3 The concept of strategic human resource management As Baird and Meshoulam(1988)remark:'Business objectives are accom- plished when human resource practices,procedures and systems are developed and implemented based on organizational needs,that is,when a strategicperspectivetohuman resource management is adopted.The aim of this chapter is to explore what this involves.It includes 1)a definition of strategic human resource management(strategic HRM),2)an analysis of its underpinning concepts-the resource-based view and strategic fit,and 3)a description of how strategic HRM works,namely the universalistic,contin gency and configurational perspectives defined by Delery and Doty (1996) and the three approaches associated with those perspectives-best practice best fit and bundling.The chapter ends with discussions on the reality of strategic HRM and the practical implications of the theories reviewed earlier. STRATEGIC HRM DEFINED Strategic HRM is an approach that defines how the organization's goals will be achieved through people by means of HR strategies and integrated HR policies and practices
33 3 The concept of strategic human resource management As Baird and Meshoulam (1988) remark: ‘Business objectives are accomplished when human resource practices, procedures and systems are developed and implemented based on organizational needs, that is, when a strategic perspective to human resource management is adopted.’ The aim of this chapter is to explore what this involves. It includes 1) a definition of strategic human resource management (strategic HRM), 2) an analysis of its underpinning concepts – the resource-based view and strategic fit, and 3) a description of how strategic HRM works, namely the universalistic, contingency and configurational perspectives defined by Delery and Doty (1996) and the three approaches associated with those perspectives – best practice, best fit and bundling. The chapter ends with discussions on the reality of strategic HRM and the practical implications of the theories reviewed earlier. STRATEGIC HRM DEFINED Strategic HRM is an approach that defines how the organization’s goals will be achieved through people by means of HR strategies and integrated HR policies and practices
34 The conceptual framework of strategic HRM Other definitions of strategic HRM include: Strategic HRM is concerned with'seeing the people of the organization as a strategic resource for the achievement of competitive advantage (Hendry and Pettigrew,1986). 'A set of processes and activities jointly shared by human resources and line managers to solve people-related business problems'(Schuler and Walker,1990). The macro-organizational approach to viewing the role and function of HRM in the larger organization'(Butler et al,1991). 'The pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals'(Wright and McMahan,1992). 'Strategic HRM focuses on actions that differentiate the firm from its Tepuement thory that successful organizational performance depends on a close fit or alignment between business and human resource strategy'(Batt,2007). BASIS OF STRATEGIC HRM Strategic HRM is based on three propositions 1.The human resources or human capital of an organization play a 2.HR strategies should be integrated with business plans(vertical inte- gration).As Allen and White (2007)stress,'The central premise of strategic human resource management theory is that successful organi- zational performance depends on a close fit or alignment between business and human resource strategy.'Boxall et al (2007)also believe that The major focus of strategic HRM should be aligning HR with firm strategies. 3.Individual HR strategies should cohere by being linked to each other to provide mutual support (horizontal integration). Strategic HRM can be regarded as a mindset underpinned by certain concepts rather than a set of techniques.It provides the foundation for strategic reviews in which analysis of the organizational context and existing HR practices leads to choices on strategic plans for the developmentof overall or specific HR strategies(see Chapter 4).But strategic HRM is not just about strategic planning;it is also concerned with the implementation of
Other definitions of strategic HRM include: l Strategic HRM is concerned with ‘seeing the people of the organization as a strategic resource for the achievement of competitive advantage’ (Hendry and Pettigrew, 1986). l ‘A set of processes and activities jointly shared by human resources and line managers to solve people-related business problems’ (Schuler and Walker, 1990). l ‘The macro-organizational approach to viewing the role and function of HRM in the larger organization’ (Butler et al, 1991). l ‘The pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals’ (Wright and McMahan, 1992). l ‘Strategic HRM focuses on actions that differentiate the firm from its competitors’ (Purcell, 1999). l ‘The central premise of strategic human resource management theory is that successful organizational performance depends on a close fit or alignment between business and human resource strategy’ (Batt, 2007). BASIS OF STRATEGIC HRM Strategic HRM is based on three propositions: 1. The human resources or human capital of an organization play a strategic role in its success and are a major source of competitive advantage. 