strategic human resource management

strategic human resource management

The Impact of Strategic Human Resource Management on Organizational Success

1. Introduction to Strategic Human Resource Management

It is presumed that employees are a determinant of organizational success as employees act as agents for shareholder and director interests. Employees are fundamental to the course of any corporation. In the 21st century, references have been made to knowledge-based economies due to the rapid pace and simultaneous evolution, globalization, and freer trade that reduces barriers between economies. SHRM is stressed in government guidelines and legislations and strategies are adopted to achieve better commitments from employees, improve efficiencies, and enhance productivity in driving corporations to be effective and competitive. The traditional personnel management is being transformed into strategic human resource management, and human resources are now emphasized as sources of sustained competitive advantage. Expertise in attracting, hiring, training and utilizing the employees’ knowledge and skills that enable the organizations to execute its strategies represent sustained competitive advantages. Human resources are highlighted as a phrase to describe the productive capacity of the workforce, which in turn creates an organization’s distinctive capabilities.

Much research has been devoted to the study of the impact of strategy on organizational performance. Strategists who analyze opportunities and design and execute the organization’s capabilities make significant contributions to organizations. Despite extensive research, it remains difficult to explain with any precision why some organizations perform significantly better than others. Colleagues and competitors observe that successful organizations tend to emphasize more, and differently on, factors of strategic human resource management (SHRM) than less successful organizations.

2. Key Concepts and Theories in Strategic HRM

Strategic human resource management (SHRM) can be summarized as the direction and administration of the workforce that affects the activities of the organization. The aim of SHRM is to support the organization in achieving success. This entails strengthening employees by communicating the goals of the companies, guiding the workers to bonuses, and boosting their accomplishment. SHRM has drawn immense interest over the last several years because of the rising acceptance that human capital adds significantly to the organizational advantage. Some theories which underlie the concept of strategic human resources management are described in this chapter. The aim here is not to go into an in-depth literature examination on these concepts; rather, their significant concepts are explained. SHRM is articulated by the contingency principle and universalistic. These theories basically depend on employees, and they work on the presumption that it is their abilities and strategies that make the company work in a more intelligent way so they can make the business more successful in the short and long term.

3. Strategic HRM Practices and Their Implementation

However, for a firm to be successful in implementing these HRM practices, it needs to have certain unique characteristics. Inherent in this approach is that the firm has an ongoing and longstanding commitment to its human resources – an HRM cultural behavior. This implies that the firm sees strategic HR as a high priority. Such a strategic HRM focus denotes the way in which human resource management personnel, subfunctions, and systems at the business level in the firm’s value system and strength of employee net management as business-developed subfunctions and systems translate these strategic objectives into tangible employment behavior.

Although initial discussions of strategic HRM focused mainly on the integration of personnel with business strategy, most contemporary HRM research regards strategic HRM as a holistic concern for culture, human resources, and change. Thus, the selection, development, and use of employees are integrated and linked to strategic needs. The emphasis is on people rather than HRM. Thus, the practice focuses on integrating human resource functions such as hiring, training, and developing and rewarding people using strategic HRM policies. The employee expertise can provide a firm with a core competence that is unique to the firm. Employees are viewed in firms as matching capital that the firm needs to be successful. In addition, tracking and examining the performance of the human resources actions are necessary to ensure “an integrated, complementary set of employment behaviors.”

4. Measuring the Effectiveness of Strategic HRM

Following a more classical approach, other writers suggest that HRM effectiveness is being determined by four dimensions: HR staff expertise, employee reactions to HR issues, the influence of HR on managerial actions, and discussions at the strategic level by both human resources specialists and by non-HR managers. Using these dimensions, one size of HRM effectiveness will not fit all organizations. A study of organizations spanning a wide variety of industries and three different national cultures presents evidence of the multidimensionality of HRM effectiveness. Another more specific approach for measuring HRM effectiveness focuses attention on the role of the HR director and places expectations on the company directors. These expectations require the HR director to contribute at the strategic level of company domestic and international operations.

Some writers on the subject of strategic HRM offer a method which describes its measure effectiveness. Two components characterize this method. First, determine a perfect HRM system or benchmark results. Then evaluate the existing HRM results against the perfect system as a way to monitor progress. Comparing results and benchmarking is a familiar practice measures of effectiveness for all functional areas of management, including HRM and quality management. The authors view determining an HRM system at the benchmark level as a key concern in assessing strategic HRM contributions.

5. Case Studies and Examples of Successful Strategic HRM

Case examples listed in both 2001 and 2002 provided insights on how technology firms in general should manage their employees and included companies such as Google, Lucent Technologies, Sun Microsystems, Microsoft, and IBM. In 1997, Cisco was a decentralized company with many independent business units having responsibility for their own HRM activities. However, the decision was made in 1997 to centralize Cisco’s HRM activities. “We woke up one day in December 1997 and decided to centralize all of Cisco’s HR.” Prior to this change, there were some consultants who went around to the top levels of the company and convinced these executives that by increasing the role and power of HR professionals, they would experience significant synergies, leverage, and economies of scale. Of course, this centralization move led to a loss of power at the peripheral companies creating “the mother of all battles. We came to work every day with brass knuckles on.”

One of the leading firms in the area of strategic HRM is found in the high-technology and knowledge-management company Cisco Systems. This company had long been considered to be a model provider of HRM because of its constant stream of innovative HRM activities. However, even with this positive reputation, the company decided to take HRM to the next higher level and developed a sophisticated workforce strategy. Cisco did this as a response to the increase in global competition in its marketplace and the realization that success now depended on the community of its employees. Thus, key HRM functional areas such as recruitment and selection, performance management, development, compensation, retention, and succession planning had to be strategically modified to support the workforce strategy.