STRATEGIC HUMAN RESOURCES MANAGEMENT

What is meant by a strategic approach to HRM? How can a strategic approach to HRM be a source of competitive advantage to an enterprise? Illustrate your view by reference to relevant literature and case studies drawn from GSN406 course materials.

The most powerful of the strategic configurations of power remains people... you must work on developing an organizational espirit de corp that aligns the hearts and minds of your staff with the aims of the business. (Boar 1997, p. 196)

Acronyms used in this paper: HR HRM SCA SHRM Human resources Human Resources Management Sustainable Competitive Advantage Strategic Human Resources Management

Student: Student no.: Unit: Assessment: Word limit ( 1000)

Jason D Bingham GSN406 HR Management Issues 1 (15% weighting) 1047 (excl. list of references etc.)

Strategic Human Resources Management

Lecturer: Due date:

Table of contents

Friday 25 May 2001

1.0Introduction.........................................................................................1 Definitions................................................................................................1 2.1 Human Resource Management...............................................................1 2.2 Strategic management .........................................................................1 Competitive advantage................................................................................1 Strategic approaches to HRM.....................................................................1 How SHRM can provide competitive advantage..........................................2 5.0 Validation of SHRM: Case studies of successful firms...........................3 SAP (Australia)...........................................................................................3 Delta Airlines (USA)....................................................................................3 Pepsi-Cola International..............................................................................3 Apple Computer (USA, Europe, Pacific).........................................................3 6.0 Conclusion...........................................................................................3 7.0 List of references.................................................................................5 Bibliography..............................................................................................6 Appendix I - Equal status organisational chart..........................................7

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1.0

Introduction

Human resources management in contemporary business is significantly different to traditional personnel management. Furthermore, many organisations now adopt a strategic approach to HRM in recognition of the competitive advantages that it can provide to the organisation as a whole. This essay discusses strategic approaches to HRM and how they can provide those advantages. It begins with some relevant definitions, moves to a discussion of broad SHRM frameworks, then proceeds to show how strategic approaches can provide competitive advantages for organisations. The essay concludes with a selection of illustrative case studies, followed by concluding comments.

Definitions
2.1 Human Resource Management

There are a plethora of definitions for human resources management (HRM). Two definitions cited by Cornelius (2001, p. 9) include: a) (HRM - the) critical management task is to align the formal structure and the HR systems (selection, appraisal, rewards and development) so that they can drive the strategic objectives of the organization. (Fobrum, Tichy and Devanna in Cornelius 2001, p. 9) b) (HRM) is directed mainly at the management needs for human resources (not necessarily of employees) to be provided and deployed. There is a greater emphasis on planning, monitoring, and control, rather than on problem-solving and mediation. It is totally identified with management interests, being a general management activity and is relatively distant from the workforce as a whole. (Torrington and Hall in Cornelius 2001, p. 9) 2.2 Strategic management

Viljoen and Dann (2000, p. 618) define strategic management as: The process of identifying, choosing and implementing activities that will enhance the long-term performance of an organisation by setting direction and by creating ongoing compatibility between the internal skills and resources of the organisation and the changing external environment within which it operates. Competitive advantage Viljoen and Dann (2000, p. 619) define sustainable competitive advantage (SCA) as longterm advantage over the organisations competitors which is achieved by offering unique value. Therefore, competitive advantage can reasonably be defined as per above, but not necessarily long-term/sustainable.

Strategic approaches to HRM

There are several broad approaches to strategic HRM, which can be grouped into the following three frameworks: 1

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a)

Universal (best practice): Focus is on broad aspects of the business environment. Suggest that a given set of HR practices or conditions will provide strategic/competitive advantage to any firm in any circumstances; Contingent (best fit): Focus is on specific business operating environments. Suggest that particular types of HR practices will provide competitive advantages for particular types of firms depending on their strategic environment and reaction to it; and Organisation-specific (unique): Focus is on the firm and its internal resources. Suggest that individual organisations contain unique and inimitable human capabilities that will provide sustainable competitive advantages. (Cornelius 2001, pp. 299-300)

b)

c)

How SHRM can provide competitive advantage

Based on the three broad frameworks, there are several approaches to how SHRM can provide competitive advantages to an organisation. They are discussed independently of each other below: a) Universal (best practice)

Organisations create competitive advantages by integrating a suitable HRM bundle of best practices into the firms overall structure. The HRM bundle typically includes high ground elements of HRM, some of which may include: A A A A goal goal goal goal of of of of employee commitment; organic structure and functional flexibility; quality; and integrating corporate objectives and HR objectives. (Guest 1987, p. 48) In theory, successful integration of the above practices into a firm will ultimately result in an environment in which HRM actually helps to determine strategy (rather than just implement it). The validity of this framework is commonly substantiated by drawing causal relationships between, for example, motivation and customer satisfaction, or other relevant factors (Cornelius 2001, p. 301). b) Contingent (best fit)

