The evolution and business impact of strategic human resource management

Strategic HRM Analysis

Human resources management has been undergoing a shift for the past several decades that is meant to instill a system that is more consistent with the departments actual role in the business. "Strategic HRM began to emerge approximately twenty-five years ago, and since then it has evolved to include several streams of theory and empirical investigations" (Schuler & Jackson, 2005). These theoretical variants have all proposed that HRM is not the same as it was when the practice was developed more than a century ago. Although upper management is content to use the HR department in the same way that they always have, this does not utilize it in such a way as it can be to help the company grow.

The practice has undergone a pretty thorough vetting among the research community because of its seeming efficacy in relation to the overall business model. "HRM researchers are attracted to [strategic HRM] because it provides a strong foundation for mounting a successful challenge to the popular charge that theirs is a discipline in search of a theory" (Niehuas & Swiercz, 1995). These researchers have tried to determine a consistent thread among the many different studies and the methods current HR departments use. Most research into this area has concluded that

"it is & #8230; possible to recognize a logical and aesthetically consistent relationship between the seemingly endless array of approaches to the study of strategic HRM" (Niehaus & Swiercz, 1995), and that is the basic thrust of this critical analysis of the practice of strategic HRM. This paper looks at what strategic HRM is according to the research, and how it relates to business planning, employee relations, and rewards for both individual employees and the business itself.

What it SHRM?

Some businesses have been integrating strategic HRM into their overall business plan for many years, but there is a segment that does not believe that strategic HRM is necessary. Some "Line managers and chief executive officers have been found to have a preference for personnel departments that deliver maintenance service, instead of strategic management activities" (Teo & Crawford, 2005). The reason that this seems to be so is because managers do not like change. It does not matter that it may be beneficial to the company, it matters that the manager, especially the line managers reserve the influence for themselves. Unfortunately, this attitude may cripple their companies because they are not full utilizing the HR department. The main problem is that they do not understand what strategic HRM is, so they continue to doubt its usefulness. This leads to a discussion of what strategic HRM actually is.

Multiple definitions have been devised to fully encompass what different people mean by strategic HRM, but a simple explanation is that "Strategic HRM (SHRM) focuses on the strategic choices in organizations and business units with regards to their use of the workforce, and its impact on operational and firm performance" (Intan-Soraya & Chew, 2010). This may seem to be saying that SHRM is engaged in the same duties that HRM always has, but reading into the common shows that this is a broad perspective. HR departments, in the past, have only focused on such duties as hiring employees, paying employees (and this function may be handled by another department), and ensuring that company policy is passed on to those employees. The new model, SHRM, realizes that "many actors are involved in the formulation and implementation of human resource strategies. These stakeholders are internal & #8230; [and] external to the organization, so the degree to which they influence & #8230; human resource policies must be considered" (Alcazar, Fernandez & Gardey, 2005). The authors mean that HR is not just concerned with what happens within the company, as the old model suggests, but the department is intimately involved with what happens externally that affects the company. This makes the function of the department much more complicated, but it also realizes how the human element of the company is central to all operations of the company.

In reality the SHRM theory is derived from the belief that it is "not likely that all duties necessary to perform a job can be identified and put in a job description," and that is also impossible "to monitor and reward employees for all the contributions they make toward accomplishing the firm's strategic objectives" (Tocher & Rutherford, 2009). These two simple statements mean that SHRM research tries to determine how an isolated employee affects the business environment in every possible way. The individual is an employee despite their location. An employee who drinks too much the night before they are to work, influences how productive they will be the next day. So, SHRM takes into account this aspect of the employee's life also. This is not to say that the practice is so micromanaging that every minute of the person's life is governed by the company they work for, but it does mean that HRM strategies should take into account what an employee does after they leave work and other factors of the person's life. To that end, "examples of strategic HRM practices include but are not limited to employee empowerment programs, incentive compensation plans, involving employees in organizational decision making, and total quality management initiatives" (Tocher & Rutherford, 2009). These programs are meant to engage the employee in the company and help them remain cognizant of the effect that they can have on the production of the business they work for. As Bhatnagar, Puri and Jha (2004) suggest "an innovative strategic HRM intervention & #8230; leads to an unlearning of the past culture and to a relearning of the new performance oriented culture."

Within SHRM research, there are two dominant "schools." "The "best practice" school & #8230; [and] the "best fit" school" (Vandenabeele & Hondaghem, 2008). These methods are exactly what they sound like as "The best practice school states there is only one best mix of HRM instruments" whereas "The best fit approach & #8230; states that it is necessary to have a horizontal & #8230; fit & #8230; [and a] vertical fit, an integration of the HRM practices with the general business strategies" (Vandenabeele & Hondaghem, 2008). However, most researchers believe that it is actually a confluence of the two that will produce what the HR department wants from its strategies. The mix of best practice and best fit strategies "should yield optimal results, the theory goes, and those results are highly performing work systems that enable the organization to do its job as well as possible" (Vandenabeele & Hondaghem, 2008).

