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Chapter two RELATIONSHIP BETWEEN STRATEGIC MANAGEMENT AND HUMAN RESOURCE MANAGEMENT CHAPTER OUTLINE Importance of strategic management Strategic management process Concepts and techniques of strategic management Strategy-oriented vs. strategically-...

Chapter two RELATIONSHIP BETWEEN STRATEGIC MANAGEMENT AND HUMAN RESOURCE MANAGEMENT CHAPTER OUTLINE Importance of strategic management Strategic management process Concepts and techniques of strategic management Strategy-oriented vs. strategically-oriented human resource management Relationship between two processes The fundamental model of strategic human resource management IMPORTANCE OF STRATEGIC MANAGEMENT L ooking back at history, it can be seen that the development of an organization profoundly depended on its adaptivity to changes, i.e., its readiness to meet the challenges of its environment. Accordingly, organ- izations have constantly developed new systems to overcome the chal- lenges they are faced with. According to Ansoff45, long-range planning was developed in the 1950s. Considering its nature, it integrated several aspects vital for business operations such as budgets, plans, programs, and goals. However, the main setback of these systems was the fact that foreseeing was based on the extrapolation of events from the past. Further, Ansoff46 believes that different management systems are sim- ilar to drugs used to cure symptoms of an illness, without investigat- ing the cause. If the illness is cured, the procedure is repeated until the same symptoms appear again. If new symptoms appear, the system is no longer used, and new “drugs” and systems are introduced to cure the new symptoms alongside the old ones.47 The early 1960s have brought a more active organizational approach to marketing which introduced a very rapid change in trends. Since long- range planning was based on extrapolation from the past, it was no longer significant support to managers. Strategic planning occurred in the 1960s as a logical next step of long-range planning which could no longer offer quality problem-solving of external issues. Its essence was creating an organizational strategy. It included decision-making in the present based on the systematic identification of opportunities and threats which lay ahead in the future. Opportunities and threats, alongside strengths and weaknesses, present the foundation for making sound decisions which should be used to avoid threats and utilize future opportunities. Seen as a process, strategic planning starts with clear definitions of the vision, mis- sion, and goals of an organization, which is used as a baseline for defin- ing the policy and creating the strategy for its facilitation. In addition, it requires the manager and all employees in the organization to believe in what they are doing and to be persistent in their work. Increasingly dynamic business operation conditions, as well as a contin- uously turbulent environment, have brought about that each new system developed was more advanced and more productive than its ­predecessor. 45 Ansoff, I. H. (1984): Strategic Management, The Macmillan Press, London. 46 Ansoff, I. H. (1976): Managing Surprise and Discontinuity-Strategic Response to Week Signals, European Insti- tute for Advanced Studies in Management, (18) 2, 21-33, 25. 47 Mašić, B. (2021): Strategijski menadžment: osnove, proces i koncepti, Data Status, Beograd, 70. 47  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management To manage processes within the system of business operation manage- ment, it is necessary to answer the following question: “What needs to be done to foresee the changes in the environment to increase the number of appropriate solutions for the given situations?” Strategic management was developed from the need to shape the functional system which can pro- vide an appropriate answer to the changes in the environment. Hence, strategic management presents an upgrade of strategic planning in the direction of the implementation and the control stage. Unlike strategic planning (which focuses on dealing with shaping, defining, and setting the direction of development), strategic management goals focus on adapting to the environment in such a way to take into account and real- ize the long-term goals (interests) of an organization. Strategic management is a process that analyses the current situation, and crafting (produces) responding strategies that are implemented in practice and modified and evaluated depending on the requirements. The concept of strategic management enables managers to utilize spe- cific methods and instruments to reduce the complex environment into gradable and clear processes which are used as the baseline for creating, shaping, and implementing new strategies directly associated with the future development of an organization.48 The orientation of strategic management is both external and internal. External orientation included the interaction of an organization with its environment. Because employees take up a considerable share of strate- gic management, an important fact to understand includes the nature of the circumstances outside an organization which is used to establish the factors (economy, competition, or demography) which could have a significant effect on strategic decisions and activities (environment). Unlike the external orientation, the internal orientation of strategic management includes the analysis of specific resources and capabilities. In this case, the role of the employees is to determine the capabilities at the disposal of the organization or the ones that are missing, i.e., the organizational competence (what it does well, and what not).49 The role of strategic management is highlighted particularly because the strategic management process prompts the organization to determine and develop certain competence which will play an important role when determining the strategic position and simultaneously developing com- 48 Kurtić, A. (2011): Menadžment poslovnih sistema: sistem, proces, funkcije, Centar za napredne studije, Sara- jevo, 133. 49 Coultard, M. (2007): Strategic Management in Action, Pearson, London, 7-8. 48  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO petence that will be used to focus the energy needed to achieve the effect of synergy. All employees must be involved in the process to realize the planned activities. However, process leaders must be determined, i.e. the employees supervising and managing the processes. Accordingly, it can be concluded that the employees essentially held the most responsible for the implementation and realization of the plans are the instruments of strategic management. According to Buble et al.50, the instruments of strategic management are The Board of directors, Top management, and The Planning depart- ment. Their influence is undoubtedly the highest. The Board of directors is a group of directors (the group is most often formed through a selec- tion made by shareholders to advocate-represent their interests). Their foremost task is to define the organizational mission as well as the stra- tegic goals and the organizational strategies needed for its realization. The Board is seldom active in the process of planning. Top management consists of a relatively small group of people including the CEO-chief executive, VP-vice president, and EO-executive officer. The top manager (CEO) is a vital organizational resource since he/she is at the very top of the organizational structure. Top managers are described as people working very hard and under constant pressure in decision-making. They are forced to make decisions daily lacking sufficient information and guided solely by the logic of their mindset. Considering their man- ner of work and operation, according to Šunje51 one must have in mind that the top management is only a human being with a certain value sys- tem, experience, knowledge, competencies, and a certain mindset. STRATEGIC MANAGEMENT PROCESS Technological prosperity constantly brings about changes with speed as their fundamental feature. Namely, to be certain that its operations will be realized, the organization must anticipate the future flow of events and have to adapt to the altered surrounding quickly and adequately. Such new scenarios indicate that modern organizations, in addition to rapid technological changes, are faced with new challenges such as the short life cycle of a product, threats of new entries, common and unpre- dictable changes related to the tactics of competitors, as well as the rapid 50 Buble, M. (Ed.) (2005): Strateški menadžment, Sinergija, Zagreb. 