As per the best practice framework, except that in this instance best practice is contingent on the firms situational environment. The competitive environment, industry and workforce structure interact to create a specific context in which HRM adds competitive advantages (Cornelius 2001, p. 302). c) Organisation-specific (unique)

Dollinger (1999, pp. 56 et seq.) uses the resource-based theory of sustainable competitive advantage to posit that intellectual and human resources are sets of attributes (i.e. the knowledge, training and experience of a firms employees), and that they can provide the firm with sustainable competitive advantages. The firm must control the resources, and they must satisfy one or more of the following criteria:

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Valuable Rare Hard to copy Non-substitutable

They allow the exploitation of a market opportunity Rivals cannot also have access to these resources Rivals cannot simply duplicate or emulate the resources held No suitable substitutes for the resources held

Competitive advantages are best realised when the sets of attributes (e.g. of each individual employee) are strategically integrated in a manner that creates synergy (Wood et al. 2001, p. 6). This synergy is difficult for competitors to identify and duplicate because of the social complexity of individual organisations.

5.0Validation of SHRM: Case studies of successful firms

SAP (Australia) Annual employee conference where everyone participates in developing the Companys vision and strategy; Staff and managers jointly compile business plans; Staff and management jointly manage performance evaluations; and Bonuses linked to rated customer satisfaction system; (Davidson and Griffin 2000, p. 471) Delta Airlines (USA) HRM is a primary activity; Human resources are viewed as a core competency for competitiveness; HRM managers have access to the top job (i.e. CEO); and HR system correlates with resource-based theory of SCA (i.e. VRHN). (Swiercz and Spencer in Southey and Lewis 2000, p. 93) Pepsi-Cola International Adopts a common values approach to HRM, to enhance competitiveness; Has a multinational vocabulary that unites staff from different cultures and countries; and Has identified 11 success factors for performance measurement and management. (Schuler and Huselid in Southey and Lewis 2000, p. 158) Apple Computer (USA, Europe, Pacific) Adopted a growth/prospector/high-tech strategy for HRM; Facilitated rapid HR growth by fattening corporate structure to create opportunities while simultaneously maintaining innovative spirit; and Removed original founders in the best interest of the Co. and its strategies. (Anthony, Perrewe and Kacmar in Southey and Lewis 2000, p. 120)

6.0Conclusion
Organisations can realise significant benefits by adopting a strategic approach to HRM (i.e. an approach that closely interfaces with the broader strategies of the organisation). This 3

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Strategic Human Resources Management entails developing and implementing HR policies and practices that help to achieve organisational objectives, as compared to the traditional routines of personnel management. The policies and practices must be: constant enough to instill confidence in the employees; and

flexible enough to contribute and adapt to changing organisational priorities and strategic directions. (Davidson and Griffin 2000, pp. 472-473) Furthermore, HRM should be strategically positioned within the organisational structure (see appendix I for example) in such a manner that decisions are made and monitored at the highest levels of the organisation (Prahalad and Hamel 1990, p. 90).

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7.0List of references
Boar, B. H. (1997) Strategic Thinking for Information Technology, John Wiley & Sons, Brisbane. Cornelius, N. (2001) Human Resource Management, (2nd Ed.), Thomson Learning, London. Davidson, P. and Griffin, R. W. (2000) Management: Australia in a Global Context, (2nd Ed.) John Wiley & Sons, Brisbane. Dollinger, M. (1999) Entrepreneurship: Strategies and Resources, (2nd Ed.), Prentice Hall, Upper Saddle River: NJ. Guest, D. (1987) 'Human Resources Management and Industrial Relations', Journal of Management Studies, vol. 24, pp. 48-51. Prahalad, C. K. and Hamel, G. (1990) 'The core competence of the corporation', Harvard Business Review, vol. 3, pp. 79-91. Southey, G. N. and Lewis, M. J. (2000) GSN406 Study Guide and Resource Book, Queensland University of Technology, Brisbane. Viljoen, J. and Dann, S. (2000) Strategic Management: Planning and Implementing Successful Corporate Strategies, (3rd Ed.), Longman, Frenchs Forest. Wood, J., Wallace, J. and Zeffane, R. (2001) Organisational Behaviour: A Global Perspective, (2nd Ed.), John Wiley & Sons Australia, Milton: QLD.

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Bibliography
Anthony, W., Perrewe, P. and Kacmar, K. (1996) Strategic Human Resource Management, (2nd Ed.), Dryden, Fort Worth: TX, pp. 74-108. Schuler, R. and Huselid, M. (1997) HR strategy in the United States: examples of key issues identification and execution, in Tyson, S. (ed.) The Practice of Human Resource Strategy, Pitman, London, pp. 174-202. Swiercz, P. and Spencer, B. (1992) HRM and sustainable competitive advantage: lessons from Delta Air Lines. Human Resource Planning, 15(2), pp. 35-46.

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Appendix I - Equal status organisational chart

This is an example of an organisational chart where the company accords equal status to the function of HRM.

M H R M a n Pa gr o e d r u c t i o nM

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C rM

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O n& a D g eM r a n a g e

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rF M i n a a n n a c g e e

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