Items Description of Module

Subject Name Human Resource Management

Paper Name Strategic HRM
Module Title SHRM: Adding Value Through People
Module Id Module3
Pre- Requisites Understanding of the basic concepts of SHRM
Objectives To Understand SHRM: Adding Value Through People
Keywords SHRM, Organizational Performance, Value Addition
QUADRANT-I
1. Module 2: Intro: SHRM: Adding Value Through People
2. Learning Outcome
3. Introduction to SHRM: Adding Value Through People
4. Themes associated with the concept of SHRM
5. Understand the different perspectives on SHRM and organizational performance
6. Summary

1. Module 2: SHRM: Adding Value Through People

2. Learning Outcome:

After completing this module the students will be able to-

 Understand the various approaches of Adding Value Through People
 Understand the different perspectives on SHRM and organizational performance

3. Introduction

Strategic human resource management is the practice of attracting, developing, rewarding, and
retaining employees for the benefit of both the employees as individuals and the organization as a
whole. HR departments that practice strategic human resource management do not work
independently in isolation.They interact with other departments within an organization in order to
understand their goals and then create strategies that align with those objectives, as well as those
of the organization. As a result, the goals of a human resource department reflect and support the
goals of the rest of the organization.

Strategic HRM is seen as a partner in organizational success, as opposed to a necessity for legal
compliance or compensation. Strategic HRM utilizes the talent and opportunity within the human
resources department to make other departments stronger and more effective.

When a human resource department strategically develops its plans for recruitment, training, and
compensation based on the goals of the organization, it is ensuring a greater chance of
organizational success. Let's think about this approach in relation to a basketball team, where
Player A is the strategic HR department, and Players B through E are the other departments
within the organization. The whole team wants to win the ball game, and they all may be
phenomenal players on their own, but one great player doesn't always win the game. If you've
 watched a lot of sports, you understand that five great players won't win the game if each one of
those five great players is focused on their own individual excellence.

That's not how a basketball team wins, and it's not how an organization wins either. A team wins
when its members support each other and work together for a common goal. Player A, our
strategic HR department, must work with players B, C, D and E, of our different organizational
departments. They must run plays that they have planned out beforehand, assist when necessary to
help another player get the basket, and compensate for the weaknesses of one in order to create a
stronger team as a whole. When a team works together to reach that common goal, only then can
they be truly successful.

We could also look at strategic HRM as the team captain or coach, as his or her responsibilities
are a little bit different from those of the other players. Human resources departments are charged
with analyzing the changes that need to occur with each 'player' or department and assisting them
in strengthening any weaknesses and add value in their people.

4. Adding Value –The people Component

In addition to focusing on the validity of the matching SHRM model and typologies of HR
strategy, researchers have identified a number of important themes associated with the people
component of Adding value through strategic HRM.

4.1 Strategic Human Resource Management Practices and People Performance

Although most SHRM models provide no clear focus for any test of the HRM performance link,
the models tend to assume that an alignment between business strategy and HR strategy will
improve organizational performance and competitiveness. During the past decade, demonstrating
that there is indeed positive link between particular sets or 'bundles' of HR practices and business
performance has become 'the dominant research issue'.

The dominant empirical questions on this topic ask 'What types of performance data are available
to measure the HRM-performance link?' and 'Do "high-commitment-type" HRM systems produce
above-average results compared with "control-type" systems?' A number of studies have found
that, in spite of the methodological challenges, bundles of HRM practices are positively
associated with superior organization performance.

4.2 Re-engineering and Strategic Human Resource Management

 All normative models of HRM emphasize the importance of organizational design. As previously
discussed, the 'soft' HRM model is concerned with job designs that encourage the vertical and
horizontal compression of tasks and greater worker autonomy. The redesign of work
organizations has been variously labeled 'high performing work systems' (HPWS), 'business
process re-engineering' and 'high commitment management'. The literature emphasizes core
features of this approach to organizational design and management, including a 'flattened'
hierarchy, decentralized decision-making to line managers or work teams, 'enabling' information
technology, 'strong' leadership and a set of HR practices that make workers' behaviour more
congruent with the organization's culture and goals.

4.3 Leadership and Strategic Human Resource Management

The concept of managerial leadership permeates and structures the theory and practice of work
organizations and hence how we understand SHRM. Most definitions of managerial leadership
reflect the assumption that it involves a process whereby an individual exerts influence upon
others in an organizational context. Within the literature, there is a continuing debate over the
alleged differences between a manager and a leader: managers develop plans whereas leaders
create a vision (Kotter, 1996). Much of the leadership research and literature tends to be
androcentric in nature and rarely acknowledges the limited representation of ethnic groups and
women in senior leadership positions (Townley, 1994). The scenario needs to change in favor of
not only encouraging but ensuring diversity at senior leadership positions by inclusion of women
and members of the ethnic groups. The current interest in alternative leadership paradigms
variously labelled 'transformational leadership' and 'charismatic leadership' may be explained by
understanding the prerequisites of the resource-based SHRM model. Managers are looking for a
style of leadership that will develop the firm's human endowment and, moreover, cultivate
commitment, flexibility, innovation and change.