51 Šunje, A. (2002): Top-menadžer: vizionar i strateg, Tirada, Sarajevo, 206. 49  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management evolution of demands and customer expectation.52 Such an environment requires permanent investment in the research of the future to identify in advance the threats and opportunities an organization will face. There are different aspects or dimensions as some call them, of the stra- tegic management process mentioned in the literature. In most cases, the process is considered a series of steps, stages or routes.53 The five stages model is a strategic management model that uses a precise sequence of steps in strategy formulation and implementation:54 Define mission, vision, and goals External and internal analysis Strategy formulation Strategy implementation Strategy control If an oganization fails to react to the challenges of the future, it risks the possibility of finding itself in a crisis. According to Kurtić55 strategic management presents an integral factor of each successful organization since it presents a permanent process of organization adaptation and its influence alongside its mission and goals used to increase the capabilities and readiness to react to changes in the environment timely and in the right way. The strategic management process includes the existence of successive and mutually associated activities leading to a certain result. The ultimate result of mutually associated phases is a series of organ- izational strategies applied in its business. Simply said, the shaping of strategy presents a rational reaction of an organization to the changes in its environment by selecting methods and mechanisms needed for the reactions to achieve the strategic goals. Namely, one of the most popular Japanese consultants Ohmae56 noticed that the success of the most significant Japanese organizations is the result of sound strategies. At the same time, there was a paradox since such successful organizations lack the departments for planning, and even lack the strategic processes of planning. Such diversity in the approach to determining the definition of organizational strategy indicates that it is a rather demanding phenomenon, with a note that each approach to 52 Todorović, J. (2003): Strategijski i operativni menadžment, Conzit, Beograd, 218. 53 Mintzberg, H., Raisinghani, D., and Theoret, A. (1976): The Structure of “Unstructured” Decision Processes, Administrative Science Quarterly, 21, 246-275. 54 Simon, H. A. (1959): Theories of Decision-making in Economic and Behavioral science, American Economic Review, 49, 253-283. 55 Kurtić, A. (2011): Menadžment poslovnih sistema: sistem, proces, funkcije, Centar za napredne studije, Sara- jevo, 134. 56 Ohmae, K. (1983): The Mind of the Strategist: The Art of Japanese Bussines, Penguin Books, London. 50  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO defining the notion of organization strategy offers an additional oppor- tunity to understand the phenomenon more completely. It is quite clear that the organizational strategy perceived in a wider sense contains both the elements of the plan and the elements of maneuver and such strategy is always the result of consistent behavior based on a synchronized value system and a developed organizational identity.57 Viewed from the context of defined key strategic actors, business strat- egy can be accepted as an instrument for realizing above-the-average economic performances and such strategy is perceived by Ohmae58 as an instrument of an organization to differentiate itself from its competitors using its strengths to better please the demands of the aimed category of customers. Many authors believe that the organization strategy actually shows guidelines for achieving long-term goals, and therefore it can be defined as a plan that includes all the main activities through which the company intends to achieve its long-term goals in a turbulent environ- ment. Since each strategy should be a package for achieving the long- term goal, we must state that to achieve these goals, it is necessary to combine the main strategies due to the specifics of the business and the environment in which the enterprise operates. Certain strategy specificities must be known to have a better understanding of the role and significance of strategy (with particular consideration of its formulation). Because strategy is expected to be the most effective way of realizing the strategic goals in a dynamic and hostile environment, it makes sense for it to include a wide specter of different orientations of methods and instruments to apply depending on the goals and circumstances. The strategy implementation phase comes after the formulation and selection phase. When formulating a strategy, it is certainly of great importance to anticipate (or at least try to anticipate) barriers that will stand in the way of successful strategy implementation. On the other hand, there are always objective circumstances that could not have been foreseen and to which the company’s management must find an answer. According to Certo and Peter59, for these reasons, the strategy implemen- tation is in the qualitative sense the most demanding process because we have to turn it into tactics (tactical plans) that will lead to the realization of the process. This phase is extremely demanding because it implements “words in action” and encounters all the problems that are not foreseen (covered) by the wording. 57 Šunje, A. (2002): Top-menadžer: vizionar i strateg, Tirada, Sarajevo, 206. 58 Ohmae, K. (1983): The Mind of the Strategist: The Art of Japanese Bussines, Penguin Books, London. 59 Certo, P., and Certo, S. (2018): Modern Management: Concepts and Skills, Pearson, Boston. 51  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management The last phase is the evaluation phase and it involves evaluating the way the strategy has been implemented. If it is determined that the strategy itself did not meet the goals that were set, it will be necessary to revise the strategy and even change it completely. On the other hand, it is also necessary to determine whether there was a misconception at the very beginning or in the analysis of the situation. To successfully implement the new strategy, it is necessary that the persons in charge of implemen- tation carefully consider all internal factors that, to a greater or lesser extent, have an impact on the concretization (implementation) of the strategy. The strategy must be identified or correspond to the organi- zational structure of the company, and as such must be a concrete and clear guideline for each member of the organization. Of course, during the implementation, there are almost constant deviations, but because of that, the top management is the one that should constantly monitor the implementation and take concrete steps to ensure the implementation of the strategy through corrective measures. A prerequisite for the suc- cessful implementation of the strategy is the construction of an effective control system. The type of strategic control will also depend on the cir- cumstances in which an organization operates. The control of the cur- rent movement is most often used for the analysis of current business, and it is applicable when an organization operates in a predictable envi- ronment. In contrast, when a company operates in turbulent conditions, change control is used, the characteristics of which are irreversible. In the end, it can be concluded that defining strategic management is not at all simple, no matter how it may seem, because it is a continuous iter- ative process aimed at maintaining the organization as a whole, which is shaped by its environment. Different business operation conditions create different opportunities and threats and the top management must prepare a reaction plan to deal with them.60 CONCEPTS AND TECHNIQUES OF STRATEGIC MANAGEMENT As noted, several times previously, we are currently living in a time char- acterized by turbulence and unpredictable business trends. The term hyper-changes can often be encountered in literature denoting rapid turning points with unpredictable results.61 60 Todorović, J. (2003): Strategijski i operativni menadžment, Conzit, Beograd, 174. 