The Different Models of Strategic HRM

The Different Models of Strategic HRM Research Paper | 2006

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The Different Models of Strategic HRM

Oday Alnabhan

Anglia Ruskin University,

Essex, United Kingdom

Masters of Arts (MA), Human Resources Management,

2005 – 2006

1.0 Introduction

Human Resource function has evolved as a strategic business partner from its

traditional passive transaction processing role. The central purpose of strategic HR

function is to "improve the performance of the company's workforce to support

overall corporate goals." The strategic target for HR should be to increase revenues

and productivity while maintaining relative labor costs; as whenever revenue is

increased in a competitive marketplace it's obvious that products and services are also

improving, which are long-term competitive advantages. (Sullivan 2005). HRM

attempts to leverage people capabilities strategically and ensures the competitive

advantage of the firm. Studies have shown that effective HR practices can positively

affect the bottom line and Employees can have a direct impact on customer

satisfaction. Effective HRM practices also contribute to compliance with laws and

regulations, Community relations, and social responsibility. Through all these

measures HR can create synergies from the diverse concerns of various stakeholders

and thereby sustain the competitive advantage.

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2.0 Organization and Environment

The environment of the organization has a large effect on the organizational structure.

Mintzberg argued that the environmental factors and the pace of the organization

determine the organizational structure. The structure of the organization is based on

the environment. (Mintzberg, 2001). The four organizational forms defined by

Mintzberg depend upon the different operational mechanisms that are used by the

organization. The organizational subunits play a major part in the functioning of a

particular project mechanism.

Mintzberg’s classification of organizational types is as follows

➢ The Simple Structure

➢ Machine Bureaucracy

➢ Defictionalized Form

➢ Professional Bureaucracy

➢ Adhocracy

The organizational structure defines the formal relationships in the organization. The

structure of the organization is created to fit the environment. Under the

organizational structure the rules, polices and the management hierarchies are defined.

The structure of the organization has to change with the environment if it does not fit

there can be problems.

2.1 Core components of organizational structure:

1. Operating core - those that provide or produce what the organization offers

customers or clients, e.g., professors and teaching and learning.




2. Strategic apex - relate mainly to the external environment, create the mission

and provide strategic direction, e.g., Trustees, Chancellor, President.

3. Middle line - those managers who supervise, control, and provide resources

for the operating core, e.g., senior staff such as assistant directors, level

coordinators.

4. Technostructure - consists mainly of analysts whose role is to standardize the

work of others by inspecting outputs and processes, e.g., Curriculum

coordinators, counselors, and special appointments.

5. Support staff - which perform tasks that indirectly facilitate the work of the

operating core, e.g., office and maintenance staff, teaching assistants

(Mintzberg, 1973)

2.2 The Entrepreneurial Start-up (the simple structure)

The entrepreneurial organization is an authoritarian structure controlled, given

direction by, and reflecting the values and concerns of one person, usually its

founder/owner or chief executive officer. The source of the authoritarian nature of this

type of organization may lie in the autocratic nature of its head that accumulates and

gathers power to him/her; or it may be because of the charismatic or visionary nature

of its leader, in which case the members of the organization willingly give up power.

This is a very basic organizational set-up, and the organization tends to be small. The

organization is, effectively, a single person and neither conflict nor political

difficulties arise (Mintzberg, 1987).




2.3 The Machine Bureaucracy

The machine or machine bureaucratic, organization is one that is highly formalized

with sharp divisions of labor usually along functional lines. There is a high level of

formalization of all aspects of organizational work. These are organizations that

exhibit an "obsession with control." Also, according to Mintzberg, they are prone to

internal conflicts (Mintzberg, 1989). Machine bureaucracy is common amongst

mature organization, which is large enough to have operations, which can be

standardized.

2.4 The Professional Bureaucracy

In this type of organization, the work carried out by its members, the professionals, is

complex and highly skilled although also relatively standardized. The archetypal

examples used by Mintzberg are universities and hospitals. But even though the work

in such organizations may be relatively standardized, because of its complexity the

same kind of formalization and control characteristic of machine bureaucracy, in

general, cannot be applied. The professionals retain their autonomy and the power that

comes from it. Such formalization and control as does exist is a reflection of the

inspired values and expectations of the profession as a whole, rather than the

particular organization in which the individuals work. The decision-making and

coordination activities tend to be based on collegiality although differences of

opinion, conflict, and attendant internal political activity can arise as well. The

professional organization exhibits a parallel combination of collegiality and

autonomy.




