Strategic Human Resource Management: A Guide to Action

1 ISTRATEGICHUMAN RESOURCEMANAGEMENTiiFor free online support material please go to the Kogan Page : SHRM53756iiiMichael ArmstrongLondon and PhiladelphiaSTRATEGICHUMAN Resource MANAGEMENTA Guide TO ACTION4TH EDITIONivPublisher s noteEvery possible effort has been made to ensure that the information contained in this book isaccurate at the time of going to press, and the publishers and author cannot accept responsi-bility for any errors or omissions, however caused. No responsibility for loss or damage occa-sioned to any person acting, or refraining from Action , as a result of the material in thispublication can be accepted by the editor, the publisher or the published in Great Britain and the United States in 1992 as Human Resource Management: Strategy and ActionSecond edition published as Strategic Human Resource Management.

2 A Guide to Action2000 Third edition 2006 Reprinted 2006 Fourth edition 2008 Apart from any fair dealing for the purposes of research or private study, or criticism or review,as permitted under the Copyright, Designs and Patents Act 1988, this publication may only bereproduced, stored or transmitted, in any form or by any means, with the prior permission inwriting of the publishers, or in the case of reprographic reproduction in accordance with theterms and licences issued by the CLA. Enquiries concerning reproduction outside these termsshould be sent to the publishers at the undermentioned addresses:Kogan Page LimitedKogan Page US120 Pentonville Road525 South 4th Street, #241 London N1 9 JNPhiladelphia PA 19147 United Michael Armstrong, 1992, 2000, 2006, 2008 The right of Michael Armstrong to be identified as the author of this work has been asserted byhim in accordance with the Copyright, Designs and Patents Act 978 0 7494 5375 6 British Library Cataloguing-in-Publication DataA CIP record for this book is available from the British of Congress Cataloging-in-Publication DataArmstrong, Michael, 1928 Strategic Human Resource management : a Guide to Action / Michael Armstrong.

3 -- 4th cmIncludes bibliographical references and 01--dc222008017601 Typeset by Saxon Graphics Ltd, DerbyPrinted and bound in India by Replika Press Pvt LtdContentsIntroductionPART 1 THE conceptual FRAMEWORK OF Strategic HRM1 The concept of Human Resource management5 HRM defined 5; Human Resource systems 8; Aims of HRM 9;Characteristics of HRM 12; Reservations about HRM 172 The concept of strategy21 Strategy defined 22; The concept of strategy 23; The formulationof strategy 283 The concept of Strategic Human Resource management33 Strategic HRM defined 33; Basis of Strategic HRM 34; Principles of Strategic HRM 35; Aims of Strategic HRM 35;Concepts of Strategic HRM 37; Perspectives on Strategic HRM 39;The best-practice approach 40; The best-fit approach 42; Bundling 46; The reality of Strategic HRM 48; Practicalimplications of Strategic HRM theory 49vPART 2 THE PRACTICE OF Strategic HRM4 HR strategies53 What are HR strategies?

4 53; What is the purpose of HR strategies? 54; Overall HR strategies 54; Specific HR strategies 59;Criteria for an effective HR strategy 61; How should HRstrategies be developed? 62; Developing HR strategies 66;Implementing HR strategies 705 The Strategic role of HR72 The Strategic nature of HR 72; The Strategic partner model 73;What being Strategic means 75; The Strategic role of HR directors 76; The Strategic role of heads of HR functions 77; The Strategic role of HR business partners 78; The strategiccontribution of HR advisers or assistants 786 The impact of Strategic HRM79 How HR impacts on organizational performance 79; How Strategic HRM concepts impact on practice 857 Strategic HRM in action86 Formulating HR strategy 86; The content of HR strategies 96;Corporate issues 98; Achieving integration 101; What are themost characteristic features of Strategic HRM in Action ?

5 104 PART 3 HR STRATEGIES8 Human capital management strategy107 Aims of Human capital management 108; The link between HCMand business strategy 108; Developing a Human capitalmanagement strategy 109; Conclusions: the role of Human capitalmanagement strategy 1149 High-performance strategy115 High-performance work system defined 116; Characteristics of ahigh-performance work system 116; Components of an HPWS 117; Impact of high-performance work systems 117;Developing a high-performance strategy 12110 Corporate social responsibility strategy126 Strategic CSR defined 127; CSR activities 127; The rationale forCSR 128; Developing a CSR strategy 130vilContents11 Organization development strategy132 Organization development defined 132; OD strategies 133;Assumptions and values of OD 133; Activities incorporated in theOD strategy 134; Strategies for organizational transformation 13612 employee engagement strategy140 engagement and organizational commitment 140; Thesignificance of engagement 141; engagement and discretionarybehaviour 142; What is an engaged employee ?

