Strategic Human Resource Management: Objectives

1. To indicate the importance of the business context for understanding the meaning and application of SHRM To analyse the relationship between Strategic Management and SHRM To analyse the different approaches to SHRM The best-fit approach The configurational approach The resource-based view The best-practice approach To evaluate the relationship between SHRM and Performance Strategic Human Resource Management: Objectives

2. Any credible attempt at model building in SHRM involves taking a position on the difficult questions: (Boxall, 1996) What is strategy? (Content) Plan? Mission? Objectives? Journey? Other? How is Strategy formed? (Process) Classical, rational-planned approach Evolutionary Processual Systemic Other? (Whittington, 2001) Strategic HRM: Understanding the Business Context

3. Strategic HRM Table 2.1Whittington’s typology of strategy Source: Adapted from Whittington (2001: 39)

4. Choose an organisation you are familiar with, or use one of the case studies: BMW or Jet Airlines Conduct a SWOT analysis to identify Strengths and Weaknesses in the internal business environment: consider finances, market, operations, resources, customer relations Opportunities and Threats in the external environment: consider political, economic, social, technological, legal factors What is the key focus of the organisation’s business strategy? What strategic choices does the organisation need to make now? What implications would this have on the management of the organisation’s human resources? Strategic HRM: Analysing an Organisation

5. 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 Other? Changes in the internal environment E.g. Product failure / Quality problems Industrial unrest Other? Why do new strategies emerge? Strategic HRM: Intended versus Emergent Strategy

6. Review figure 2.2 (Mintzberg, 1987) Plot your personal development / career development on a time line, identifying the peaks and troughs Now analyse where you have not realised your intended personal development strategies i.e. changes in career, university, degree subject Identify the factors / processes that enabled new strategies to emerge What factors / processes do you think organisations need to take into account to successfully identify and implement emergent strategies? Strategic HRM: Analysing your career / personal development

7. Emphasises the contingent relationship or alignment between an organisation’s human resource policies and practices, and its business strategy and in turn the external context of the firm Vertical Integration where leverage is gained through HR procedures, policies and processes is therefore acknowledged as a key element of Best-fit and SHRM Life cycle models emphasise the alignment of appropriate HR policies and practices for the various life stages of a business. Competitive advantage models emphasise alignment of relevant HR policies and practices with generic competitive advantage strategies Much literature tends to emphasise tight fit, where senior management cascade strategic objectives down to functional areas. The role of HR here is restricted to effective implementation. Other writers (Torrington & Hall,1998) have noted the varying levels of integration, and the benefits of dialogue, a holistic approach or even a HR Driven approach! Strategic HRM:The Best-fit Approach

8. Compare and Contrast the approaches to SHRM advocated in a: Cost Reduction focussed strategy Fixed and explicit job descriptions Repetitive tasks, that emphasise specialisation and efficiency Short-term results driven appraisal / reward Basic skills training, limited development opportunities Quality focussed strategy Competency-driven job descriptions Involvement at job level Individual and group performance targets for reward Continuous training and development Can you identify any difficulties in applying this approach? Many organisations pursue hybrid strategies Fitting HR policies and practices to strategic focus of businesses in 21st century is more complex than suggested by Schuler & Jackson,1987 Strategic HRM:Competitive Advantage Models

9. Reliance on classical, rational-planning approach which does not recognise the inherently messy and emergent nature of strategy Reliance on determinism and generic competitive strategies Alignment in reality tends to focus on fit (Torrington & Hall, 1998) where HR is downstream of strategic activity Emphasis on the external context at expense of internal context Strategic HRM: Limitations of the Best-Fit Approach

10. Recognises the existence of hybrid strategies Recognises the limitations of focussing on vertical integration alone Recommends identification of internal set of HR practices, that are horizontally integrated to ensure synergistic benefits Which are in turn linked to the appropriate strategic configuration of the business Thus both horizontal and vertical integration are maximised Strategic HRM: The Configurational Approach

11. Represents a paradigm shift in SHRM thinking by focussing on the internal resources of the organisation Human resources are identified as key strategic assets Which are capable of being a key source of sustainable competitive advantage Strategic HRM: The Resource-based view

12. The VRIO Framework Value How can an organisation’s human resources add value to the business? How can they enhance customer added value? Rarity Adding value will at best only provide temporary competitive advantage, and may only provide competitive parity. The organisation needs to identify and exploit the rare characteristics of its human resources to gain competitive advantage. Inimitability Achieving value and rarity will only provide temporary competitive advantage over an organisation’s rivals. If a competitor can imitate these characteristics, CA will be lost over time. The organisation needs to develop and nurture characteristics that cannot be easily imitated by its competitors, such as socially complex phenomena, ie. Unique history or culture and team synergies. These are strengthened through causal ambiguity and social complexity. Organisation Finally to achieve SCA (Sustainable Competitive Advantage) the HR function needs to ensure they are organised or have appropriate integrated systems to capitalise on the value, rarity and inimitability of their human resources. Strategic HRM:The Resource-based view Barney & Wright, 2001