2.5 The Adhocracy (the innovative organization)

As its name suggests, this type of organization is characterized by its fluidity and

flexibility, and lack of formal organization and structures. Work tends to be carried

out by various kinds of experts, formed into teams on an ad-hoc or project-by-project

basis.

Because of its fluidity, it is probable that players, in the information ward model

sense, simply do not get the chance to form in this type of organization. Different

teams or groups within it operate with whatever processes and data prove to be

necessary for their purpose at the time. But not only do the processes and data that are

operated with change unpredictably, so also does the membership of the teams or

groups them. Under such rapidly changing circumstances any team or group, as well

as the organizational resources they depend upon, may not remain stable enough to

develop a separate identity and corresponding sense of business role ownership.




The business environment can be divided into four types:

Simple – companies will be faced with few uncertainties and pressures for change

Complex – there are more variables to be found, leading to greater uncertainty. This

can come from some markets in which the organization operates, either due to

diversification strategy or because of the number international markets it chooses to

operate in.

Stable – When a market is facing little pressure to change, allowing the firm to

predict with some certainty market situations that facilitate planning and strategic

consideration.




Unstable – Are characterized by the frequency of change, which gives rise to change

in these four situations the need to develop a structure that can accommodate these

challenges should be considered. From operating in the international marketplace,

complex and unstable environments will be of interest. To meet challenges of the

unstable environment, many companies attempt to build structures that promote

horizontal rather than top-down communication; likewise, job definitions will tend to

be less formalized and that promote a more fluid organization.

Machine bureaucracy – is built on the importance of technostructure or the need to

regulate activities, leading to an emphasis on bureaucratic procedures that are

appropriate when the environment is either simple or static.

Professional bureaucracy – The importance of operating core has been increased

and is found where there is a high degree of professionalism required to join the core.

Divisionalized form – The importance of the middle managers and provides the

power and influence for this group. This has been seen as a threat to firms.

3.0 Role of HRM

Human Resource Management has a variety of function, which includes managing

employees and meeting their needs, it includes training them and assuring that they

perform at their best to enhance the performance of the organization. The main

difference between HRM and Personnel management is that HRM aims to integrate

the personnel function of the company into the overall strategy of the company. The

personnel function is responsible for recruiting training and managing the employees




and HRM is concerned with integrating all part of the organization to motivate the

employees so the best result can be obtained. One reason for the development of

HRM has been the de-industrialization of the western economies and the emergence

of the services sectors. Today the employees have to manage more meticulously than

before. They need to be developed, and the management has to invest in them

regarding development and training to ensure that they are motivated and perform at

their optimum levels (Armstrong, M, 1987).

The other changes that have encouraged the personnel function to take a strategic

direction are the increased competition and the globalization of the business

environment. This has forced managers to enhance their competitiveness and

performance thus this led to attaining the best results from the employees along with

all other resources of the organization. There is no exact definition of the HRM that

would be universally accepted as it has a different meaning to HRM PR actioners and

academics in the field. Guest (1987) defined HRM as a people-oriented approach,

which aimed to maximize the performance of the employee through a set of,

integrated policies and practices which involved consultation and feedback from the

senior management. However, the Guest’s model fails to recognize the difference

between personnel management and HRM. HRM is a based on long-term planning

that incorporates the personnel function into the long-term corporate and strategic

objectives of the firm.

Legge (1995) defined HRM as a central strategic management task, which aims to

utilize the personnel functions at all, levels and create and maintain a sustainable

competitive advantage. When HRM is compared with personnel management, it can




be seen that HRM is fit between managing the employees and strategic direction of

the company. Some HR professionals viewed HRM as a principle that guided a

company’s culture and personnel function to fit their strategy. Thus, the main

difference between the personnel management and HRM is said to be long-term

corporate objectives that incorporate the human resource factors in call company’s

strategies. HRM is more long-term and strategic, and it considers the employee

performance and development in all corporate strategies.

Armstrong (1987) argued that HRM is a new name for Personnel management and the

exact difference between the approach taken by HRM was not so different to

personnel management. The main difference as explained by Kessler et al. (1998) is

that HRM considers the employees to be an asset and a resource like all other factors

of production. This development in personnel management function has strongly been

influenced by the Human Relations School that focused on employee development,

motivation, and leadership. HRM has identified other job-related factors such as

employee development and conditions at work, which can motivate and enhance the

employee performance. HRM is a move away from collectivism, and the traditional

vie of employee relations management which was solely concerned with enforcing

rules and regulating the employees. HRM is an ideological shift from collective

towards a more individualistic standpoint, which focused on the commitment of the

employees (Wickens, 1987).

