STRATEGIC HUMAN RESOURCE

MANAGEMENT

⦿ Strategy is an ambiguous term.

◉ Johnson and Scholes define strategy as the direction
and scope of organizations over the long-term within a
challenging environment whereby through the
configuration of resources the needs of the markets are
met and the stakeholders’ expectations are fulfilled in
 order to achieve an advantage.

◉ Nonetheless, strategy is applied unique to each levels of

the organizations such as corporate, business unit and
operational.

◉ Currently, the term ‘strategy’ is associated with every

function of the organizations that purports on turning
strategies into actions as a key to achieve cost and
competitive advantages.
 What is SHRM?
Strategic human resource management (strategic HRM,
or SHRM) is an approach to managing human resources that
supports long-term business goals and outcomes with a
strategic framework.

Analyze the opportunities and threats existing in the external environment.

Implement the strategies so formulated.

Formulate strategies that will match the organization's (internal) strengths

and weaknesses with environmental (external) threats and opportunities

Evaluate and control activities to ensure that organization's objectives are

duly achieved.
 BENEFITS OF SHRM
◉ Allows identification, prioritization and exploitation of
opportunities. Provides an objective view of management
problems.
◉ Represents a framework for improved co-ordination and control
of activities. Minimizes the effects of adverse conditions and
changes.
◉ Allows major decisions to better support established objectives.
◉ Allows more effective allocation of time and resources to identified
opportunities.
◉ Allows fewer resources and lesser time to be devoted to correcting
erroneous or adhoc decisions.
◉ Creates a framework for internal communication among
personnel.
◉ Helps to integrate the behaviors of individuals into a total effort.
◉ Provides a basis for the clarification of individual responsibilities.
 ❑ There is no one answer about what is competitive advantage or one
way to measure it, and for the right reason. Nearly everything can be
considered as competitive edge, e.g. higher profit margin, greater
return on assets, valuable resource such as brand reputation or
unique competence in producing jet engines. Every company must
have at least one advantage to successfully compete in the market. If a
company can’t identify one or just doesn’t possess it, competitors
soon outperform it and force the business to leave the market.
❑ There are many ways to achieve
the advantage but only two basic
types of it: cost and differentiation
advantage. A company that is able
to achieve superiority in cost and
differentiation is able to offer
consumers the products at lower
costs or with higher degree of
differentiation and most
importantly, is able to compete
with its rivals.
 How a firm can achieve
competitive advantage?

Thrau gh extern
al By develapin g it in side
ch an ges

•Ch an ges in PEST • VRIO Resources

factors • Unique Campeten cies
•Firm’s ability to respan • In navative Capa
d fast to chan ges

Two basic types of

competitive advantage
Cast advantage Differentiation advantage
 COST
ADVANTA
A Cost Advantage is where the company has decided
het cheapest product on the market. This
to create tegy

E
requires the product to be commoditized and take
advantage of the economies of large scale. Usually there
can only be one Cost Advantage within an industry.
When you choose the Cost Advantage strategy, you must
ensure that your product meets the minimum
requirements of the market. If your product does not meet
these requirements, you will be forced to drop your prices
even lower.
 Differentiation
The Differentiation strategy is where a company decides to
choose a certain attribute of the product to focus on. In order to
make this strategy work you have to select an attribute that a big
enough section of the market care about enough in order to pay
a premium price for your product.
Unlike the Cost Advantages strategy, the Differentiation
strategy allows multiple products to co-exist as long as they
concentrate on different attributes.
In order to make the Differentiation strategy work, you must
ensure that the premium price you are able to charge is
enough to cover your costs of focusing on the chosen attribute.
If the attribute you choose to focus on is not valued highly
enough by the market, you will end up with below average
returns.
OF SHRM
◉ Nonetheless, despite universalistic, contingency or
configurationally approaches, SHRM is an
important element of achieving the competitive edge
in terms of quality, cost and flexibility.

◉ SHRM puts human at the center. When we say ‘human’,

it does not necessarily mean the employees, but embracing
also those people whom the organizations does business
with.
 From a resource-based perspective, there are various
categories of resources that SHRM can build upon to gain
the so-called advantage such as :

Physical

Human
resources Organiza-tional

SHR
M

Technolo-gical Financial
•Through them, sustainable
competitive advantage, or
the achievement of value-
creating strategies that direct
and indirect rivals could not
implement, could be
achieved.

•The sustainable competitive

advantage potential
of human resources is central
on the premises that human
resources are valuable, rare,
inimitable and
non-substitutable.
As valuable resources, human resources are heterogeneous
◉ organizations require different jobs which require different skills as
well as differing in types and level of idiosyncratic skills. As such, the
variance placed on the contribution of individuals to the
organizations means to provide value at diverse degrees.

◉ The rarity of high quality and ability workers is due to their skills
and competency levels and the supposedly normal distribution of
skills, competencies, expertise and capabilities.

◉ For the human asset to be imitated, competitors should be able to

identify the exact source of such and duplicate exactly the elements
of the human capital.

◉ In addition, human resources should not be imperfectly mobile so

that they cannot be traded.

