Strategic human resource practices

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Table of Contents

Introduction
Theoretical perspectives of SHRM
Determinants of Fit
Personal factors
Type of strategy
Values and culture
Conclusion
References

Introduction

Strategic human resource practices refer to an approach of managing human resource activities in a way that is in line with the organization’s strategy. It ensures that human capital policies and practices are designed and implemented in away that they eventually contribute to the efforts of an organization of achieving its objectives (Baird & Meshoulam 1988).

The concept of Fit refers to the congruence of HRM practices and business strategies as set up in an organization’s plan. It is divided in to two; horizontal fit which refers to the congruence and coordination between various HRM practices.

Vertical Fit refers a situation whereby the HR practices chosen by a firm are in line with the corporate strategy (Wei, 2006). In order to examine the lack coherence and consistency in the design and implementation of strategic human resource practices, it’s important to focus on the various perspectives/ approaches of SHRM.

Theoretical perspectives of SHRM

First there is resource-based view which states that a firm can have firm should own resources that are not identical to what its competitors have, as a result it will be able to use those resources to attain its competitive advantage (Barney, 1991). Therefore the resources should have the following qualities; valuable, non-substitutable, rare and cannot be easily imitated.

Some scholars have therefore argued that these resources are only met by human resources (Snell, Youndt & Wright 1996). Therefore employees that have those qualities are what the company should look for and not concentrate on pre-determined training. However some leading authors have argued that people is the only resource that is common to all organizations. (Barney & Wright, 1998)

Therefore it is the firm that should have technical HR activities that it can use to select employees who have high values. After selection it can use its strategic HR activities which are aligned to the firm’s unique strategies to train employees, hence ending up with human resources that are imitable (Huselid, Jackson and Schuler, 1997)

Secondly transaction cost perspective which assumes that there is lack of trust between the employee and the employer, particularly because every individual will always make decisions based on their self interest.

Therefore in order to get performance of the employee to the organization, the employee and employer should enter in to a contract that brings in trust. In addition it assumes that through the contract the organization will have minimized costs that are associated with decision making (Schuler & Jackson, 1987).

However the main challenge comes in determining ways of measuring performance as this is crucial in the signing of the contract. Particularly because, the management should be able to define performance in line with the firms strategy and in away that the employee can relate to. As a result they will be able to direct, monitor and motivate as well as refine performance (Salaman, Storey & Billsberry, 2005).

There are two theories that have been advanced as far as designing performance management systems is concerned: goal setting theory which explains that employees have goals that they pursue and this can play an important role in motivating performance. As the employees pursue their goals they will align their behaviours to organizational goals and as a result will attain organizational performance.

Therefore the HR department can integrate the organizational goals with the employees’ goals. However critics of this theory have instead suggested the expectancy theory, whereby an organization ties performance targets to the satisfaction expected by an employee when he/ she achieves certain goals (Salaman, Storey & Billsberry, 2005).

Third is universalistic theory; this explains that an organization can be able to use a set of universal HRM best practices and as a result achieve and sustain competitive advantage.

This perspective emphasize that some practices are better than others, every organization should use them (Brockbank, 1999). However many recent studies have faulted the universalistic perspective. It has been established that individual HR practices are less influential than bundles of practices (Huselid, 1995).

For instance bundles of HR practices used to promote employee commitment resulted in higher performance. For example, salaried compensation and decentralization of decision making (Arthur, 1994), investment in HR activities, for example employee participation and incentive compensation resulted in employees who are motivated as well as with developed skills.

This reduced staff turnover and increased productivity, as a result organizational performance was increased (Huselid, 1995). It therefore comes out that there are a set of interrelated HR practices that can be used to attain competitive advantage, however each of these sets are suitable in particular situations Boselie, Paauwe, & Jansen, 2001).

One thing that comes out clearly from these different arguments and theories is that understanding of the Fit concept and its determinants is crucial in the implementation of HR practices and strategies. The concept of Fit underlines that there should be congruence of bundles of HR practices that are used by any organization and that the bundles should be in line with the strategic objectives of the firm (Wei, 2006).

There are two types of Fit the horizontal and the vertical, whereby the horizontal refers to the congruence of the various HR practices chosen by the organization (Baird & Meshoulam 1988). The vertical Fit refers to a situation whereby the combination of all HR practices chosen by the organization is in line with its strategy (Schuler & Jackson 1987).

Determinants of Fit

HR functions factors: These include the HR policy; HR practices options and HRM budget. HR policy refers to the guiding principles on human resources and is to be examined if they are compatible with the HR practices that the firm uses. For instance here we examine what the priorities of the organization are concerning the different functions.

Particularly because if the HR department is the first to be targeted when cost are being reduced then no matter what good practices a firm has it will not achieve its objectives.

This also underlines the importance of the budget allocated to various HR practices. If they are to make a contribution in building the competitive advantages of the firm then they need to balance how they allocate finances among the HR practices based on priority (Wei, 2006).

Personal factors

For an organization to successfully implement its goals and strategies it is important it pays attention to the ability and skills of it employees. This can be examined in three levels: First, the HR manager capability, for how effective the design of the HR system and its implementation mostly depends on how capable the HR manager is.

Particularly because as an organization pursues its goals there will be environmental changes, therefore this requires the manager to be able to initiate changes such re-training of employees that will ensure that the organization is able to make necessary adjustments to its strategy. This means that the employees will be equipped with new skills that that they can use with the new HR practices (Wei & Lau 2005).

Second is the ability and support of senior managers, whereby the knowledge and ability of the top-level managers influences the support they will provide to the functional areas of the organization.