HRM takes a more strategic approach to planning other components such employee

involvement; commitment, appraisal, and reward are also included in personnel

management. Skinner argues that due to HRM practice managers are rewarded for

policies, which would show results in long-term. Thus, there is no linked between




Organizational effectiveness and HRM policies. Legge (1989) suggested that HRM

suffers from three main contradictions, which include individualism versus

cooperation, commitment versus flexibility and strong cultures versus adaptability.

These issues have to be addressed before HRM policies in the organization can be

sustained.

The nature of relations in HRM differs based on the two different perspective views

of Pluralist and Unitarist. Personnel management puts more emphasis on the

individualism. Personnel management views the relationship between management

and employees are merely contractual. HRM focuses more on collectivism, and the

management creates a corporate vision and aims that are linked to the business goals.

In the HRM, approach the fulfillment of mutual interest lies where employees satisfy

organization’s needs, and the management addresses the employee needs. Another

different approach HRM takes is the distribution of power; unlike personnel

management the power is not centralized, it is delegated. The HRM approach sees

decision-making as a collective task where employees have a say in the making and

implementation of policies. Thus, the HRM approach encourages a more power-

sharing technique, which integrates all the employees and departments of the

organization. HRM focuses more on the Total Quality Management approach which

encourages team works and employee participation in management where employees

share power and authority with the top management.

The strategic vision of HRM focuses on encouraging better employee participation

and performance. Therefore, the leadership style in HRM context is different. The

leadership style favored by HRM policies is the transformational leadership; this style

e n c o u r a g e s b u s i n e s s objectives to be shared by both the employees and




management. The leaders focus more on people-oriented procedures, which include

establishing trust and flexibility in the organization. HRM has a more flexible way of

employment, which encourages the employees to develop new skills and knowledge

to perform better at their jobs. HRM policies encourage the organization to motivate

people by other means by group profit sharing schemes and value-added incentives

which will enhance the commitment of the employee in the organization. The job

design function in HRM focuses job design and job rotation, which creates more

teamwork and group sharing. Similarly, another aspect of these policies encourages

the free and prompt flow of information between the lower level employees and

senior management. Thus, through these HRM policies, most western organization

have eliminated the trade unions by getting closer to the employee and fulfilling their

needs. In any negotiations, the employees is encouraged to participate in the decision-

making process (Mullins, L, 1999).

4.0 Relationship between business strategy and HRM

The human resources have been regarded as the critical source for many companies.

Human Resource Management (HRM) is the technique through which managers

integrate the actions of individuals in the organization with the objectives of the firm

(Goold & Quinn, 1990). Now, most businesses agree that HR functions have a direct

impact on the company performance. This is why HRM is an important function in

the organization today as it is one of the main determinants of organizational

performance.

Strategic HRM looks at how HR practices can be combined and implemented. SHRM

techniques focus on managing the workforce as a whole. SHRM views that strategy




and HRM should be linked together (Schuler & Jackson, 1989). SHRM focuses on the

behavioral aspects of employees and how they affect the performance of the firm. The

theory focuses on how HRM behavior regulates and controls the attitudes and

behaviors of the employees. Thus, to achieve this kind of control over the employees

SHRM practices suggest that organization strategy should reinforce this form of

employee behavior that is beneficial to the organization as a while. Schuler &

Jackson’s (1987) model linked HRM practices with competitive strategies such as

innovation, quality enhancement, and cost reduction. This model proposes that the

role behavior can vary on dimensions such as repetitive versus innovative behavior,

low versus high risk-taking and inflexible versus flexible to change.

The contingency theory suggests that HRM practices have to be coupled with specific

business strategies to enhance the organizational performance. If a firm deploys a cost

reduction strategy, it must implement rigorous controls and bring costs down. Another

aspect of enhancing organizational performance is increasing efficiency. The behavior

controls in an organization increase the predictability as routine processes are

routinized. HR function can achieve this and appraise the employee behavior and

performance. This suggests that HRM is linked to the performance of the firm (Liao,

2005).

5.0 Strategic HRM

Strategic Human Resource Management (SHRM) also referred to as a “contingency”,

“best fit” or “external fit” approach. SHRM aims to achieve a closer fit between the

HRM policies and the overall competitive strategy to make the organization more

effective. SHRM is based on the works of Chandler (1962) who




Pioneered the concept of the organizational life cycle. This model suggested that

HRM practices should change with the stage of the organization on the life cycle

which includes formation, growth, maturity, and decline (Robbins, 1990). This

suggests that when organizations are in their growing stage they operate in an

entrepreneurial environment in which the major recruitment source is the external

labor market. At this stage, there is a high level of employee participation, and the

wages are linked to the profitability of the company. The mature organization has a

more efficient structure rather than the one based on innovation. The focus of the HR

policies is on employee retention and enhancing the efficiency of the organization.