61 Mašić, B. (2021): Strategijski menadžment: osnove, proces i koncepti, Data Status, Beograd, 419. 52  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO Influenced by increasingly dynamic movements and turbulence, learning is becoming the basic premise for the organization to develop the essence of their competitiveness which enables them to cope with new managerial challenges. Learning itself is characterized by a certain level of difficulty since it is limited by time because it is important to be ahead of the com- petition, i.e. to acquire and apply new knowledge faster than the compe- tition. Nowadays, it can be even said that we live in a century of learning and applying discoveries. Everyone works hard to implement knowledge into practice as fast as possible to reach favorable results, i.e. to achieve a competitive advantage. Hence, organizations, too, learn (copy) one from another and use the acquired knowledge to achieve an advantage. Readi- ness to learn will depend on the personal attitude of all employees, strate- gic behavior and strategic policy, as well as entrepreneurial attitude. Consequently, planning and goal setting of an organization, as well as strategy crafting cannot be a fixed strategy, no matter how much one would desire such a scenario. The change of business operations con- ditions and almost a complete reorientation towards the marketing approach conditions the top management to adapt its strategies to new business trends and to integrate several strategic approaches into a sin- gle approach to answer the increasingly more profound actions by the competitors on one side and increasingly higher demands from the end’s customers, on the other. Strategic management concepts New challenges arising before management, coupled with technological, social, political, and economic factors heavily influencing the dynamics of changes have led to the formation of new concepts and creation of new management theory and practice. Today, the generation of new concepts and approaches in strategic management consists of the following:62 1. Learning Organization 2. Core Competence 3. Knowledge Management 4. Customer Relationship Management 5. Total Quality Management 6. “Strategy as a revolution” 62 Mašić, B. (2021): Ibidem, 419-581. 53  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management Mašić63 offers the following overview of the most significant concepts and their features. Learning Organization is essentially capable of creating, collecting, exchanging, and modifying its behavior in a way that reflects new knowl- edge. Senge cites a lifelong learning program that includes five learning disciplines that every organization would have to develop to become and have the characteristics of a learning organization. Core Competence is the next concept that will be partially presented and it belongs to the new concepts too. The concept called the core com- petence of the organization is one of the concepts that have the primary task of providing a competitive advantage for an organization. This con- cept focuses on what one organization does best. Knowledge Management is a business concept that focuses on organi- zational learning. Its development has begun in the last decade of the last century and from then until today, through continuous development, it has become one of the most important programs for radical changes in an organization. It is a process in which knowledge is created, con- quered, preserved, shared, and applied. Customer Relationship Management is based on a marketing approach to sales where proponents of this concept focus on the cus- tomer and a lasting relationship with him/her. Namely, the most success- ful organization of the day focuses on customers and directs most of the attention toward them. Total Quality Management is an approach in which managers must be constantly more innovative, flexible, resourceful, proactive, and yet focused on quality. This concept is based on a common approach of all employees in one organization, all of which are oriented towards long- term success by meeting customer needs. “Strategy as a revolution” represents a new management paradigm and marks the beginning of the creation of a revolutionary and strategic change model. Therefore, the top management must understand the need for con- tinuous benchmarking, activities to compare the results of an organization with the best practices to continuously create incentives and improvements. 63 Mašić, B. (2021): Ibidem, 419-582. 54  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO Strategic management techniques Different techniques for enhancing the strategic management process must be used to ensure its efficiency of the strategic management pro- cess. Each organization needs to secure itself from certain negative cir- cumstances that can affect the realization of its goals through the appli- cation of the concept of strategic management. The application of the strategic management model highlights business trends to predict mar- ket orientations to notice discontinuities on time. Today, the most sig- nificant methods and techniques applied in the strategic management process include:64 1. Portfolio concept 2. PIMS program 3. SWOT analysis 4. Scenario method 5. Value chain 6. Five forces 7. Gap analysis 8. Experience curve 9. Creative techniques 10. Digital tools Mašić65 offers the following overview of the most significant methods and their features. The portfolio concept is, in the simplest terms, “in charge” of taking care of and preserving the profit potential of an organization. The crea- tion of a certain strategic position is impossible without the use of some of the portfolio matrices (market growth/market share or BCG), mar- ket portfolio development based on a matrix of nine blocks, technology portfolio development) which is today the most common method due to its simplicity, clarity, and efficiency in use. PIMS program is used by organizations in an attempt to overcome cer- tain barriers faced by the concept of portfolio management. The main goal of this model is to achieve more successful strategic planning and man- agement of an organization together with its joint strategic business units. 64 Mašić, B. (2021): Ibidem, 93-189. 65 Mašić, B. (2021): Ibidem, 93-189. 55  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management SWOT matrix is named after the initials of four key factors that it identi- fies: strengths, weakness, opportunities, and threats. Today, the matrix of opportunities is largely represented when it comes to strategic planning because it is aimed at determining the position of an organization within its environment while taking into account the intensity of opportunities and threats. The scenario method is one of the methods that is most often used today in the analysis and prediction of the macro environment. Namely, when predicting trends, we often neglect certain phenomena that over time prove to be crucial for the development of planned activities. Using the scenario method has an advantage in turbulent conditions where the future is uncertain and where there is a need for an organization to react quickly and flexibly to changes in the environment. The value chain breaks down an organization into its strategic parts to more accurately identify the costs that the organization creates. Using the value chain, the activity (business) of an organization can be divided into two parts: (1) primary activities and (2) support activities. The organization performs many independent activities within each of