Therefore their understanding of the importance of the HR department in the formulation of business strategy will influence the support they provide. This can be support in the implementation of compatible HR practices and also it will determine the resources allocated to the HR function.

This therefore means that even if the HR professionals come up with effective design of the HR system its implementation largely depends on the top-level managers (Kane & Palmer 1995).

The third personal factor is employee knowledge and skill, whereby the performance of the HR system largely depends on how knowledgeable and skilful employees are. Particularly because the design and implementation revolves around them, in that the employees should have competencies that will enable them to carry out the various HR practices that are necessary to implement the business strategy.

In addition their desire to learn and acquire new knowledge and skills will also be a key factor, because if the employees are not interested in gaining the skills then it will be difficult to change their behaviour and this will be a hindrance in implementation of new strategy

Type of strategy

Type of strategy has an influence in the achievement of vertical Fit, particularly because different strategies require different HR practices. There are strategies which a business can use training as a HR practice to attain however some strategies cannot be achieved through pre-defined training. This is because some strategies are so complex such that creativity and flexibility of the employees matters so much.

For instance a firm adopting cost leadership strategy can attain it by training its employees on what is required of them and it will be successful. However if it wants to adopt differentiation strategy, training only will not help as this strategy is not as clear and certain as the cost leadership strategy (Martell, Gupta and Carroll 1996)

Values and culture

How quick an organization can achieve a vertical fit is highly dependent on the values and culture held in the organization. The HR department provides an advisory role to the management, therefore extent to which the management values the recommendations from this department will determine how compatible its HR practices will be with the organization strategy.

If the recommendations of the HR department are viewed as less important or minor then the HR professionals will be less motivated to come up with HR practices that are compatible with the organization’s corporate strategy as they may not be implemented (Wei & Lau 2005).

In addition the values and culture of an organization can determine how flexible it will be to adjust to changes. This means that if the organization has a culture of renewing its strategy and not sticking to traditional ways, then it will ready to embrace new HR practices from the HR department. The view of other functional departments on the HR department also will affect its ability to design compatible HR practices.

Particularly because the HR department also depends on the other functional heads to implement the new HR practices in their various departments. Therefore if they are willing to do so then vertical Fit will be easily achieved. However if not then the HR department will not be successful, as its efforts will be frustrated (Wei & Lau 2005).

Conclusion

In examining the designing and implementation of the SHRM practices based on theoretical perspectives of SHRM, it is evident that there is little or no at all agreement on the various theoretical practices. Resource based view underscores the importance of the internal resources of the organization yet it ignores the external factors in attaining competitive advantage.

Transaction cost focuses on tying the employee on an agreement of attaining performance, however the theory cannot bring out a definite standard on how performance is to be measured hence not achieving its objective effectively.

On the other hand universalistic perspective claims that there is a bundle of best HR practices that every firm should implement in order to achieve competitive advantage. However there are other studies that have faulted this theory by explaining that different bundles of HR practices are suitable for given situations.

As a result of these shortcomings firm should take into consideration the concept of Fit when designing and implementing their strategies and HR practices. This involves the horizontal Fit whereby there should be congruence of the various bundles of HR practices adopted by the firm and vertical Fit whereby the composition of the HR practices should be compatible with the corporate strategy.

References

Arthur, J. B. (1994). Effects of Human Resource Systems on Manufacturing Performance and Turnover. Academy of Management Journal, 37(3), 670-687.

Baird, L., & Meshoulam, I. (1988). Managing two fits of strategic human resource management. Academy of Management Review, 13(1), 116-128

Barney, J.B. (1991). Firm resource and sustainable competitive advantage. Journal of Management, 17(1), 99-120.

Boselie, P., Paauwe, J., & Jansen, P. (2001). Human resource management and Performance: lessons from the Netherlands. International Journal of Human Resource Management, 12(7), 1107-1125

Brockbank, W. (1999). If HR Were Really Strategically Proactive: Present and Future Directions in Hr’s Contribution to Competitive Advantage. Human Resource Management, 38(4), 337-352.

.Huselid, M. A. (1995). The Impact of Human Resource Management Practices on Turnover, Productivity and Corporate Financial Performance. Academy of Management Journal, 38(3), 635-672.

Huselid, M.A., Jackson, S.E., & Schuler, R.S. (1997). Technical and strategic human resource management effectiveness as determinants of firm performance. Academy of Management Journal, 40(1), 171-188

Kane, B., & Palmer, I. (1995). Strategic HRM or managing the employment relationship? International Journal of Manpower, 16(5/6), 6-21.

Martell, K., Gupta, A., & Carroll, S.J. (1996). Human resource management practices, business strategies, and firm performance: A test of strategy implementation theory. Irish Business and Administrative Research, 17(1), 18-35.

.Schuler, R.S., & Jackson, S.E. (1987). Linking competitive strategies with human resource management practices. Academy of Management Executive, 1(3), 207-219.

Snell, S.A., Youndt, M.A., & Wright, P.M. (1996). Establishing a framework for research in strategic human resource management: Merging resource theory and organisational learning. In J. Shaw, P. Kirkbride & K. Rowland (Eds.), Research in personnel and human resource management (Vol.14, 61-90). Greenwich, CT: JAI Press

Wei, L. (2006). Strategic Human Resource Management: Determinants of Fit, Research and Practice in Human Resource Management, 14(2), 49-60.

Wei, L.Q., & Lau, C.M. (2005). Market orientation, HRM importance and HRM competency: Determinants of SHRM in Chinese firms. International Journal of Human Resource Management, 16(10), 1901-1918.

Salaman, G. Storey, J. and Billsberry, J (2005). Strategic human resource management: theory and practice. London: SAGE

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