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The Impact of Strategic Human Resource Management on Organizational

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Golden Gate University

MGT 370
Strategic Human Resources Management

Prof Felicia Harris-Foster

Maha Yousry Hanno

The Impact of Strategic Human Resource Management

on Organizational Performance

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MGT: 370 - Strategic Human Resources Management

The Impact of Strategic Human Resource Management

on Organizational Performance

Organizations are seeking to create much competition between them, taking more market, more
customers, more sales, etc. Rapid changes stemming from globalization, advancement of
information systems and other factors have caused higher competition. Many organizations are
driven by the market to set their goals in their performance. Some of the goals are: cost reduction,
achieving sales levels, increasing the number of customers, increasing the market percentage,
improving productivity and quality, innovative products. The realization of these goals will be
achieved through the human resources management in organizations. Workforce, as the key to
success, will enable the achievement of organizational performance.

Human resources are regarded as one of the most important sources of today's firms. Human
resources management is more important than other competitive sources because these people use
other assets in organization, create competitiveness and realize objectives. Thus firstly,
organizations must understand the expectations of their workforce in order to achieve the desired
performance. The realization of the expectations of employees will enable the desired behavior of
employees in the organization. Some of the desired outcomes of the organization in managing their
workforce are: competence, cooperation of employees with managers, cooperation of employees
between them, showing the capabilities of employees; motivation, commitment and satisfaction;
attitude and presence; employee behaviors.

The overall goal of performance management is to create a culture as high performance in which
individuals and teams to take responsibility for the continuous improvement of business processes
and their skills and contribute in achieving the targets set by managers. In particular, management
performance can be expressed as the approximation of individual objectives of employees with
organizational objectives provided that employees support the culture of the organization. It
provides for expectations to be defined and agreed in terms of role responsibilities and
accountabilities (expected to do), skills (expected to have) and behaviors (expected to
be)(Armstrong, 2006).

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MGT: 370 - Strategic Human Resources Management

The purpose of strategic human resource management is to improve business performance through
people management. The organizations need to manage their human resources effectively and
efficiently to achieve the desired goals and objectives. The achievement the goals and objectives
translate also in better performance. So, the issues raised for discussion are: How should
organizations manage their main source – human resources? Does strategic human resource
management help to meet the needs, the goals and objectives of the business? As should be adapted
strategic human resource management to realize the performance? How should adapt strategic
management of human resources to increase organizational performance?

Strategic HRM is a process that involves the use of overarching approaches to the development of
HR strategies, which are integrated vertically with the business strategy and horizontally with one
another. These strategies define intentions and plans related to the overall organizational
considerations, such as organizational effectiveness, and to more specific aspects of people
management, such as; resourcing, learning and development, reward and employee relations.
Strategic HRM focuses on actions that differentiate the firm from its competitors (Purcell, 1999).
It is suggested by Hendry and Pettigrew (1986) that it has seven meanings:

• the use of planning; • a coherent approach to the design and management of personnel; • systems
based on an employment policy and workforce strategy; • often underpinned by a “philosophy”; •
matching HRM activities and policies to some explicit business strategy; • seeing the people of
the organization as a strategic resource; • achievement of competitive advantage (Armstrong,
2006). Strategic HRM has a clear focus on implementing strategic change and growing the skill
base of the organization to ensure that the organization can compete effectively in the future
(Holbeche, 2004). SHRM facilitates the development of a human capital that meets the
requirements of business competitive strategy, so that organizational goals and mission will be
achieved (Guest, 1987). Strategy of human resource management is an integral part of business
strategy. The main focus of this strategy is to achieve organizational objectives. So, strategy, then,
is a set of strategic choices, some of which may be formally planned. It is inevitable that much, if
not most, of a firm’s strategy emerges in a stream of action over time (Boxall and Purcell, 2003).

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MGT: 370 - Strategic Human Resources Management

Organizational performance is one of the most broadly and extensively used dependent variables
in organizational studies today, and yet, at the same time, it remains one of the most imprecise and
loosely-defined constructs (Rogers and Wright, 1998). In the strategy literature, the focus of
attention on this construct has been concerned almost entirely with financial measures of
performance. Conceptually, organizational performance has been defined as the comparison of the
value produced by a company with the value owners expected to receive from the company
(Alchian and Demsetz 1972). Venkatraman and Ramanujam (1986) indicate that a narrow
definition of performance focus on the use of simple outcome-based financial indicators that are
assumed to reflect the fulfillment of the economic goals of the firm.

