Strategic Human Resource Management

Before describing the nature of strategic human resource management (SHRM), it is useful to understand the meaning of strategic management itself.

By strategy we mean future-oriented plan for interacting with the competitive environment to achieve organizational goals. Strategy is a framework for managerial decisions. It reflects a firm’s awareness of how, when and where it should compete and for what purpose it should compete. The focus is on managing competition. By implication, sans competition firms may not need strategies at all, as was reflected in the business environment in Japan prior to 1990s. Operating in a highly protected environment, organizations had no rivals to encounter, no challenges to face, and no problems to worry about. Whatever was produced was grabbed by the markets. Strategies hardly had any relevance during those days.

Strategic management refers to the process of crafting strategies, their implementation and evaluation of their effectiveness. The aim of SHRM is to ensure that HR strategy is not a means but an end in itself as far as business objectives are concerned. Experts have given their own perspectives about strategic management. But the one we have given here serves our purpose well.

What is to be emphasized is that at the core of the strategic management process is a team comprising the CEO aided by top executives. For example, the core team that formulated and executed the strategic takeover of Corus by Tata Steel consisted of Ratan Tata, the CEO, Muthuraman, M.D. Tata Steel, Arunkumar Gandhi, Head of the M&A cell of the Tata Group and Koushik Chatterjee, VP Finance, Tata Steel.

Strategic human resource management refers to the process of developing practices, programs and policies that help achieve of organizational objectives. What is essential is that these programs, policies and practices need to be aligned with organizational strategies.

Specifically, strategic human resource management involves that-

1. Human resource management is fully integrated with the strategy and the strategic needs of the firm;

2. Human resource policies cohere both across policy areas and across hierarchies;

3. Human resource architecture of the firm results in its above-average financial performance. HR architecture is composed of the systems, practices, competencies and employee performance behaviors that reflect the development and management of the firm’s human resource; and

4. Human resource practices are adjusted, accepted, and used by line managers and employees as part of their everyday work.

It is not that the HR manager himself/herself formulates strategies. He or she will be the member of a core team which formulates company strategies and ensures their implementation. To be full fledged strategic partners with senior management, HR executives should compel and guide serious discussion on how the company should be organized to carry out its strategy. Four roles of HR executives are relevant in this context:

First, HR should define an organization’s architecture. In other words, it should identify the underlying model of the company’s way of doing business. More specifically, the architecture is a judicious mix of structure, systems, rewards, processes, people, styles, skills and shared values. After the architecture is defined it needs to be articulated explicitly. Without such clarity, managers tend to become more myopic about how the company runs.

Second, HR needs to be accountable for conducting an organizational audit. Audit helps identify which components of architecture should be changed in order to facilitate strategy execution.

The third role of HR as a strategic partner is to identify methods for renovating the parts of the organizational architecture that need it. In other words, HR manager should be assigned to take the lead in proposing, creating and debating best practices that can help implement strategies.

Fourth and finally, HR must take stock of its own work and set clear priorities. At any given time, the HR staff might have several initiatives in its sights, such as pay-for-performance, global team work, and action-learning development experiences. But to be truly tied to business outcomes, HR needs to join forces with line managers to continuously assess the impact and importance of each one of these initiatives. The nature of strategic HRM become more clear when it is contrasted with traditional HRM.