4.4 Workplace Learning and Strategic Human Resource Management

Within most formulations of SHRM, formal and informal work-related learning has come to
represent a key lever that can help managers to achieve the substantive HRM goals of
commitment, flexibility and quality (Beer et al., 1984; Keep, 1989). As such, this growing field of
research occupies centre stage in the 'soft' people centred SHRM model. From a managerial
 perspective, formal and informal learning can, it is argued, strengthen an organization's 'core
competencies' and thus act as a lever to sustainable competitive advantage - having the ability to
learn faster than one's competitors is of the essence here. There is a growing body of work that
has taken a more critical look at workplace learning. Some of these writers, for example,
emphasize how workplace learning can strengthen 'cultural control' (Legge, 1995), strengthen the
power of those at the 'apex of the organization' and be a source of conflict when linked to
productivity or flexibility bargaining and job control (Bratton, 2001).

4.5 Trade Union and Strategic Human Resource Management

The issues related to impact of trade unions on SHRM and vice versa are many. The notion of
worker commitment embedded in the HRM model has led writers from both ends of the political
spectrum to argue that there is a contradiction between the normative HRM model and trade
unions. In the prescriptive management literature, the argument is that the collectivist culture,
with its 'them and us' attitude, sits uncomfortably with the HRM goal of high employee
commitment and the individualization of the employment relationship. The critical perspective
also presents the HRM model as being inconsistent with traditional industrial relations, albeit for
very different reasons. Critics argue that 'high-commitment' HR strategies are designed to provide
workers with a false sense of job security and to obscure underlying sources of conflict inherent in
capitalist employment relations. Other scholars, taking an 'orthodox pluralist' perspective, have
argued that trade unions and the 'high-performance-high-commitment' HRM model cannot only
coexist but are indeed necessary if an High Performing Work Systems HPWS is to succeed. What
is apparent is that this part of the SHRM debate has been strongly influenced by economic,
political and legal developments in the USA and UK over the past two decades.

4.6 International and Comparative Strategic Human Resource Management

 The assumption that SHRM is a strategically driven management process points to its
international potentialities. The employment relationship is shaped by national systems of
employment legislation and the cultural contexts in which it operates. Thus, as the world of
business is becoming more globalized, variations in national regulatory systems, labourmarkets
and institutional and natural contexts are likely to constrain or shape any tendency towards
'convergence' or a 'universal' model of best HRM practice. This section addresses aspects of the
international scene to help us place the discourse on the SHRM model into a wider global context.
In doing so, we make a distinction between international HRM and comparative HRM. The

subject matter of the former revolves around the issues and problems associated with the
globalization of capitalism. Comparative HRM, on the other hand, focuses on providing insights
into the nature of, and reasons for, differences in HR practices across national boundaries.

5. Understand the different perspectives on SHRM and organizational performance

There cannot be universal HRM Strategies which can be implemented in every organization. The
organizations have to identify or design the HR strategies which fit a particular organization. The
organisationhas to work towards internal fit by developing a range of interconnected and mutually
reinforcing HRM policies and practices. So a bundle of ‘best HR practices’ have to be designed
and implemented that fit together adequately, so that one practice compliments the performance
of the other practices. ‘Synergy’ is the main idea behind internal fit. Synergy can be achieved if
the combined performance of a set of HRM policies and practices is greater than the sum of their
individual performances.
The organisation has to work towards external fit by developing a range of HRM policies and
practices that fit the business’s strategies outside the realm of HRM. This implies that
performance will be improved when the right fit, or ‘match’, between business strategy and HRM
policies and practices is achieved. Hence HRM strategies should be so designed so that support
generic business strategies.

Over the last decade or so the concept of fit has been further investigated by many scholars. An
analysis of such work highlights that there are generally three modes of fit, or approaches to fit:
‘universalistic’, ‘contingency’, and ‘configurational’. The core features of these modes constitute
the structure of the so-called strategic HRM / business performance models.
The ‘universalistic perspective’ or HRM as an ideal set of practices suggests that a specified set of
HR practices (the so-called ‘best practices’) will always produce superior results whatever the
accompanying circumstances. Proponents of the universalistic model emphasize that ‘internal fit’
or ‘horizontal fit’ or ‘alignment of HR practices’ helps to significantly improve an organization’s
performance.