these categories of activities that are essentially the key weaknesses and strengths of an organization. Five forces focus on the five competing forces to analyze the nature and intensity of competition in the industry. This model emphasizes competition and presents its starting point. In addition to the competi- tion, the analysis includes: (1) the threats of substitutes, (2) the indus- try rivalry, (3) the bargaining power of suppliers, and (4) the bargain- ing power of buyers. Gap analysis is one of the strategic management techniques for deter- mining the growth and development opportunities of an organization. The task of this technique is to explore and create strategies to fill the gap by determining future techniques and current opportunities in this context. Delphi method and Brainstorming method are today the most pop- ular techniques to increase creativity and were developed in the second half of the last century. The Delphi method is a way of systematically collecting and combining individual assessments of the outcome of phe- 56 Relationship between strategic management and human resource management CHAPTER TWO I PART TWO nomena on the economic horizon until an acceptable solution is reached for all parties. The brainstorming method works by forming meetings where a group of carefully selected experts “fantasize” about how to solve the problem. Digital tools are the result of the fourth industrial revolution, which gained its affirmation after the Hanover fair in 2011 fair. Industry 4.0 encompasses the technological transformation of an organization towards the use of a range of new technologies that create fusion by making existing boundaries between the physical, digital, and biologi- cal worlds less pronounced. Industry 4.0 affects the entire organizational value chain, enabling a whole new approach to its design. STRATEGY-ORIENTED VS. STRATEGICALLY-ORIENTED HUMAN RESOURCE MANAGEMENT The goal of strategic management is to use its proactive nature and utilize an entire arsenal of instruments, methods, and techniques in an interac- tive and iterative process to foresee the possible threats as well as potential opportunities and to define mechanisms and strategies to minimize the potential threats and drawbacks while maximizing the internal potential and recognized opportunities on the market. In addition, strategic man- agement is defined as a manner of thinking about the future, too. That is a concept of management of the future through a process-oriented toward the determination and application of a productive (effective and efficient) strategy in the context of an association between an organization and its relevant environment to realize its strategic goals and business continuity. In doing so, the determination and the dimensioning of aims are condi- tioned by the status and the planned premises concerning the internal fac- tors of the internal environment (strengths and weaknesses) on one side, and the status and premises concerning its external environment (oppor- tunities and threats), on the other. The further process of this unique and interactive and iterative process is the strategy formulation phase encom- passing several different paths (manners), i.e. different strategic options. In other words, the direction and the manner of achieving the fundamental development orientation of an organization are developed alongside strat- egy. The result of that process is unique strategies and the best strategies are a result of creative strategic contemplating and an individualized design. 57  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management According to Rahimić66, strategic management includes a principally long-term and multiple oriented gradual management and profit poten- tial formation and development using strategy formulation and imple- mentation. To better understand human resource management orientation, litera- ture provides different interpretations and definitions of its role. That often leads to different interpretations, which causes confusion among the readers. According to Schuler67 there really shouldn’t be any mys- tery about the word strategic in the phrase strategic human resource management. Given the fact that the human resource management concept directed special attention at adjusting the human factor to stra- tegic development and organizational strategy, the attribute strategic was added further in its development, creating its original name stra- tegic human resource management. DeNisi and Griffin68 point out that the growing awareness of the strategic importance of human resource management has led to new terminology that reflects the obligation and commitment of the organization toward its employees and the commit- ment of people to the organization, its mission, goals, and tasks. Strate- gic human resource management which is shaped in this way includes several groups of activities from the domain of human resource manage- ment, such as employee influence, human resource flow, reward system, and works system.69 At first, in its focus were hard variables (strategy, structure, systems), and soft variables (staff, skills, style, shared values) were neglected. In addi- tion, according to Kane, Crawford, and Grant70, it is possible to iden- tify two broad approaches to human resource management: “hard” and “soft” approaches. Hard and soft variables are only generally separated, and the areas they cover strongly interfere in practice. As Price71 states, under the “hard” approach, employees are considered as one of the organization’s resources and thus be managed in the same way as any other resource in the organization. According to Schuler and Jackson72, this approach measures the human resource management 66 Rahimić, Z. (2010): Menadžment ljudskih resursa, Ekonomski fakultet Univerziteta u Sarajevu, Sarajevo, 95. 67 Schuller, R. S. (1992): Strategic Human Resources Management: Linking the People with the Strategic Needs of the Business, Organizational Dynamics, 21, 18-32. 68 DeNisi, A. S., and Griffin, R. W. (2008): Human Resource Management, 3rd Ed., Houghton Mifflin Company, Boston, 13. 69 Sherman, W. A., Bohlander, W. G., and Chruden, J. H. (1998): Managing Human Resources, 8th Ed., South-We- stern Publishing Co., Cincinnati, 101. 70 Kane, B., Crawford, J., and Grant, D. (1999). Barriers to Effective HRM, International Journal of Manpower, 20, 494-515. 71 Price, A. (2007): Human Resource Management in a Business Context, 3rd Ed, Thomson Learning, London, 648. 72 Schuler, R. S., and Jackson, S. E. (2005): A Quarter – Century Review of Human Resource Management in the U. S.: The Growth in Importance of the International Perspective, Management Review, 16, 1-25. 58  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO effectiveness by monetary criteria: cost accounting, utility analysis, eco- nomic value-added, and return on investment of HR activities, etc. Some companies develop a sophisticated model of how HR practices affect the satisfaction of customers, or identify investors as the most important stakeholders, without whose capital would be impossible to continue business and reach satisfaction. As Torrington, Hall, Taylor, and Atkin- son73 state hard variables emphasize the need to manage humans in a way that will ensure added value from them and thus enable the organi- zation to achieve competitive advantage. As Price74 states, the “soft” approach includes that employees are an important group of stakeholders and a distinct resource that cannot be managed like any other resource and whose interests and needs have to be taken into consideration. According to Schuler and Jackson75 states, this approach measures the human resource management effectiveness by nonmonetary criteria: commitment, satisfaction, engagement, knowl- edge development, etc. As Torrington, Hall, Taylor, and Atkinson176 state, soft variables are based on the human relations school and include test- ing of humans as appreciated and the most valuable asset, as a source of competitive advantage. Another part of the human resource management debate has focused on the direction of shaping its complex content by applying the approach of integral coverage of all influential (“hard” and “soft”) variables. The soft model emphasizes individuals and their self-direction and places com- mitment, trust, and self-regulated behavior at the center of any strategic approach to people. In contrast, the hard model stresses the rationalism of strategic fit and places emphasis on performance management and an instrumental approach to the management of individuals. Today, the focus of strategic human resource management is shifted to soft variables. In recent literature, there are two different interpretations, i.e., variants of the notions of management on one side and human resource management on the other side. The authors espoused the need to establish a close two-way human resource management orientation. Those are:77 (a) Strategy-oriented human resource management (b) Strategically-oriented human resource management 73 Torrington, D., Hall, L., Taylor, S., and Atkinson, C. (2014): Human Resource Management, 9th Ed., Pearson, Harlow. 