◉ Lastly, for the human resources to be able to provide

sustainable competitive advantage, they must not be
substitutable.
 Achieving competitive advantage is based on the collective
practices within that are intended for the outside
environment which otherwise cannot be achieved or limited
through HRM alone. These are :

◉ employment security
◉ recruitment selectivity
◉ high wages
◉ incentive pay
◉ employee ownership
◉ information sharing
◉ participation and empowerment
◉ self-managed teams
◉ training and skills development
◉ cross-utilization and cross-training symbolic egalitarianism
◉ wage compression and promotion from within
employment
security

In the Times Guide,

Killian Hurley, MD of
property developer
Mount Anvil reported
an increase in staff
engagement through
heightened job
security following a
net drop in earnings
after investment in a
new development
project instead of
paying bonuses
 Training and skills
development

In the Training and

Development category,
Blue Rubicon funded
training for everyone and
the result is that 87% of
staff report that the firm is
good for personal growth
and consider the
experience gained is
valuable for the future.
self-managed teams & Qedis, a management
consultancy, formed
information sharing
‘families’ of between
12 and 20 staff.
All
participated and no-one
held any special status
in the family.The
families had three roles:
communications, social
events and work
scheduling. Qedis
scores 90% for
employees going out of
their way to help
colleagues achieve in
their work.
What Makes a Good Firm

A good firm is one

in which there is
enough gross Is it the gross margin that
margin to fund releases the funds or the
activities such as activities that motivate
staff development and engage staff such that
increased competitive and
and to allow cost advantage follow?
employees time to
assist one another.
Management need
to be awake to the
benefits to be had in
such activities.
 The truth is that the cycle has
to start somewhere. The start
point is that the principal has to
believe that there’s benefit to
be had and take the first step.
The Essential Equation

An individual’s performance
(and with that the firm’s
performance as an aggregate of
all employees) is given by the
equation:
P = f(A, M, O)
{result P is dependent on
variables A, M and O}
P is performance, A is ability, M
is motivation and O is
opportunity. People perform
well when they have the
necessary competence or ability.
Competence is skills modified by
knowledge.
Competitive advantage is also realized when:
◉ the organizations through SHRM is continuously
investing on its reputation or image stressing the need
for sound human resource policies and practices and
aligning such with the business strategies and its
external context.

◉ The focus is both on cost

and quality whereby there
are definite processes,
systems and procedures th at
consolidates competencies,
continuous education,
proficient performance at
individual and collegial
levels and balance monetar y
and non-monetary reward
systems.
It is also through SHRM that
the creation of an inclusive
workforce is plausible since :

◉ there are structured

opportunities for sharing and
self- disclosure,
◉ increased understanding of
the cultural diversity,
◉ demonstrated flexibility for
varying needs and preferences,
◉ demonstrated unwritten rules
and mutually-satisfying conflict
resolution system
⦿ HRM are also centered on HUMAN as an integral asset while
neglecting the key factor of NURTURING relationships with
them and between them makes HRM a shallow endeavor
THOUGH it is not to say that HRM is FUTILE.

⦿ There are still inconsistencies of defining what

ACTUALLY CONSTITUTES the best HR practices per se
MUCH more taking on a holistic approach to
managing people and managing relationships between
these people.

⦿ FURTHER, HRM are aligned only to specific

ORGANIZATIONAL context SUCH as the needs of
the employees, its contradicting ideologies, the
INADEQUACY of HRM systems and lack of
synergy between HR practices.
 HRM Vs Strategic HRM
HRM is Human Resources Management which is a approach to
the management of employees. HRM involves the process of employing people,
developing their skills/capacities, and utilizing their services. But today, HRM
has come across many changes, and the latest one is the Strategic HRM which
is the most powerful idea currently. Strategic HRM can be termed as a branch
of HRM.

❖ In HRM, traditional methods are followed. On the other hand In Strategic

HRM, there are specific rules specified for specialized fields.

❖ In HRM, there are no separate people for different areas whereas in

Strategic HRM there are different people who are skilled in specific
areas.

❖As the term itself denotes, Strategic HRM deals with strategic aspects of
HRM. Unlike HRM, Strategic HRM mainly focuses on the programs
with
long-term objectives.
❖ Unlike the traditional HRM, Strategic HRM uses more sophisticated methods for
improving overall employee motivation and productivity. Unlike the traditional
HRM,
Strategic HRM uses more systematic tools.
 Summary:

1. HRM involves the process of employing people, developing their

skills/capacities, and utilizing their services. Strategic HRM can be termed as a
branch of HRM.
2. While traditional HRM focuses mainly on employee relations, Strategic
HRM focuses on partnerships with internal and external customers.
3. When HRM has only short-term goals, Strategic HRM is for long-term goals.
4. When HRM has staff specialists, Strategic HTM has line managers.
5. When considering job design, there is a tight division of labour and
independence specialization in HRM. On the other hand, job division in Strategic
HRM is flexible.
HRM SHRM
⦿ The framework presented how manage human resources
strategically as an integral part of the strategic planning
process. Executives should consciously formulate human
resource strategies and practices that are linked to and
reinforce the broader strategic posture of the organization.
⦿ The framework consists of:

Determining and Identifying and Maintaining or

focusing on desired implementing enhancing
strategic outcomes essential human competitive
resource management advantage
actions
 The strategic approach to human resource
management includes:

Assessing the
organization's Formulating the human
Comparing the resource strategy based on
environment and current inventory the differences between the
mission of human assessed requirements and
resources the current inventory

Assessing the human

Formulating the
resources Implementing the
organization's requirements based appropriate human resource
business strategy on the intended practices to reinforce the
strategy strategy and attain
competitive advantage
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