2. HR strategies should be integrated with business plans (vertical integration). As Allen and White (2007) stress, ‘The central premise of strategic human resource management theory is that successful organizational performance depends on a close fit or alignment between business and human resource strategy.’ Boxall et al (2007) also believe that ‘The major focus of strategic HRM should be aligning HR with firm strategies.’ 3. Individual HR strategies should cohere by being linked to each other to provide mutual support (horizontal integration). Strategic HRM can be regarded as a mindset underpinned by certain concepts rather than a set of techniques. It provides the foundation for strategic reviews in which analysis of the organizational context and existing HR practices leads to choices on strategic plans for the development of overall or specific HR strategies (see Chapter 4). But strategic HRM is not just about strategic planning; it is also concerned with the implementation of 34 l The conceptual framework of strategic HRM
The concept of strategic human resource management35 strategy and the strategic behaviour of HR specialists working with their line management colleagues on an everyday basis to ensure that the business PRINCIPLES OF STRATEGIC HRM Strategic HRM supplies a perspective on the way in which critical issues or success factors related to people can be addressed,and strategic decisions are made that have a major and long-term impact on the behaviour and success of the organization.It is not just concerned with'mirroring current condi tions or past practices'(Smith,1982).As a means of developing integrated HR strategies,strategic HRM is facilitated to the extent to which the following seven principles set out by Ondrack and Nininger(1984)are followed: 1.There is an overall purpose and the human resource dimensions of that purpose are evident. 2.A process of developing strategy within the organization exists and is understood,and there is explicit consideration of human resource dimensio 3. Effective linkages exist on a continuing basis to ensure the integration of human resource considerations with the organizational decision-making process. 4. The office of the chief executive provides the challenge for integrating human resource considerations to meet the needs of the business. 5.The organization of all levels establishes responsibility and accounta- bility for human resource management 6.Initiatives in the management of human resources are relevant to the needs of the business. 7.It includes the responsibility to identify and interact in the social political,technological and economic environments in which the organi- zation is and will be doing business. AIMS OF STRATEGIC HRM The fundamental aim of strategic HRM is to generate strategic capability by ensuring that the organization has the skilled,engaged and well-motivated employees it needs to achieve sustained competitive advantage.In accor- dance with the resource-based view as described later,the strategic goal will
strategy and the strategic behaviour of HR specialists working with their line management colleagues on an everyday basis to ensure that the business goals of the organization are achieved and its values are put into practice. The strategic role of HR professionals is examined in Chapter 5. PRINCIPLES OF STRATEGIC HRM Strategic HRM supplies a perspective on the way in which critical issues or success factors related to people can be addressed, and strategic decisions are made that have a major and long-term impact on the behaviour and success of the organization. It is not just concerned with ‘mirroring current conditions or past practices’ (Smith, 1982). As a means of developing integrated HR strategies, strategic HRM is facilitated to the extent to which the following seven principles set out by Ondrack and Nininger (1984) are followed: 1. There is an overall purpose and the human resource dimensions of that purpose are evident. 2. A process of developing strategy within the organization exists and is understood, and there is explicit consideration of human resource dimensions. 3. Effective linkages exist on a continuing basis to ensure the integration of human resource considerations with the organizational decision-making process. 4. The office of the chief executive provides the challenge for integrating human resource considerations to meet the needs of the business. 5. The organization of all levels establishes responsibility and accountability for human resource management. 6. Initiatives in the management of human resources are relevant to the needs of the business. 7. It includes the responsibility to identify and interact in the social, political, technological and economic environments in which the organization is and will be doing business. AIMS OF STRATEGIC HRM The fundamental aim of strategic HRM is to generate strategic capability by ensuring that the organization has the skilled, engaged and well-motivated employees it needs to achieve sustained competitive advantage. In accordance with the resource-based view as described later, the strategic goal will The concept of strategic human resource management l 35