74 Price, A. (2007): Human Resource Management in a Business Context, 3rd Ed., Thomson Learning, London, 648. 75 Schuler, R. S., and Jackson, S. E. (2005): A Quarter – Century Review of Human Resource Management in the U.S.: The Growth in Importance of the International Perspective, Management Review, 16, 1-25. 76 Torrington, D., Hall, L., Taylor, S., and Atkinson, C. (2014): Human Resource Management, 9th Ed., Pearson, Harlow. 77 Rahimić, Z. (2010): Menadžment ljudskih resursa, Ekonomski fakultet Univerziteta u Sarajevu, Sarajevo, 93. 59  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management Strategy-oriented human resource management, according to Rahimić78, only refers to the measures for strategy implementation because human resource is deeply connected with strategy formula- tion and implementation. That limits this notion to the strategic man- agement part only. Strategy-oriented human resource management interactively connects the organizational strategy, organizational struc- ture, and human resource management. As it is already known, organ- izational structure plays an inevitable role in strategy implementation thanks to the renowned American scholar Chandler whose research on the relationship between the two variables conducted during the 1960s undoubtedly alters the approach to strategy implementation. As Šunje79 states referring to Chandler’s thesis, with the explanation of the mutual connection between strategy and structure (structure follows strategy). This means that the organization first (re)shapes the strategy and action programs and on this basis, it sets an appropriate organiza- tional structure. Should an organization try to successfully implement an existing strategy, it needs to choose a corresponding structural configura- tion to complete the process. Should an organization choose an unfitting structural configuration, it will certainly face obstacles during strategy implementation. Such obstacles often lead to weak performances, mak- ing the organization uncompetitive. Implementation of the new structure often occurs only after several causes. Considering that people within an organization are those who perform work related to the implementation of other strategies, the human resource strategy is closely adapted to the other strategies to enable the right number of people with adequate com- petencies and to use them efficiently and effectively. According to Rahimić80, the Harvard model can be interpreted as a model for strategy-oriented human resource management. Although human resource management in the Harvard model has strongly deter- mined tasks in comparison with the Michigan model, it is still more a consequence than the starting point of strategic thoughts. The starting point is that in addition to organizational strategy there are additional interest groups and situational factors that determine human resource management. 78 Rahimić, Z. (2010): Ibidem, 93. 79 Šunje, A. (2002) according to Chandler, A. (1969): Strategy and Structure: Chapters in the History of the Ameri- can Industrial Enterprise, The MIT Press, Massachusetts. 80 Rahimić, Z. (2010): Ibidem, 94. 60  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO BOX 2.1. In Chandler’s work Strategy and Structure - chapters from the history of Ame- rican industrial organization based on an intense study of the history of DuPont, General Motors, Standard Oil of New Jersey, and Sears, Roebuck, and Co., Chand- ler set and proved the claim that the strategy of an organization determines the structure of the organization and that joint name for this is the use of organiza- tional resources (humans, funds and production means) to cover demand on the market. The structure is thereby a means for integrated application of existing organizational resources, while strategy is a plan for the allocation of resour- ces for future market demands. Chandler formulated his famous thesis stru- cture following a strategy. This thesis says that changes in the environment and market possibilities and dangers that derive from that tell the leadership how to adjust the organizational strategy to the changed circumstances (geographical expansion, vertical integration, i.e. diversification of products). Simultaneously with the implementation of these strategies, changes in the organizational stru- cture become mandatory after a certain time. Chandler studied large US orga- nizations in the detail and reached satisfying results that enable generalization. Source: From Chandler, A. (1969): Strategy and Structure: Chapters in the History of the American Industrial Enterprise, The MIT Press, Massachusetts. Strategically-oriented human resource management, according to Rahimić81, is an explicit interactive inclusion of human resource into the strategic management process. The label strategically-oriented exceeds the label strategy-oriented in several ways. From this perspective, strategical- ly-oriented human resource management is considered a tool for strategy formulation and implementation. The main interest of an organization in the strategy selection process is to achieve a sustainable competitive advantage. Whenever an organization adopts a new strategy or a program, its implementation must be conducted through humans. All of it requires complete external orientation of the management that enables the identifi- cation of very low signals of changes, their anticipation, and rapid, imme- diate reactions and proactive responses. The foundation for such inter- pretation can be found in the so-called Warwick models and it is favored by many authors. Strategically-oriented human resource management can make a connection between the outer environment, inner environment, strategy context, HRM context, and HRM content. As previously stated, HRM content has a significant role in shaping the strategic and HRM con- text thanks to German professors Berthel and Becker, who published their work which highlights the relationship among the three variables altering the strategy implementation approach in the early 2000s. 81 Rahimić, Z. (2010): Ibidem, 94. 61  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management As Rahimić82 states referring to Berthel and Becker, when the organiza- tion is formulating the strategy, the starting points are limited, existing, available qualifications (strategy follows qualification). This means that is necessary to explain to which extent the human resource management gives initiative and support to the formulation and implementation strategy processes. The authors emphasize the analysis of the linkages between human resource and organizational strategy and how strategy provides goals and constraints for the other in its competitive environ- ment and with the immediate business conditions that it faces. According to Evans83, the Warwick model can be interpreted as a model for strategically-oriented human resource management. Although human resource management in the Warwick model has strongly deter- mined tasks in comparison with the Michigan model, it is still the process of linking the human resource with the strategic objectives to improve performance. The human resource management position within the strategic manage- ment process is presented in Table 2.1. TABLE 2.1. Human resource involvement in the strategic management process Strategic Way of including management human resource in process the strategic management process Conceptualization Indirect participation in of strategic Direct participation in the process the process decisions The formal Human resource Involvement in the formal strategic management process Targeted impact on strategic holders of the strategic management Strategy Strategy decision-making process process formulation implementation Human resource managers Inclusion The informal in informal strategic decision-making The indirect effect of strategic processes measures for human decision-making resource management process Human resource management as the designing activities strategic actions launcher Source: From Rahimić, 2010 according to Berthel, and Becker, 2003, 546. 