13. How did Nordstrom exploit the rare characteristics of its employees? Operates in highly competitive retail environment which is usually characterised by low skill and high turnover yet Nordstrom focusses on competence and attitude of individual salespeople to provide sustainable competitive advantage Attracts high calibre graduates to career in retailing High reward, upto twice the industry average Encourage employees to make a heroic effort to meet customer needs Taken a relatively homogeneous labour pool, and exploited rare characteristics to gain competitive advantage over rivals How did South West Airlines create a culture that was difficult to copy? Exploited inimitability of socially complex phenomena i.e. South West’s culture to gain competitive advantage Culture of fun and trust Employees empowered to do what it takes to meet customer needs Extensive selection process Empowerment reinforced by CEO Strategic HRM: Nordstrom and South West Airlines

14. Both approaches advocate that it is a firm’s ability to learn faster than its competitors that leads to sustainable competitive advantage Hamel & Prahalad identify the need to create the future through its core competencies Thus strategy goes beyond achieving ‘fit’ and resource allocation to achieving stretch and resource leverage through emphasising the importance of both tacit and explicit knowledge and the ability of employees to learn. Strategic HRM: Resource-based View and Knowledge-based Organisation

15. Hamel & Prahalad, 1994: 217-218 A core competency is: A bundle of skills and technologies that enable a company to provide particular benefits to customers Is not product specific Represents . . . The sum of learning across individual skill sets Must be competitively unique Is not an asset in the accounting sense of the word Represents a broad opportunity arena or gateway to the future Strategic HRM: The Knowledge- based view & Core Competency

16. Notion that set of HR best-practices, whether focussing on high commitment, high involvement or high performance, will contribute to enhanced organisational performance through Improved employee attitude and behaviours Improved morale Higher levels of skill Lower levels of turnover/absenteeism Which it is assumed leads to higher productivity/ profitabilty, enhanced quality of service and product and enhanced efficiency Strategic HRM: The Best-practice Approach

17. Universalists argue that all organisations will benefit and see improvements in organisational performance if they identify and gain commitment to a universal set of best HR practices The closer an organisation can get to the ideal set of best practices, the better the organisation will perform Pfeffer’s revised practices (1998) for buildingprofits by putting people first Employment security Selective hiring Extensive training Sharing information Self-managed teams / teamworking Reduction of status differentials High pay contingent on company performance Role of HR = gaining senior management commitment and ensuring effective implementation Strategic HRM: The best-practice approach and universalism

18. Recognises the need to examine and quantify the relationship between SHRM and organisational performance Emphasises the HRM system and the need to develop bundles of integrated HR practices that are tailored to meet an individual organisation’s specific context: Need to be aligned and integrated with each other To avoid deadly combinations of HR practices which work against each other The total HRM systems needs to support business priorities To gain full benefit from the powerful connections or synergies between practices Huselid, 1995 Strategic HRM: High performance Work Practices

19. Inconsistencies in defining what actually constitutes best HR practice In analysing the empirical evidence, it is difficult to confirm whether it is HR practices that lead to enhanced organisational performance, or whether strong organisational performance enables organisations to invest in Best-practice HRM Difficult to convince organisations operating within tight financial margins to invest in expensive HR practices In short-termist Western economies hard HR techniques tend to be justified in terms of the greater good of the organisation and increased return on shareholder value. Therefore difficult to justify cost of best HR practices, as benefits not always easy to quantify Tend to assume a unitarist perspective and ignore pluralist values Strategic HRM: Problems with operationalising Best-practice

20. Kaplan & Norton, 1996, 2001 The Balanced Scorecard relates critical non-financial factors to financial outcomes, by assisting firms to map key cause-effect linkages in their desired strategies Challenges the short-termism found in many Western traditional budgeting processes Emphasises the significance of the implementation stage of the strategy-making process: ‘business failure is seen to stem mostly from failing to implement and not from failing to have wonderful visions’. Kaplan & Norton, 2001:1 Adopts a stakeholder perspective, and identifies the need to satisfy investors, customers and employees Through setting objectives, measures, targets and initiatives in Financial: to succeed financially, how should we appear to our shareholders? Customer, to achieve our vision how should we appear to our customers? Internal Business Processes, to satisfy our shareholders and customers, what business processes must we excel at? Learning and Growth, to achive our vision, how will we sustain our ability to change and improve? Strategic HRM and Performance: The Balanced scorecard