To better understand the distinction between the two strategies it is necessary to see how they differ according to actual implemented plans, and why these two schools work best together. Cunningham and Kempling (2011) suggest that "a model of strategic HRM that promotes "fit" would start with a definition of the organization's vision, mission, and strategies, and an examination of internal resources, (strengths and weaknesses) and external developments (opportunities and threats)."

SHRM is a complicated rethinking of the old HRM paradigm, and the new research contains even more levels that must be incorporated to understand the breadth of the process. Kim and Hong, in their research, say that

"a strategic HRM system & #8230; should build on the best attributes of & #8230; three models: traditional public administration ... principles of impartiality and merit; new public management ... performance management and professionalism; and the governance paradigm ... more responsive to the demands of citizens and other stakeholders."

These aspects of SHRM policy are not included in the old paradigm. New human resource departments, and especially the leaders of those departments, need to understand the expanding view that is being expected of them, but it is not just the HR department that has to change its thinking. "This reconsideration of the nature of HRM also influences the position of this function within the organization & #8230; HRM is no longer an exclusive responsibility of personnel managers, but also of other managers, especially line directors" (Alcazar, Fernandez & Gardey, 2005). Every member of management in the company must understand what the new function of HR is. People become stuck in their notion of what a specific department is, or what it can do. Because HR has a much greater scope than previously believed, all levels of management have to accept the new scope for the change to be effective.

One of these new functions, as related in contextual models of SHRM, is that "an expansion of the concept of HRM [needs] to encompass factors that have been traditionally underestimated, such as a firm's relationships with Public Administration and Unions, and other social and institutional determinants" (Alcazar, Fernandez & Gardey, 2005). This external function has long been handled by other departments within a company, SHRM suggests that planning as relates to these business functions should include HR in the planning because they relate integrally with employees.

Another issue that has been pursued in the SHRM research is the fact that "it has been argued that strategic HRM is conditioned by & #8230; factors such as size, technology or structure, as well as power relationships" (Alcazar, Fernandez & Gardey, 2005). Many outside of the Strategic paradigm have suggested that the shift to this new system of business governance will only work in specific case, but the research belies that assumption. Taking the size argument for an example, a great deal of research has been conducted on whether this is a factor in implementing SHRM in a firm. "In a study of 293 American firms, it was found that strategic HRM practices such as total quality initiatives, empowerment programs, and employee job design programs positively influenced firm performance" (Tocher & Rutherford, 2009). This was a study conducted with large, multinational firms that were tasked with implementing small SHRM initiatives. All of the firms announced some positive gains as a result. In another study, "U.S. steel mini-mills, it was found that mills that emphasized strategic HRM practices such as formal employee participation programs, team-based problem solving, and detailed employee socialization, experienced higher productivity, as well as lower turnover and lower scrap rate in comparison with mills that did not emphasize such practices" (Tocher & Rutherford, 2009).

Thus, small and large firms have found that SHRM practices gave the firms positive productivity improvements. The province of British Columbia, with its 30,000 employees, also discovered the utility of using SHRM practices and SME's were also tested in some studies with positive results. It does not matter the size or types of organization, strategic methods have been found to be efficacious.

A final thought comes by way of research conducted by Guido Strunk in 2009. He says that;

"According to strategic management [research] it inevitably involves some thinking and planning ahead of time & #8230; As the business environment becomes steadily more turbulent, it is increasingly problematic for firms to create clear, coherent strategic plans. Thus, measurements of "turbulence" & #8230; may be of some use for monitoring not only individual careers but also the business ."

Strunk is pointing out that employees are not static and that they are not alike. He is also saying that the business environment basically functions as a distinct individual with a definite culture and personality. Because people, and organizations, are prone to chaos, it behooves the HR department to take this "turbulence" into consideration during planning phases.

Employee Relations

How exactly does SHRM influence employees and their relation to the company? It would seem that if employees believe a company treats them poorly, there is very little that the HR department can do to change that attitude. But, research has shown that this is not the case. Due to the varying nature of the functions of the HR department, they have a greater effect on how employees view a company than any other department as a whole. When employees discuss their dissatisfaction with the actions of the company, they are generally discussing functions of the HR department. Thus, there needs to be a method by which employees change their attitudes toward the HR department and realize that it stated function is to benefit them. By implementing SHRM, the company invariably accomplishes this goal.

