three levels of strategy formulation and comment on the links betweenbusiness strategy and human resource management (HRM) three models of human resources (HR) strategy: control, resource and on the various Strategic HRM themes of the HR performance link: re-engineering, leadership, work-based learning and trade some key aspects of international and comparative HRMI ntroduction management human resource management resource strategy models Strategic human resourcemanagement and models of humanresources strategy of Strategic humanresource management and comparative Strategic human resourcemanagement the first chapter , we examined the theoretical debate on the nature and significanceof the human resource management (HRM) model.

2 In this chapter we explore anapproach to HRM labelled strategichuman resource management , or SHRM. By astrategic approach to HRM, we are referring to a managerial process requiring humanresource (HR) policies and practices to be linked with the Strategic objectives of theorganization. Just as the term human resource management has been contested, sotoo has the notion of SHRM. One aspect for debate is the lack of conceptual clarity(Bamberger & Meshoulam, 2000). Do, for example, the related concepts of SHRM andHR strategyrelate to a process or an outcome? Over the past decade, HR researchers and practitioners have focused their attentionon other important questions. First, what determines whether an organization adoptsa Strategic approach to HRM, and how is HR strategy formulated? Of interest is whichorganizations are most likely to adopt a Strategic approach to HRM. Is there, forexample, a positive association with a given set of external and internal characteristicsor contingencies and the adoption of SHRM?

3 Another area of interest concerns thepolicies and practices making up different HR strategies. Is it possible to identify acluster or bundle of HR practices with different Strategic competitive models? Finally,much research productivity in recent years has been devoted to examining the rela-tionship between different clusters of HR practices and organizational HR strategy really matter? For organizational practitioners who are looking forways to gain a competitive advantage, the implication of HR Strategic choices forcompany performance is certainly the key factor. Before, however, we look at some of the issues associated with the SHRM debate, weneed first to examine the Strategic management process. This chapter also examineswhether it is possible to speak of different models of HR strategy and the degree towhich these types of HR strategy systematically vary between organizations.

4 We thenconsider some issues associated with SHRM, including international and comparativeSHRM. As for the question of whether there is a positive association between differentHR strategies and organizational performance, we are of the opinion that, given theimportance and volume of the research surrounding this issue, the topic warrants anextended discussion ( chapter 13). In the current chapter , we address a number ofquestions, some essential to our understanding of how work organizations operate inthe early 21st century work and the role of HRM therein. How do big corporate deci-sions impact on HRM? Does the evidence suggest that firms adopting differentcompetitive strategies adopt different HR strategies? How does HRM impact on the bottom line ? There is a common theme running through this chapter , much of theHR research pointing out that there are fundamental structural constraints that attestto the complexity of implementing different HRM managementThe word strategy , deriving from the Greek noun strategus, meaning commander inchief , was first used in the English language in 1656.

5 The development and usage ofthe word suggests that it is composed of stratos(army) and agein(to lead). In amanagement context, the word strategy has now replaced the more traditionalterm long-term planning to denote a specific pattern of decisions and actions38 human resource ManagementModel of Strategic managementIn the descriptive and prescriptive management texts, Strategic management appearsas a cycle in which several activities follow and feed upon one another. The strategicmanagement process is typically broken down into five steps: undertaken by the upper echelon of the organization in order to accomplish perform-ance goals. Wheelen and Hunger (1995, p. 3) define Strategic managementas that setof managerial decisions and actions that determines the long-run performance of acorporation . Hill and Jones (2001, p. 4) take a similar view when they define strategyas an action a company takes to attain superior performance.

6 Strategic managementis considered to be a continuous activity that requires a constant adjustment of threemajor interdependent poles: the values of senior management , the environment, andthe resources available (Figure ). Strategic human resource management 39 Figure three traditional poles of a Strategic plan Source:Adapted from Aktouf (1996)ResourcesEnvironmentSenior managementHRM IN PRACTICE PLANNING HAS SUDDENLY GOT SEXYGORDON PITT. THE INS AND OUTS OF management TOOLS. GLOBE AND MAIL, 1998, JANUARY 8In the past decade, the NorthAmerican workplace, as thosein Europe, has seen a constantparade of management fadsand fashions. In 1993, the topthree most popular manage-ment techniques were missionstatements, customer satisfac-tion measurement, and totalquality management . In 1996, Strategic planning, missionstatements and benchmarkingwere the top three managementtechniques. Of the 409 NorthAmerican companies surveyed,89 per cent reported using strate-gic planning in 1996.