36 The conceptual framework of strategic HRM be to 'create firms which are more intelligent and flexible than their competitors'(Boxall,1996)by hiring and developing more talented staff and by extending their skills base. Schuler(1992)states that: Strategic human resource management is largely about integration and adap- tation.Its concern is to ensure that:(1)human resources(HR)management is fully integrated with the strategy and strategic needs of the firm;(2)HR policies cohere both across policy areas and across hierarchies;and (3)HR practices are adjusted,accepted and used by line managers and employees as part of their everyday work. As Dyer and Holder(1988)remark,strategic HRM provides'unifying frame- works which are at once broad,contingency based and integrative'.The rationale for stra egic HRM is the perceived adva ntage of having an agreed and understood basis for developing and implementing approaches to people management that take into account the changing context in which the firm operates and its longer-term requirements.It has been suggested by Lengnick-Hall and Lengnick-Hall(1988,1990)that underlying this rational in a business is the concept of achieving competitive advantage through HRM. When onsidering the aims of strategic HRM it is necessary to address the issue of the extent to which HR strategy should take into account ethical considerations-the interests of all the stakeholders in the organization and employees in general,as well as owners and management and the responsi- bilities of the organization to the wider community. In Storey's (1989)terms 'soft strategic HRM'will place greater emphasis on the human-relations aspect of people management,stressing continuous development,communication,involvement,security of employment,the quality of working life and work-life balance.Hard strategic HRM'on the other hand will emphasize the yield to be obtained by investing in human resources in the interests of the busines Strategic HRM should attempt to achieve a proper balance between the hard and soft elements.All organiza tions exist to achieve a purpose,and they must ensure that they have the resources required to do so and that they use them effectively.But they should also take into account the human factors contained in the concept o soft strategic HRM.In the words of Quinn Mills(1983)they should plan with people in mind,taking into account the needs and aspirations of all the members of the organization.The problem is that hard cons iderations in many businesses will come first,leaving soft ones some way behind. Organizations must also consider their responsibilities to society in general on the grounds that because they draw resources from society they must give back to society.The exercise of corporate social responsibility
be to ‘create firms which are more intelligent and flexible than their competitors’ (Boxall, 1996) by hiring and developing more talented staff and by extending their skills base. Schuler (1992) states that: Strategic human resource management is largely about integration and adaptation. Its concern is to ensure that: (1) human resources (HR) management is fully integrated with the strategy and strategic needs of the firm; (2) HR policies cohere both across policy areas and across hierarchies; and (3) HR practices are adjusted, accepted and used by line managers and employees as part of their everyday work. As Dyer and Holder (1988) remark, strategic HRM provides ‘unifying frameworks which are at once broad, contingency based and integrative’. The rationale for strategic HRM is the perceived advantage of having an agreed and understood basis for developing and implementing approaches to people management that take into account the changing context in which the firm operates and its longer-term requirements. It has been suggested by Lengnick-Hall and Lengnick-Hall (1988, 1990) that underlying this rationale in a business is the concept of achieving competitive advantage through HRM. When considering the aims of strategic HRM it is necessary to address the issue of the extent to which HR strategy should take into account ethical considerations – the interests of all the stakeholders in the organization and employees in general, as well as owners and management and the responsibilities of the organization to the wider community. In Storey’s (1989) terms ‘soft strategic HRM’ will place greater emphasis on the human-relations aspect of people management, stressing continuous development, communication, involvement, security of employment, the quality of working life and work–life balance. ‘Hard strategic HRM’ on the other hand will emphasize the yield to be obtained by investing in human resources in the interests of the business. Strategic HRM should attempt to achieve a proper balance between the hard and soft elements. All organizations exist to achieve a purpose, and they must ensure that they have the resources required to do so and that they use them effectively. But they should also take into account the human factors contained in the concept of soft strategic HRM. In the words of Quinn Mills (1983) they should plan with people in mind, taking into account the needs and aspirations of all the members of the organization. The problem is that hard considerations in many businesses will come first, leaving soft ones some way behind. Organizations must also consider their responsibilities to society in general on the grounds that because they draw resources from society they must give back to society. The exercise of corporate social responsibility, 36 l The conceptual framework of strategic HRM
