Strategic human resource management and organizational performance alignment

Role of SHRM

Strategic human resource management (SHRM) plays a vital role in organizational strategies and goals. Once organizational strategies and goals are determined, the human resource strategies and goals must align with organizational before financial performance and outcomes can be achieved. Research identified best practices based on business differentiation (Wright, 2008). Whether a company uses a commitment strategy or a control strategy depends on the organizational strategy the business uses.

HRM Strategy vs. Organizational Strategy

Strategic Human Resource Management links the human resource function with the organizational strategies to improve the organizational performance (Bratton). The strategic management model consists of steps of missions and goals, environmental analysis, strategy formulation, strategy implementation, and strategy evaluation. Strategy implementation involves human resources because the implementation requires staff members to implement the strategy. Therefore, human resource management strategy is based on the organizational strategies.

Focus of HR Strategy

The focus of HR strategy is on performance. This includes employees having skills, competencies, and abilities, where they feel committed, engaged, and motivated, and come to work, be productive, serve customers, and stay with the organization. Research has identified best strategy for business differentiation as the commitment strategy (Wright, 2008). It consists of broadly defined tasks, high levels of employee participation, highly skilled workers, extensive training, high wages, and high benefits.

The value matrix approach enables the ability to implement four possible HR strategies (commitment, performance, compliance, and partnership) to four distinct job groups (strategic, core, support, and collaborative). It enables the HR strategy to distinguish skill sets in terms of value to the firm and uniqueness in the labor market. It also identifies the human assets of the organization. Each sector includes descriptions of appropriate HR strategies.

The overall employee engagement includes high levels of skill, motivation, and attitude. It encourages employee contribution proactively and long tenure with the employee staying with the company. It minimizes costs of managing employees, work design, and controls. Research has found a significant relationship between HR strategies and profitability, but has seldom identified how the relationship works (Wright, 2008). What employees do is based on what they have, skills, motivation, engagement, and what they do is a function of what they feel, whether negative or positive towards the organization. What employees do is a critical link to implementing the organizational strategy for performance.

Behaviors related to business success are task behavior, discretionary behavior, counterproductive behavior, attendance, and turnover. If employees are well trained and feel the organization is being fair with them and cares about them, they will stay motivated to perform their best, serve customers in the best possible ways, show up to work every day, and stay with the organization for long periods of time. The behaviors of employees determine the productivity of the company in the number of products produced with the least amount of labor hours possible to produce those products.

Example of High Performance Work Practice

Wal-Mart, Inc. has focused on low workforce cost to keep prices low for consumers. On the other hand, Costco invests more money into wages, health care benefits, and unions. The results have shown that Costco has lower labor costs and higher profitability per employee than Wal-Mart. The Costco employees feel that Costco cares about them and is willing to compensate them fairly for the work performed. This resulted in increased sales, higher motivation of employees that work harder to serve customers, and lower turnover of employees. Employee actions affect the business financial performance and outcomes. Labor productivity, quality and shrinkage, all key operational functions, are affected by the HR strategy.