7 As onebusiness observer (Pitt, 1998)commented: Strategic planninghas always been around [but] itsuddenly got sexy. and goals analysis formulation implementation evaluation. Figure illustrates how the five steps interact. At the corporate level, the strategicmanagement process includes activities that range from appraising the organization scurrent mission and goals to Strategic evaluation. The first step in the Strategic management model begins with senior managers eval-uating their position in relation to the organization s current mission and goals. Themission describes the organization s values and aspirations; it is the organization sraison d treand indicates the direction in which senior management is going. Goalsare the desired ends sought through the actual operating procedures of the organiza-tion and typically describe short-term measurable outcomes (Daft, 2001). Environmental analysislooks at the internal organizational strengths and weak-40 human resource ManagementFigure Strategic management modelMission and goalsManagement philosophyValuesSTEP 1 Environmental analysisInternal scanExternal scanSTEP 2 Strategic formulationStrategic choiceCorporateBusinessFunctionalSTEP 3 Strategy implementationLeadershipStructureControl systemsHuman resourcesSTEP 4 Strategy evaluationOperating performanceFinancial performanceSTEP 5nesses and the external environment for opportunities and threats.

8 The factors thatare most important to the organization s future are referred to as Strategic factors andcan be summarized by the acronym SWOT Strengths, Weaknesses, Opportunitiesand formulationinvolves senior managers evaluating the interaction betweenstrategic factors and making Strategic choices that guide managers to meet the organi-zation s goals. Some strategies are formulated at the corporate, business and specificfunctional levels. The term Strategic choice raises the question of whomakes deci-sions and whythey are made (McLoughlin & Clark, 1988). The notion of strategicchoice also draws attention to Strategic management as a political process wherebydecisions and actions on issues are taken by a power-dominant group of managerswithin the organization. Child (1972, quoted in McLoughlin & Clark, 1988, p. 41)affirms this interpretation of the decision-making process when he writes:[W]hen incorporating Strategic choice in a theory of organizations, one is recognizing theoperation of an essentially political process, in which constraints and opportunities arefunctions of the power exercised by decision-makers in the light of ideological a political model of Strategic management , it is necessary to consider the distribu-tion of power within the organization.

9 According to Purcell and Ahlstrand (1994, p. 45), we must consider where power lies, how it comes to be there, and how theoutcome of competing power plays and coalitions within senior management are linked to employee relations . The Strategic choice perspective on organizationaldecision-making makes the discourse on strategy more concrete and provides impor-tant insights into how the employment relationship is implementationis an area of activity that focuses on the techniques used bymanagers to implement their strategies. In particular, it refers to activities that dealwith leadership style, the structure of the organization, the information and controlsystems, and the management of human resources (see Figure above). Influentialmanagement consultants and academics (for example Champy, 1996; Kotter, 1996)emphasize that leadership is the most important and difficult part of the strategicimplementation process.

10 Strategy evaluationis an activity that determines to what extent the actual changeand performance match the desired change and performance. The Strategic management model depicts the five major activities as forming arational and linear process. It is, however, important to note that it is a normativemodel, that is, it shows how Strategic management shouldbe done rather thandescribing what is actually done by senior managers (Wheelen & Hunger, 1995). As wehave already noted, the notion that Strategic decision-making is a political processimplies a potential gap between the theoretical model and of strategyAnother aspect of Strategic management in the multidivisional business organizationconcerns the level to which Strategic issues apply. Conventional wisdom identifiesdifferent levels of strategy a hierarchy of strategy(Figure ) Strategic human resource management 41 Corporate-level strategy Corporate-level strategy describes a corporation s overall direction in terms of itsgeneral philosophy towards the growth and the management of its various businessunits.