The concept of strategic human resource management37 defined by McWilliams,Siegel and Wright(2006)as'actions that appear to further some social good beyond the interests of the firm and that which is required by law',may be regarded as outside the scope of human resource management.But because e it relates to ethical actions in the interests people there is a strong link,and it is therefore an aspect of organizational behaviour that can legitimately be included in the strategic portfolio of HR specialists. CONCEPTS OF STRATEGIC HRM Strategic HRM is underpinned by three concepts,namely the resource-based view,strategic fit and strategic flexibility. The resource-based view To a large extent,the philosophy of strategic HRM is based on the resource- based view.This states that it is the range of resources in an organization including its human resources,that produces its unique character and creates competitive advantage (Hamel and Prahalad,1989).The resource- based view as developed by Penrose (1959)and expanded by Wernerfelt (1984)provides'adurablebasis forstrategy(Grant,1991)and buildson and provides a unifying framework for the field of strategic human resource management'(Kamoche,1996). Jay Barney(1991,1995)states that competitive advantage arises first when firms within an industry are heterogeneous with respect to the strategic resources they control and,second,when these resources are not perfectly mobile across firms and thus heterogeneity can be long-lasting.Creating sustained competitive advantage therefore depends on the unique resources and capabilities that a firm brings to competition in its environment.These resources include all the experience,knowledge,judgement,risk-taking propensity and wisdom of individuals associated with a firm.For a firm resource to have the potential for creating sustained competitive advantage it should have four attributes:it must be 1)valuable,2)rare,3)imperfectly i mitable and 4)non-substitutable. To discover these esources ar d capabil ities,managers must look inside their firm for valuable,rare and costly-to- imitate resources.and then exploit these resources through their organization. Wright and McMahan(1992)also argue that competitive advantage through people resources arises because 1)there is heterogeneity in their availability in the sense of the differences that exist between them across firms in an industry and 2)they are immobile in the sense that competing
defined by McWilliams, Siegel and Wright (2006) as ‘actions that appear to further some social good beyond the interests of the firm and that which is required by law’, may be regarded as outside the scope of human resource management. But because it relates to ethical actions in the interests of people there is a strong link, and it is therefore an aspect of organizational behaviour that can legitimately be included in the strategic portfolio of HR specialists. CONCEPTS OF STRATEGIC HRM Strategic HRM is underpinned by three concepts, namely the resource-based view, strategic fit and strategic flexibility. The resource-based view To a large extent, the philosophy of strategic HRM is based on the resourcebased view. This states that it is the range of resources in an organization, including its human resources, that produces its unique character and creates competitive advantage (Hamel and Prahalad, 1989). The resourcebased view as developed by Penrose (1959) and expanded by Wernerfelt (1984) provides ‘a durable basis for strategy’ (Grant, 1991) and ‘builds on and provides a unifying framework for the field of strategic human resource management’ (Kamoche, 1996). Jay Barney (1991, 1995) states that competitive advantage arises first when firms within an industry are heterogeneous with respect to the strategic resources they control and, second, when these resources are not perfectly mobile across firms and thus heterogeneity can be long-lasting. Creating sustained competitive advantage therefore depends on the unique resources and capabilities that a firm brings to competition in its environment. These resources include all the experience, knowledge, judgement, risk-taking propensity and wisdom of individuals associated with a firm. For a firm resource to have the potential for creating sustained competitive advantage it should have four attributes: it must be 1) valuable, 2) rare, 3) imperfectly imitable and 4) non-substitutable. To discover these resources and capabilities, managers must look inside their firm for valuable, rare and costly-toimitate resources, and then exploit these resources through their organization. Wright and McMahan (1992) also argue that competitive advantage through people resources arises because 1) there is heterogeneity in their availability in the sense of the differences that exist between them across firms in an industry and 2) they are immobile in the sense that competing The concept of strategic human resource management l 37