82 Rahimić, Z. (2010) according to Berthel, J., and Becker, G. F. (2003): Personal-Management: Grundzüge für Konzeptionen betrieblicher Personal arbeit. 7. Aufl., Schäffer-Poeschel, Stuttgart, 546. 83 Evans, P. A. L. (1986): The Strategic Outcomes of Human Resource Management, Human Resource Manage- ment, 25, 149-167. 62  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO The human resource management position within the strategic manage- ment is presented in Table 2.1, which shows that there are two levels, i.e., direct and indirect participation in the strategic management process. According to Noe, Hollenbeck, Wright, and Eligh84 as the preceding table illustrate, often the “with what will compete” question presents ideal ave- nues for human resource management to influence the strategic man- agement process. As Rahimić85 states, the task of strategic management lies in the building, preservation, and further development of specific resources and the development of abilities, that these resources are used for organizational capabilities. Quality utilization of human resource can be used as a source of competitive advantage for a modern organiza- tion. Hence, many modern organizations give particular attention to the development of special talent management programs which are used as an instrument for ensuring quality resources of competitive advantage. As the Author states it is necessary to analyze which odds and problems human resource and human resource management can strategically offer and expect, as well as to determine which human factors of success are more critical than others and how they can be developed (employees as potential). According to Noe, Hollenbeck, Wright, and Eligh86, this might among the executive team regarding how the organization might develop the human resource necessary for such a strategy to be successful. RELATIONSHIP BETWEEN TWO PROCESSES According to Bahtijarević-Šiber87, the policy, content, and importance of human resource management are not only determined by what organiza- tions are, but also by what organizations want to become, i.e., their strategy for future development and goals that they wish to accomplish. The core of successful human resource management in that organization is good and successful support of organizational strategies and achievement of overall business and strategic goals. Nowadays, there are numerous tools for meas- uring the level of business strategy implementation. Undoubtely, human resources provide a significant contribution to the long term results of an organization through the implementation of its know how. 84 Noe, R. A., Hollenbeck, J. R., Wright, P. M., and Eligh, L. (2016): Strategic Human Resource Management: Gaining a Competitive Advantage, McGraw-Hill, Toronto, 53. 85 Rahimić, Z. (2010): Menadžment ljudskih resursa, Ekonomski fakultet Univerziteta u Sarajevu, Sarajevo, 93. 86 Noe, R. A., Hollenbeck, J. R., Wright, P. M., and Eligh, L. (2016): Strategic Human Resource Management: gaining a competitive advantage, McGraw-Hill, Ottawa, 53. 87 Bahtijarević-Šiber, F. (1999): Management ljudskih potencijala, Golden marketing, Zagreb, 138. 63  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management According to Rahimić88 strategic management and human resource man- agement represent two of the most important preoccupations of modern management. Strategic management aims to create a strategy based on the organization’s opportunity to build and preserve sustainable compet- itive advantage. According to Leopold and Harris89, when the possibility of faster imitation by the competitors is more expressed, precisely the generic and specific competencies of people satisfy with greater certainty the mentioned criteria in comparison with other resources. In addition, they also represent the foundation of all organizational changes that are necessary for adaption to the changeability and uncertainty of the organ- izational environment. According to Bahtijarević-Šiber90 strategic management and human resource management are highly interdependent because of several reasons: (1) In this turbulent business environment, people are the key factor and the lever of a strategy. They are the key strategic advantage, but also the main factor of limitations to organizational strategies. Every corporate and business strategy has an important human dimension, therefore it is necessary to include human resource managers in the entire process of strategy formulation, as equal members and partners in the strategic team of top management. This applies to the entire organization, as well as for every strategic business unit in whose team the human resource managers must be included as well. (2) In situational analysis, i.e., the analysis of opportunities and threats in the environment and strengths and weaknesses in an organization, the SWOT analysis that is an inevitable part of the strategy formulation pro- cess, and the analysis of human resource and trends pertinent to them are an extremely important segment. This analysis has two important parts: strategic analysis of the environment and strategic analysis of organizational capabilities. This analysis helps the organization by cho- osing a strategy. (3) Corporate strategy and business strategy significantly determine the manner of treating human resource and strategic choices of human resource. Different organizational strategies require different people and behaviors and different ways of their selection, rewarding, training, 88 Rahimić, Z. (2010): Menadžment ljudskih resursa, Ekonomski fakultet Univerziteta u Sarajevu, Sarajevo, 96. 89 Leopold, J., and Harris, L. (2009): The Strategic Management of Human Resources, Prentice Hall, Harlow, 234-256. 90 Bahtijarević-Šiber, F. (1999): Management ljudskih potencijala, Golden marketing, Zagreb, 139-140. 64  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO i.e., the human resource strategy that can adequately respond to the needs of organizational and business strategies and enable their succe- ssful implementation. The possibility of application and success of cor- porate strategy and business strategies implementation largely depends on the degree of compliance with the human resource strategy. (4) Determining functional strategies, including the human resource stra- tegy, is an integral part of organizational strategy. The design of a fun- ctional strategy is an integral part of the company’s strategy design and therefore it must be designed following the corporate and business stra- tegies. Since human resource management cannot be limited to a sin- gle function and a special organizational unit that performs it, human resource strategy must be defined for the entire organization and each strategic business unit. (5) Successful strategy implementation largely depends on people and the success of the human resource function which ensured the necessary changes in humans, their competencies, and motivation. In addition to competencies and motivation, successful strategy implementation also depends on connectivity with a series of other elements in the organi- zation. Few important variables determine success in the implemen- tation of the strategy: organizational structure, organizational culture, leadership, and other important facts as well. So far, according to Šušnjar-Štangl and Zimanji91, the strategic man- agement process was presented in terms of a step-by-step procedure, through five identified steps which initiate different issues of human resource function, before the decisions on strategy are reached. After that, a plan of human resource activities necessary for the implementa- tion of that strategy is created. THE FUNDAMENTAL MODEL OF STRATEGIC HUMAN RESOURCE MANAGEMENT Interdependence of strategic management and human resource man- agement can be shown in the basic connection model which takes into consideration the fundamental issues of human resource management. Research conducted worldwide has imposed several key issues from this 91 Šušnjar-Štangl, G., and Zimanji, V. (2006): Menadžment ljudskih resursa, Ekonomski fakultet Univerziteta u Subotici, Subotica, 77. 