Research between strategic HRM and business performance has dominated the academic and
practitioner debate for more than two decades. However, most studies and publications in the field
of HRM have defined the concept in terms of individual practices. According to Noe et al. (2007),
refers HRM practices and policies that influence behaviors, attitudes and performance of
employees. They are focused on several important practices which, in turn, can positively impact
organizational performance, such as human resource planning, recruitment, selection, training and
development, compensation, performance management and employee relations. Pfeffer reshapes
these practices into seven HRM practices; these practices are expected to enhance organizational
performance and enable the organization to gain a competitive advantage (1998). Such practices
are detailed as follows (Boxall, Purcell and Wright, 2007): o Employment security. o Selective
hiring of new personnel. o Self-managed teams and decentralization of decision-making as the
basic principles of organizational design. o Comparatively high compensation contingent on
organizational performance. o Extensive training. o Reduce status distinctions and barriers,
including dress, language, office arrangements, and wage differences across levels. o Extensive
sharing of financial and performance information throughout the organization.

Strategic management of human resources represents a transformation that is relatively new in the
field of human resource management. An important role of strategic human resource management
is about focusing the management in employees as a tool to gain competitive advantage. Now,
organizations are made aware that successful human resources policies and practices of

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MGT: 370 - Strategic Human Resources Management

appropriate can increase performance in various areas such as productivity, quality and financial
performance.

Performance management is a planned process in which key elements are different measurement,
feedback, positive reinforcement and ongoing dialogue between managers and employees. It has
to do with measurement results in the form of performance achieved in comparison with the
expectations expressed as objectives. Also, it has to do with the inputs and values. Inputs are the
knowledge, skills and behaviors necessary to produce the expected results. Needs are identified by
defining these requirements and evaluate the degree to which the expected levels of performance
are achieved through effective use of knowledge and skills, appropriate behavior.

Performance management strategy has to do with all the business and not just the managers. So
managers are not only responsible for delivering the required performance. Managers should have
the confidence to distribute authority and responsibility throughout the organization. In a sense,
managers need to collaborate and consider as part of their own people in order to report on
achieving the required performance. Managers and their teams are jointly responsible for the
results and are both involved in agreeing what they should do and how they should do it.
Performance management processes are part of sweeping across the organization. Managers and
other employees of the organization should work together to jointly commit to achieving the
performance.

In conclusion, organizations are trying to create as much competitive in the market, reaching to
manage their human resources in achieving organizational performance required. Some of the
goals are cost reduction, achieving sales levels, increasing the number of customers, increasing the
market percentage, increasing product quality, innovative products, improve productivity. Human
resources are playing an important role in achieving these performance indicators. But before that,
organizations should realize the expectations required from employees and so the employees show
their skills, be motivated and behave in the manner required by the organization to achieve
performance. Strategic HRM is a detailed process for human resource management throughout the
organization that it’s integrated with the organization's overall strategy. It enables the organization

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MGT: 370 - Strategic Human Resources Management

having employees with the right skills and putting them in positions according to the level of their
qualification and skills.

Different authors have tried to give different definitions for organizational performance. In
general, organizational performance is related to the achievement of the objectives required by the
organization. The achieving organizational performance is a result of the behavior of employees
in the organization. Policies and practices of organizations motivate employees and they give
impact on organizational performance. Some of these are: human resource planning, recruitment,
selection, training and development, compensation, performance management and employee
relations. A link between Strategic HRM and organizational performance has been developed by
author Michael Armstrong. According to him, the performance is a function of the Ability +
Motivation + Opportunity (AMO). By achieving the expectations of employees, it will be reached
the performance required by the organization. Organizations need to consider human resource as
a tool to gain competitive advantage needed to create appropriate policies and practices.

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 MGT: 370 - Strategic Human Resources Management

References

Alchian, A. A., & Demsetz, H. (1972). Production, information costs, and economic organization. American
Economic Review, 62 (December), 777-795.
Armstrong, M. (2006). A Handbook of Human resource management practice. 10th edition. Cambridge
University Press.
Armstrong, M. (2006). Performance management: key strategies and practical guidelines. 3 th edition.
Kogan Page Limited.
Armstrong, M. (2006). Strategic human resource management: A guide to action. 3th edition. Thomson-
Shore, Inc.
Lance, C. E. (1994). Test of a latent structure of performance ratings derived from Wherry’s (1952) theory
of ratings. Journal of Management, 20, 757–771.
Lifson, K. A. (1953). Errors in time-study judgments of industrial work pace. Psychological Monographs, 67
(355).
Noe, R., Hollenbeck, J. R., Gerhart, B., and Wright, P. M. (2007). Fundamentals of human resource
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MA, McGraw Hill. Pfeffer, J., (1998). Seven practices of successful organizations. California Management
Review, 40(2), 96–124.
Purcell, J. (1999). High commitment management and the link with contingent workers: implications for
strategic human resource management. Research in Personnel and Human Resources
Management.
Rogers, E. W., & Wright, P. M. (1998). Measuring organizational performance in strategic human resource
management: Problems, prospects, and performance information markets. Human Resource
Management Review, 8 (3), 311.
Ronan, W. W. & Prien, E. P. (1971). Perspectives on the measurement of human performance. New York:
Appleton-Century-Croft.
Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research:
A comparison of approaches. Academy of Management Review, 11, 801-814.

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