6 142; What are thefactors that influence engagement ? 143; Strategies for enhancingengagement 145; Measuring engagement 14813 Knowledge management strategy149 The process of knowledge management 149; Sources and types of knowledge 150; Approaches to the development of knowledgemanagement strategies 151; Strategic knowledge managementissues 151; Components of a knowledge management strategy 15314 employee resourcing strategy154 The objective of employee resourcing strategy 154; The strategicHRM approach to resourcing 155; Integrating business andresourcing strategies 155; Bundling resourcing strategies andactivities 156; The components of employee resourcing strategy 156; Human Resource planning 157; employee valueproposition 160; Resourcing plans 161; Retention strategy 163.

7 Flexibility strategy 16715 Talent management strategy168 Talent management defined 168; The process of talentmanagement 170; Developing a talent management strategy 17316 Learning and development strategy175 Strategic Human Resource development (SHRD) 175; Strategiesfor creating a learning culture 178; Organizational learningstrategies 178; Learning organization strategy 180; Individuallearning strategies 18117 Reward strategy183 Reward strategy defined 183; Why have a reward strategy? 183;Characteristics of reward strategies 184; The structure of rewardstrategy 184; The content of reward strategy 185; Guidingprinciples 188; Developing reward strategy 189; Effective rewardstrategies 191; Reward strategy and line management capability 192 Contentslvii18 employee relations strategy193 employee relations strategy defined 193; Concerns of employeerelations strategy 194; Strategic directions 194; The background toemployee relations strategies 195; The HRM approach toemployee relations 195; Policy options 197; Formulatingemployee relations strategies 197; Partnership agreements 198.

8 employee voice strategies 200 PART 4 THE Strategic HR TOOLKIT1 Strategic Human Resource management toolkit205 References226 Subject index241 Author index246viiilContentsIntroductionStrateg ic Human Resource management (SHRM) is an approach to the devel-opment and implementation of HR strategies that are integrated withbusiness strategies and enable the organization to achieve its essence, Strategic HRM is conceptual ; it is a general notion of how inte-gration or fit between HR and business strategies is achieved, the benefitsof taking a longer-term view of where HR should be going and how to getthere, and how coherent and mutually supporting HR strategies should bedeveloped and implemented. Importantly, it is also about how members ofthe HR function should adopt a Strategic approach on a day-to-day means that they operate as part of the management team, ensure thatHR activities support the achievement of business strategies on a continuousbasis and are consciously concerned with seeing that their activities understand Strategic HRM it is first necessary to appreciate theconcepts of Human Resource management and strategy as covered inChapters 1 and 2 respectively in Part 1 (the framework of Strategic HR).

9 Theconcept of Strategic Human Resource management ( Strategic HRM) is thenexamined in detail in chapter 2 of the book is concerned with the roles of management and HR instrategic HRM and with the processes of developing and implementing HRstrategies. Part 3 covers each of the main areas of HR in which strategies aredeveloped. The book concludes with a toolkit providing guidance on devel-oping HR strategy through a Strategic PAGE HAS BEEN INTENTIONALLYLEFT BLANKPart 1 The conceptual frameworkof Strategic HRM34 THIS PAGE HAS BEEN INTENTIONALLYLEFT BLANK1 The concept of humanresource managementIn the first section of this chapter Human Resource management (HRM) isdefined in general and as a system. Its aims and characteristics are describedin later sections of the DEFINEDH uman Resource management is defined as a Strategic and coherentapproach to the management of an organization s most valued assets thepeople working there, who individually and collectively contribute to theachievement of its et al(2007) describe HRM as the management of work and peopletowards desired ends.

10 John Storey (1989) believes that HRM can beregarded as a set of interrelated policies with an ideological and philo-sophical underpinning . He suggests four aspects that constitute the mean-ingfulversion of HRM: 1) a particular constellation of beliefs andassumptions; 2) a Strategic thrust informing decisions about peoplemanagement; 3) the central involvement of line managers; and 4) relianceupon a set of levers to shape the employment relationship. HRM is furtherdefined by the two models of HRM developed by what might be describedas its founding matching model of HRMOne of the first explicit statements of the HRM concept was made by theMichigan School (Fombrun, Tichy and Devanna, 1984). They held that HRsystems and the organization structure should be managed in a way that iscongruent with organizational strategy (hence the name matching model ).