65  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management interconnected field, issues that can be answered only with a mutual con- nection. Fundamental issues of strategic management and fundamental issues of human resource management can be connected with stages of the strategic management process, i.e., through the process of shaping organizational strategies and the role of human resource in them. There- fore, according to Šunje92, factors that influence the human resource pol- icy are: (1) Situational factors in the external environment or within an organi- zation are laws and social values, labor market, unions, the marks of the workforce, business strategies, management philosophy, tasks, and technology. According to Beer et al.93, these factors can limit the defini- tion of human resource policy, but (to a different degree) they can also be under the influence of human resource policy. (2) Interests of stakeholders, including shareholders, managers, employees, unions, community, and government. Beer et al.94 claims that the human resource management policy should be influenced by all stakeholders, or else the organization will not manage to meet the needs of those stakeholders in a long run and will collapse as an institution. According to Leopold and Harris95 stages of the strategic management process necessarily require an emphasized role of human resource. It is very important to involve human resource in all stages of the strategic management process that will result in the crafting of the strategy. That creates a basis for human resource policy. All issues that arise regarding the human resource functions should be addressed through special research and analyses. The role of human resource function in every stage, according to Bahtijarević-Šiber96, shows why the immediate inclusion of human resource managers is necessary for the strategic management team and why the partnership between them and human resource managers is needed. This is clearly shown in Figure 2.1. 92 Šunje, A. (2002): Top-menadžer: vizionar i strateg, Tirada, Sarajevo, 215-218. 93 Beer, M. (Ed.) (1984): Managing Human Assets, The Free Press, London, 13. 94 Beer, M. (Ed.) (1984): Ibidem, 13. 95 Leopold, J., and Harris, L. (2009): The Strategic Management of Human Resources, Prentice Hall, Harlow, 265. 96 Bahtijarević-Šiber, F. (1999): Strateški menadžment ljudskih potencijala: Suvremeni trendovi i izazovi, Školska knjiga, Zagreb, 69. 66  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO FIGURE 2.1. Strategic management process stages and human resource management roles Source: From Bahtijarević-Šiber, 2014, 70. As shown in Figure 2.1., there is a high degree of interaction between the process of strategy formulation and strategy implementation, i.e., between strategic management and human resource management. That fact conditions and requires constant involvement of:97 (a) The human resource function has in its scope of work all activities, pro- cesses, policies, and practices pertinent to employees in the organization and which influence the behaviors, attitudes, and success of employees, where the most important groups of operations are (1) recruitment and selection, (2) training, (3) compensation, (4) benefits,(5) employees’ services, (6) relations with employees and social community, (7) perso- nal files, health and safety, and (8) strategic planning, 97 Bogićević-Milikić, B. (2008): Menadžment ljudskih resursa, Ekonomski fakultet Univerziteta u Beogradu, Beo- grad, 13. 67  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management (b) Human resource manager who possesses general knowledge and perennial experience in operations of human resource management. Human resource managers have three important roles in the orga- nization: (1) line function - in leading employees in human reso- urce function, (2) coordination function - coordination of activities of human resource management in the entire organization, and (3) counseling function - counseling of line managers in an organiza- tion about how to perform activities of human resource management under their jurisdiction, (c) Human resource manager who possesses specialized knowledge from certain fields and is usually the first or the entering job in the career of human resource managers. Specialization within the human resource function is usually conducted according to the basic functional areas, in the entire process of shaping and developing organizational strategies, not only in the design of functional strategies. This type of work is condu- cted at the following workplaces: (1) associate for candidate interviewing, (2) earnings analyst, (3) job analyst, and (4) training associate. This is formally reflected in the need to have human resource managers as members of strategic management teams across all levels of an organ- ization: corporate, business, and functional. Human resource managers, i.e., the organizational unit which holds it, must be members of the team for the design and development of strategy in all strategic business units. They are an important source of the necessary information for quality decision-making on strategic options and the best strategic choice. Schuler’s 5-P model of strategic human resource management Schuler’s 5-P model of strategic human resource management (Philoso- phy, Policies, Programmes, Practices, Processes)38 represents a compre- hensive approach that includes a different philosophy, policy, and prac- tice of human resource. Viewed this way, many activities within the five “Ps” (HR Philosophy, HR Policies, HR Programs, HR Practices, and HR Processes) can be strategic. Thus, categorizing these activities as strategic or not depends upon whether they are systematically linked to the stra- tegic needs of the business, not on whether they are done in long term rather than the short term or whether they focus on top management rather than nonmanagerial employees. 68  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO The model is presented in the figure below. FIGURE 2.2. 