Various researchers, with different goals in mind, have come to the same conclusion, workers matter in the scheme of a company. While this may not come as a great surprise, it may be surprising to see what was discovered. Cunningham and Kempling (2011) found that "Skilled and knowledgeable workers who are not motivated are unlikely to contribute any discretionary effort. Motivated workers who lack skills may contribute discretionary effort with little impact on performance." This means that the services of the HR department are working to a greater degree for the some employees than for others. Skilled employees are the most difficult to retain and their loss has the greatest impact on the company. The goal of SHRM is to motivate every employee, and to seek employees who have an attitude and commitment that fits within the parameters needed within the specific company's culture. Teo (2000) stated "HRM implies a strategic approach to the people management function, which emphasizes the strategic direction of the organizations." HR is an important function within the company because its policies directly impact where the employees are presently, and where they are going in the future.

One particular study found that "The Australian experience with strategic HRM shows health care as a service industry that is not particularly people focused and this has led to greater job insecurity and lower job satisfaction" (Hogan, Moxham, & Dwyer, 2007). This can be said of many industries and has been noted in many studies. The experience of Australian nurses is not an isolated one. This means that HR departments are falling down on their most important duty. An HR department should create job satisfaction rather than creating the opposite. Schuler and Jackson said

"Perhaps the most useful thing a strategic job modeler can do is develop his or her own understanding and framework for thinking about the customer's [organization's] problems. This means ... working to understand the underlying issues and developing working hypotheses about what is important and what is relevant in a given context.'

This would have worked well in the Australian nursing scenario. All an HR manager had to do was try to understand why nurses were dissatisfied with their jobs, try to get at the underlying features of that dissatisfaction and implement changes to fix it.

Of course, fixing problems is not easy or simple; people are complicated and the workforce has become more complicated also. As Strunk (2009) says;

"Growing complexity is a central argument for more workforce flexibility. Additionally, a more scattered and diverse workforce is in turn a driving force for more complexity: it leads to an increasing unpredictability of individual careers and the irregular development of human capital, which is scattered by such chaotic career trajectories."

This complexity of which he speaks makes SHRM more difficult to implement because the HR professional realizes that there is much more to the job than there was previously. But, there are some simple things that an HR department can do to implement SHRM practices.

Reward System

Going back to the nurses in Australia Hogan, Moxham and Dwyer (2007) found that "the bureaucratic cultural norm of hospitals, with their hierarchical structures, rules and regulations and heavy emphasis on measurement of outcomes and costs, may not be the culture most conducive to enhancing job satisfaction' and commitment for nurses." The nurses do not relish their jobs because they do not find the reward. This encompasses both intrinsic emotional reward and the extrinsic financial one. These have been taken away by the practices of management, and the inability of the old HR paradigm to effect change. The researchers statement at the end of the article that

"Strategic HRM & #8230; has the ability to fundamentally alter organizational culture by addressing the needs of employees, with new HRM practices for recruitment, selection, performance appraisal and change management and pay increments aligned to corporate intent" (Hogan, Moxham, & Dwyer, 2007) is very well stated. The rewards the nurses are looking from are small in comparison to the problems disgruntled nurses can cause.

Most businesses realize "Performance measurement and strategic HRM are becoming increasingly important & #8230; even in the intangible areas of the organization, strategy and performance are bound to play a larger part in the future" (Vandenabeele (Hondaghem, 2008) because the research into a multitude of different cases proves that this is the truth. The fact that firms do not understand the efficacy is no longer an excuse. Because of the amount of research done on the subject they have to realize that "Strategic HRM will reinforce firm success to the extent that it helps to integrate and legitimate the organization in its environment, a condition that, as Institutional Theory has pointed out, is directly linked to firm survival" (Alcazar, Fernandez & Gardey, 2005). The researchers are here stating that without SHRM principles being implemented, the firm could actually become defunct in the end because of its loss of employees' trust and productivity.

Conclusion

The definition of what SHRM is may be somewhat shaky, but the effects of including HR in planning, employee relations and reward systems is not. The issue here is twofold as told by the research. The upper management of companies does not understand the value of SHRM and senior HR managers are not making it known to any great extent. This means that companies are not taking advantage of what could be a very positive influence to employee relations, retention and the company's overall economics. However, SHRM research has not even considered all the advantages that could come from the paradigm As Schuler and Jackson say "extending the domain of HRM to include a more nuanced consideration of stakeholders' concerns such as ethics and sustainability is an agenda item for the future practice of strategic HRM." The elements of SHRM could mean that the HR function has an even greater influence than is presently known.