The jobs are more narrowly defined, and the structures and procedures are formalized

in the organization (Hughes, 2001).

SHRM is based on the strategic theories that were developed during the 1970s and

1980s. Schuler & Jackson (1978) matched the three generic organizations strategies

that include cost reduction, innovation, and quality enhancement, with HRM

philosophies such as utilization, facilitation, and accumulation. Schuler & Jackson

(1978) suggested that the cost reduction/ utilization strategy aims to minimize labor

costs and does not focus on mobility or employee training (Huang, 2001).

On the other hand, the organization that has innovation facilitation strategy tends to

focus in creativity and collaborations. This strategy focuses on creativity, cooperation,

and flexibility. The job descriptions in such organizations are brad, and there is a lot

of employee interaction. The management focuses on teamwork and developing the

employees through training and education (Huang, 2001). The last strategy is quality/

accumulation that focuses on the careful selection of candidates based on the




Personality and acumen of the individual (Bin Othman, 1996). This kind of

organizational structure requires employees to adapt to the environment and update

their skill sets. Under this strategy, the employees are required to follow a set routine

in a predictive and repetitive behavior. There is a strong emphasis on cooperation and

quality (Huang, 2001)

Boxall & Purcell (2003) have provided a basic framework of Strategic HRM as given

below:

Human Resources are the talents and energies of people who are available to an

organization as potential contributors to the creation and realization of the

organization’s mission, vision, and goals. HRM can be described as all the activities

of an organization use to affect the behaviors of all the people who work for it.

Strategic HR is gaining a lot

Critical HR Goals

Desired types and levels of:

• Labour productivity

(cost effectiveness)

• Organizational flexibility

• Social Legitimacy

(Employment citizenship)

Critical non-HR Goals

Desired outcomes for:

• Sales

• Market Share

• Return on capital employed

• Social legitimacy (environmental impacts) etc

Ultimate business goals

• Viability with adequate

returns to shareholders

• Sustained competitive

advantage




of importance now as compared to tactical actions which were performed earlier by

HR Professionals. (Allan 2006). Human Resources, like all other business functions,

must do a range of things well from basic transactions to strategic planning to be

successful and gain a competitive business advantage. As Jamroq and Overhot (2004)

observe that 'there's something elusive and ambiguous about this widely touted goal of

becoming a strategic business partner.

The Strategic Importance of Managing Human Resources

Every business firm strives to achieve the competitive Advantage; which is a state

when all or part of the market prefers the firm’s products and services. Human

Resources Management is a strategic approach and following are the ways firms can

use HRM to gain a sustainable competitive advantage:

1. Maximize the value added by employees

2. Acquire rare employees

3. Develop a culture that can’t be copied.




Following is a Framework suggested by Jackson and Schuler (2003) for Managing

Human Resources through Strategic Partnerships.

Global Environment

The HR

[Ref: Jackson and Schuler (2003)]

6.0 The Forms of Strategic Human Resource Management.

There are many ways and means through which the HR can play a strategic role in an

organization. HR should try operating much like a business by regularly measuring how

well it is serving its customers—that is, the business units that rely on HR’s services. By

creating well-defined and clear service-level agreements with the business units to gauge

effectiveness is a good way of starting the strategic thinking process. In the ultimate

analysis, HR must measure itself regarding the overall business results and improvements in

the performance of the company's workforce—and base rewards on those measurements.

By creating and keeping a concise scorecard lets HR to keep track of its improvements, and

Organizational

Environment

• • • •

Leadership

Strategy

Structure

Culture

HRM

Activities

• •

Formal Policies

Daily Practices

Stakeholder

Satisfaction

•

• • • •

Owners /Investors

Customers

Society

Other Orgs

Org. Member




Highlight HR's business value to management. Creating and maintaining the HR scorecard

is another important form of Strategic human resources management.

For example, in Accenture, HR play three distinct roles to fulfill the strategic purpose as

detailed below (Jensen 2003)

Business

advisor/consultant

“HR managers must be able to sit as peers with executives from

other parts of the business and actively participate in strategic

decision-making. They must also advise, coach and educate senior

executives on how workforce issues can affect the overall

performance of the business, and offer solutions that support the

execution of business plans. That means that HR professionals

must thoroughly understand the capabilities of the company's

people and how the business operates—and bring those insights

together to determine how best to deploy people to deliver

business results.”

Change leader “HR professionals must play an active role in shaping the workforce

to support the company's business objectives. They must have a firm

grasp of organizational behavior, communication, and change

management, and be prepared to plan and lead large-scale change

programs and leadership-development initiatives that improve

workforce performance.”