Considering that internal fit is central to universalistic models, the main question / problem is how
to determine an HR system, that is, as a coherent set of synergistic HR practices that blend better
in producing higher business performance. The methods used in developing such HR systems
depend on the ‘additive relationship’ (i.e. the case when the HR practices involved have
independent and non-overlapping effects on outcome), and on the ‘interactive relationship’ (i.e.
the case when the effect of one HR practice depends on the level of the other HR practices
involved). However, in our opinion universalistic models do not explicitly consider the internal
integration of HR practices, and consider them merely from an additive point of view. Emerging
research evidence reveals the so-called ‘portfolio effect’, that is, how HR practices support and
improve one another. However, it is important to remember that there can be countless
combinations of practices that will result in identical business outcomes. This contributes to the
concept of ‘equifinality’, in which identical outcomes can be achieved by a number of different
systems of HR practices.

Support for the universalistic approach to strategic HRM is mixed, as there are notable differences
across studies as to what constitutes a ‘best HR practice’. Most studies focus on three
mechanisms by which universal HR practices impact on business performance: (1) the ‘human
capital base’ or collection of human resources (skills, knowledge, and potential), that the
organization has to work with – the organization’s recruitment, selection, training and
development processes directly affect the quality of this base; (2) ‘motivation’, which is affected
by a variety of HR processes, including recognition, reward, and work systems; and (3)
‘opportunity to contribute’, which is affected by job design, and involvement/ empowerment
strategies. In addition, the best practices approach generally refers to the resource-based theory of
firm and competitive advantage, which focuses on the role internal resources such as employees
play in developing and maintaining a firm’s competitive capabilities. For a resource to be a source
of competitive advantage, it must be rare, valuable, inimitable and non-substitutable. Therefore,
HR practices of the organization can lead to competitive advantage through developing a unique
and valuable human pool.

The ‘contingency’ which can also be called as ‘HRM as strategic integration’ model argues that
an organization’s set of HRM policies and practices will be effective, if it is consistent with other
organizationalstrategies. ‘External fit’ is basic to contingency approach. As discussed above, in
 this regard specific HRM policies and practices link with various types of generic business
strategies. For example, the range of HRM policies and practices an organization should adopt
depend on the competitive product strategies it is following. Considering that external fit is the
key concept of contingency models, the contingency approach refers firstly to the theory of the
organizational strategy and then to the individual HR practices that interact with organizational
strategy in order to result in higher organizational performance. The adoption of a contingency
HRM strategy is then associated with optimized organizational performance, where the
effectiveness of individual HR practices is contingent on firm strategy. The performance of an
organization that adopts HR practices appropriate for its strategy will be higher.

The ‘configurationa approach’ is also called as ‘HRM as bundles’ model argues that strategy’s
success depends on combining internal and external fit. This approach makes use of the so-called
‘bundles’ of HR practices, which implies the existence of specific combinations or configurations
of HR practices depending on corresponding organizational contexts, where the key is to
determine which are the most effective in terms of leading to higher business performance.

Considering that both the internal and external fits are the key concepts of
configurationallymodels, the configurationally approach refers firstly to the theory of the
organizational strategy and then to the systems of HR practices that are consistent with
organizational strategy in order to result in higher organizational performance. As indicated
above, there are a number of strategies anorganization may choose to follow, strategic typology
that identifies the four ideal strategic types of Defender, Prospector, Analyzer, and Reactor.

With respect to the configurations of HR practices, scholars have developed theoretically driven
‘employment systems’. Specifically, Delery and Doty (1996) propose the following two ‘ideal
type’ employment systems: the ‘market type system’, which is characterized by hiring from
outside an organisation, and the ‘internal system’, which is characterised by the existence of an
internal market. Because organisations adopting a defending strategy concentrate on efficiency in
current products and markets, the internal system is more appropriate for this type of strategy. On
the other hand, organisations pursuing a prospector’s strategy are constantly changing, and the
market system is more appropriate for this type of strategy. A possible third type of
configurational strategy can be the analyser, at the midpoint between the prospector and the
defender. In summary, according to this approach, if consistency within the configuration of HR
practices and between the HR practices and strategy is achieved, then the organization will
achieve better performance.

6. Summary
As global business competition shifts from efficiency to innovation and from enlargement of scale
to creation of value, management needs to be oriented towards the strategic use of human
resources. Strategic human resources management practices enhance employee productivity and
the ability of agencies to achieve their mission. Integrating the use of personnel practices into the
strategic planning process enables an organization to better achieve its goals and objectives.
Combining human resource practices, all with a focus on the achievement of organizational goals
and objectives, can have a substantial effect on the ultimate success of the organization. To
manage future operations effectively, various approaches of adding Value through people were
discussed in this module like Strategic Human Resource Management Practices and People
Performance, Re-engineering and Strategic Human Resource Management , Leadership and
Strategic Human Resource Management , Workplace Learning and Strategic Human Resource
Management , Trade Union and Strategic Human Resource Management, International and
Comparative Strategic Human Resource Management
We also discussed three modes or approaches to fit: i.e. ‘universalistic’, ‘contingency’, and
‘configurational’ which are adopted in different situations or types of organizations for enhancing
organizational performance.