Strategic Human Resource Management

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Q. Critically analyse the article for the meaning of strategic human resource management

and identify the factors impacting on strategic human resource management in

contemporary organisations.

Before an argument can be put in place about whether human resource management

(HRM) can be strategic, we need to be aware that human resources (HR) is more then

maintaining personal functions. Corporate and economic developments since the

1950*ƒ*…½*ƒ‚¦s have dictated that businesses, to remain competitive, need to view HRM

as an evolutionary process which combines the HR functions with the HR policies and

strategies, with the business strategies and management teams, with all stakeholders

(Unions and Governments) and with the organisation and understanding of the actual

employees themselves. Strategic HRM is about aligning the abilities and desires of the

employee with the needs of the business so that the corporate objectives can be met. HRM

can no longer afford to be viewed as simply an administrative task. Corporations need to

have *ƒ*…½*ƒ’proactive*ƒ*…½*ƒ‚¦ policies to attract and retain the right type of people

to their business and in this ever changing and uncertain economic climate the

management of employees takes on an even greater role.

Using the VIRO (value, rareness, imitability, and organisation) human resources can be

proven to be strategic and therefore, provide firms with a competitive advantage through

its people. The article by Barney and Wright (On becoming a strategic partner: The role of

human resource management in gaining competitive advantage *ƒ*…½V page 32) states

that companies can achieve this competitive advantage on three levels, those being through

the use of physical capital resources, the organisational structure and the human capital

resources. The article by Schuler and Jackson titled *ƒ*…½*ƒ’Linking Competitive

Strategies with Human Resource Management Practices*ƒ*…½*ƒ‚¦ states on page 208

that competitive advantage can be achieved through innovation, quality enhancement and

cost reduction strategies all of which require certain specific employee behaviors to be

achieved. The consistent theme with the articles is that the actions and conduct of the

employees directly affects whether these forms of competitive advantage can be achieved.

Strategic HRM focuses on influencing the behaviors of the employee so that their activities

are aligned to achieving the corporate goals. The key is to identify the policies needed to

influence and guide employees so that this, working towards a similar goal, can be

achieved.

Value, first area covered by the VIRO model, focuses on minimising costs and

differentiating products offered. If your product is a service then you can differentiate it by

having well trained, competent and qualified staff that the clientele will like dealing with.

To achieve this you may need to implement HR policies such as certified training

programs. If your corporate strategy is to create value then the role of HR is to implement

strategies that will achieve adding value. These may be to cut costs and improve

production efficiency. HR may also add value to a firm by increasing revenues through

increased employee satisfaction and responsibility *ƒ*…½V linking an employees

remuneration to their individual and over all company performance is one method to

building an incentive for employees to generate revenues. The Barney and Wright article

provided an example of where a strategic HR choice (paying aircraft on-time bonuses to

employees) leads to both increased revenue (better service lead to more passengers

deciding to use that airline) and decreased costs (passenger accommodation expenses due

to late aircraft was reduced). If HR policies can add value to a corporation it clearly has a

need to be included in the corporate strategies.

Rareness, the fact that a resource is limited, can also provide firms with a competitive

advantage. The role of HR is to ensure that the characteristics of their human capital can

not be found elsewhere (such as with a competitor). In other words HR needs to *ƒ*…

½*ƒ‚§exploit*ƒ*…½*ƒ the rare characteristics of its workforce. For example, William M

Mercer Pty Limited emphasises the fact that it is one of the greatest employers of qualifies

Actuaries in the world meaning that if the rare mathematical skills of an Actuary are

required then the client would contact Mercer and not a competitor who would not have

the required skills. HR policies to achieve rareness include graduate recruitment programs

and ensuring that the skill of these sort of people (those with the rare skills) are being used

appropriately and not in a role that could be completed by some one less qualified and less

rare.

Strategic HR should also focus on ensuring that the characteristics of a firm are not easily

imitated or copied by others (imitability in the VIRO model). Creating a niche market for

your firm can be achieved by ensuring your product or service can not be provided by

another firm. The HR policies must be adapted so that the company is seen as unique,

these policies may be to provide greater decision making power and work place flexibility

to employees or to prosper initiative and communication between all stakeholders such as

the executive, the line-managers and the clients.

Finally in the VIRO framework, how the Organisation is structured can impact upon

achieving competitive advantage. The HRM team of a firm must work with senior and

middle management to that they have the right number of skilled people in the right place

at the correct time to meet the needs of the consumers. To achieve this, HR must recruit the

correct type of people (by providing career paths, competitive remuneration and training)

so that the specific jobs needed to achieve the corporate objectives, are being done. HR

also needs to establish what sort of internal management structure would best suit the

corporation, whether it be a flat system or a hierarchical arrangement. The chain of

command and organisational profile are critical to how employees are managed and to how

employees believe they fit into the company. Employee reporting lines, maintenance and

performance and appraisal should also be identified as requirements by the HR

departments.

Organisation also focuses on how the internal systems are structured *ƒ*…½V for

example does the company have computer systems in place. The role for HR is to ensure,

that if the company does have electronic systems, the employees have the necessary

competencies to use the systems effectively.

After reading about the VIRO framework, strategic human resource management could be

understood to mean; achieving a sustainable competitive advantage through the use of a

firms people by setting appropriate human resource strategy, inline with corporate strategy,

and then setting specific functional plans to implement the strategy. VIRO can be

considered a reasonable framework for the assessment of strategic HRM because it

incorporates the role HR has within the corporate level, the specific business unit and the

functions required to implement the strategies required by management. However, for

HRM to be strategic there needs to be long term planning where the business context is

defined, the future needs to achieve the requirements are outlined and plans to achieve

future objectives are set and continually monitored.

VIRO has a strong corporate philosophy and strategic human resources must also focus on

the needs of the individual employee, whether those needs be the understanding of

personal culture, personal development or other. However, the Barney and Wright article

does state that the growing importance and influence of HR policies and achievements on

organisational performance proves that HRM can be strategic. By improving the

performance and efficiency of your staff you can improve the operation and financial

performance of a business. This can also have the adverse affect *ƒ*…½V in that, poor

HR policies can lead to poor corporate results.

There are also a number of factors that impact upon the strategic HR policies set by

companies. These include the following:

Economic climate: during periods of recession companies may adopt policies of internal

recruitment and redundancy packages. Economic conditions can also dictate and influence

revenues and expenses meaning companies may have to limit their costs and budgets.

Government legislation: Laws covering topics such as equal employment opportunity,

sexual harassment, awards and pay scales all have an impact upon the type of strategic

human resource policies that can be set. For example a firm can not adopt a policy of only

recruiting male employees because they believe they are harder workers, as it would be a

breach of the law.

Trade Unions: The union influence on policy decision making is heavily reliant upon

which industry a corporation falls. However, the level of union influence should not be

under estimated, as union activity could prove devastating to a businesses activities.

Competitors and Clients: The HR policies should be set to ensure that the needs of the

clients are being met. Some clients are more demanding then others and policies should

reflect the companies desire to satisfy all clients to the best of their ability. HR policies

should also be inline if not above those of the companies competitors so that the firm

remains an employer of choice and maintains its competitive advantage.

However, the biggest challenges facing contemporary firms when trying to adopt strategic

HRM policies come from internal sources. Firms must be willing to change and be

progressive in their HR policies. Functions must be adopted by all the employees and then