HR functional expert “HR professionals need to understand the best practices and new

developments in HR, and apply that knowledge to the creation of




Source: Accenture Report

7.0 The Best Framework for Strategic HRM

The best method to implement Strategic HR is to design and carry out a “HR-Workforce

Performance Model” based on the balance scorecard principles of as suggested by Kaplan

and Norton (2001). Balanced Score Card is primarily a technique for implementing the

business strategy and a tool that integrates the HR activities with the Business perspectives

leading to the achievement of the end-objectives. It will also help in bringing about changes

in the workplace by fostering a climate of innovation and entrepreneurship. It is a technique

for Operationalizing the vision/mission/strategy of the organization.

Balanced Score Card is defined as a framework that focuses on shareholders, customers,

internal and learning requirement of a business to create a system of linked objectives,

measures, targets and initiatives which collectively describe the strategy of an organization

and how that strategy can be achieved. Balanced Scorecard is a comprehensive system that

allows the monitoring of business performance in a way that compliments financial

measures. By measuring and monitoring operational efficiency, employee performance and

innovation, customer satisfaction, long-term strategies can be linked to

effective business solutions. The HR field is evolving, which means

that an effective HR department needs to stay current on a range of

tools and techniques, including advancing technologies in eLearning,

Web-based workspace portals and employee self-service, and

innovative organizational approaches, such as the outsourcing of

various HR functions.”




Short-Term actions. The scorecard provides an enterprise view of an organization's

overall performance by integrating financial measures with other key performance

indicators around customer perspectives, internal business processes, and

organizational growth, learning, and innovation. The BSC is a framework for

implementing complex programs of change and can also be used to test, gain feedback

on, and update the organization’s strategy. (Kaplan and Norton, 2000)

Balance Score Card proposes four prospective frameworks which include:

(i) financial perspective

(ii) Customer perspective

(iii) Business process perspective

(iv) Organization learning perspective

The strategic role of HR is very different from its traditional administrative role. A

fundamental shift from the old back-office, transaction-handling focus to a proactive

decision-making paradigm that benefits the business is most wanted for making HR

more strategic in nature and result oriented. This will demand in changing the

mindsets, procedures, and processes, policies and information access-tools and also

demand new skill sets.

Changing the HR environment can be a complex undertaking because there are a

variety of factors that drive and enable improved performance. It requires some

separate initiatives that have to be identified, prioritized, and planned—and in the end,

these various efforts have to come together like the pieces of a puzzle to create a

coherent whole. It can




be difficult for executives to get a handle on it all, but there are ways that they can

organize and simplify their efforts.

This balanced scorecard method is considered as the best strategy implementation

model in HR due to:

a) The basic premise of Balanced Score Card is Measurement Motivates. In

other words, what gets measured gets done. Hence Balance Score Card focuses on

setting strategic & other objectives and measurements at all levels in the organization

and then measuring their achievement systematically.

b) Gives clarity & concreteness to fuzzy/vague concepts that are stated in strategy.

c) Objectives and measurements, when they are cascaded down,

become a tool to communicate strategy and not a simple tool to control.

d) Building the Balance Score Card for the whole organization develops

consensus and teamwork throughout the organization.

8.0 Conclusion

HRM has a strategic edge, which needs to be implemented properly in the

organization through the proper use of planning and coherent approach to employment

strategy. HRM policies have to be aligned and matched the business strategy, and the

management must view the employees as a strategic resource. This entails that the

management looks after the employees and provides them with all necessary means to

improve their job performance, which includes training and development. Also, the

management has to include the employees in al decision-making. Through the

strategic focus and alignment of HR policies, the organization can achieve a

sustainable competitive advantage by enhancing the




employee performance and assuring that the employees are committed and

emphatically loyal to the organization.

The transformation of HRM into a complete strategic function is a very difficult task

to achieve. By employing the right methods and tools along with the right expertise,

this can be achieved in any organization. Once the strategic HR management is

successfully integrated into the overall business agenda, the results will be far superior

to anticipated, as Human Resources are considered as the most critical assets in

modern organizations. To leverage that critical asset for organizational growth and

value creation, strategic HR is the major key. The human capital needs to be

strategically managed for achieving breakthrough improvements in human

performance and ultimately to help the company to compete and win. The following

conclusions will ensure the effective strategy implementation in this direction (Jenson

2003). To implement a successful SHRM plan, it is important to invest in the HR

strategic capabilities, and the management must commit to assessing the HR function

in the organization. Also, the role of the management is to create learning

opportunities for its employees so they can enhance their skills.




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