5-P model of strategic human resource management Source: From Schuler, 1992, 20. Reproduced with permission of the Author. As the Figure 2.2. shows, that this model is permeated by permanent ques- tioning and redefining or shaping of the organizational strategy, internal and external analysis, and the determining of strategic operational needs that are a result of operationalization of the mission and vision. Among key elements of internal analysis is the analysis of the nature of business, structure, culture, knowledge, skills, etc., while some of the key factors of external analysis are the situation in the economy and critical factors of 69  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management success in the operation. Their main role is to comprehensively consider the overall top management plans regarding further operations, their growth, adjusting to the demands of the environment, and organizational strategies with which they intend to improve their position in compari- son with the competition. One benefit of the 5-P Model is that it shows the interrelatedness of activities that are often treated separately in the literature. Another benefit of the 5-P Model is that it highlights just how significant the strategy-activity link can be. This separate focus, perhaps necessary for research purposes, tends to understate the complexity of how human resource activities influence individual and group behavior. Thus, according to Schuler98, we may gain a greater understanding of this complex interaction by using the 5-P Model: Human resources philosophy, the first P in the model, is largely determined by strategic goals and ways of achieving them, i.e., strategies. This is a statement of how the organization regards its human resource, what role the resource play in the overall success of the business, and how they are to be treated and managed. Human resources policy, the second P in the model, provides guide- lines for action on people-related business issues for actions of solving business issues and problems related to people who are crucial for busi- ness and operational success. The term human resource policy does not mean human resource policy manual because policy manual may con- tain statements of general guidelines which employees often perceive as the manual as a “rule book” prescribing very specific actions permitted in very specific situations. Human resources programs or strategies, the third P in the model, represent coordinated human resource efforts specifically intended to initiate, disseminate, and sustain strategic organizational change efforts necessitated by the strategic business needs. These efforts may begin at the top of the organization and filter down, or they may begin elsewhere. Human resources practices, the fourth P in the model, represents and strengthens the models of anticipated behavior, i.e., the leading, managerial and operational role. The analysis of roles and responsibil- ities can serve for their better and more efficient defining and organiz- ing, or redirecting or delegating some operations, tasks, and decisions to lower levels, teams, and the like. 98 Schuller, R. S. (1992): Ibidem, 18-32. 70  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO Human resources processes, the fifth P in the model, refer to the deals with “how” all the other human resource activities are identified, formulated, and implemented. Human resource processes seem to vary along a continuum of extensive participation by all employees to no participation by any employees in the formulation and implementation stages e.g., high participation or involvement during formulation, but low involvement at implementation. The concept presented here proposes that the framework of strategic human resource management is made up of all activities affecting the behavior of individuals in their efforts to formulate and implement the strategic needs of the business. According to Schuler99, this rather broad concept carries several significant implications: First, successful efforts at strategic human resource management begin with the identification of strategic business needs. There is no doubt that strategic human resource management can be instrumental in meeting these needs, then these needs should be systematically analyzed for their impact on all activity’s human resource management. Another implication is that, because all employees are affected by stra- tegic human resource management, participatory processes may help cement the link between strategy formulation and implementation with human resource practices. While a participatory process may not always be necessary, there is mounting evidence that employees respond favora- bly to it when it is an option. A third implication is that strategic human resource management depends upon a systematic and analytical mindset. While the effectiveness of this approach has yet to be formally measured, indicators such as market share, profitability, and productivity suggest a fair amount of success. A fourth implication is that the human resource function shares a sig- nificant opportunity to impact their organizations’ effort to successfully launch strategic initiatives. This argues strongly for human resource par- ticipation in strategy formulation - if for no other reason than to get a head start on the systematic analysis of what the strategic needs of the business are vis-a-vis human resource. A final implication relates to the formal study of strategic human resource management. As practitioners do their work, human resource academics have a significant opportunity to observe organizations in transition, a real-life laboratory for learning. 99 Schuller, R. S. (1992): Ibidem, 18-32. 71  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management Presented 5-P model of strategic human resource management strives to highlight the strategic aspects of managing human resource. Pierce’s 10-C model of strategic human resource management Pierce’s 10-C model of strategic human resource management (Compre- hensiveness, Coherence, Control, Communication, Credibility, Com- mitment, Change, Competence, Creativity, and Cost-effectiveness)100 represents a kind of upgrade of the Harvard model that includes four components commitment, congruence, competence, and cost-effec- tiveness. Among this new genre of models, these principles of human resource management are particularly useful for practitioners to deter- mine how strategic human resource management affects three separate stakeholders. Viewed this way, many activities within the ten “Cs” can be viewed Outer ring (Comprehensiveness, Cost-effectiveness, Coherence, and Control), Inner Ring (Credibility, Communication, Creativity, and Competence), and all leading to the central ring (Change and Commit- ment). Thus, the model is measurable at the organizational level and the success of the model lies in the tension and balance between the ten Cs. The model is presented in the figure below. FIGURE 2.3. 10-C model of strategic human resource management Source: From Price, 2007, 648. Reproduced with permission of the Author. 100 Price, A. (2007): Human Resource Management in a Business Context, 3rd Ed., Thomson Learning, London, 74. 72  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO As the Figure 2.3. shows, that this framework incorporates ten dimen- sions, each conveniently beginning with “C” - in the best manage- ment-guru style. Terms beginning with “C” have a considerable track record in human resource management. These ten dimensions have been chosen because they are all measurable in some way and the essence of human resource management lies in the tension and balance between them. Thus, by using the 10-C Model, this balance between ten dimen- sions might receive better comprehension:101 Comprehensiveness, the first C in the model, includes all aspects of people management. The human resource strategy of an organization must include all the aspects of people management, typically starting from recruitment to post-separation programs. Coherence, the second C in the model, implies that human resource management activities and initiatives must be from a meaningful whole. Coherence addresses the internal balance and integration of the people management system. Control, the third C in the model, ensure performance is consistent with business objectives. Human resource management policies and practices must ensure that human resource performance is consistent with busi- ness objectives. Communication, the fourth C in the model, implies that the objectives of the organization and that of human resource management must be understood and accepted by all employees. Serious attention must be given to communicating the organization’s strategic objectives within which they can be achieved. Credibility, the fifth C in the model, implies that the staff trusts top management and believes in their strategies. The human resource prac- tices must build trust between staff and top management and encourage employees’ belief in human resource strategies. Commitment, the sixth C in the model, the last C stresses that employ- ees are to be motivated to achieve strategic goals. That is employees’ identification with the organization, integrity, and personal motivation in their work. 101 Price, A. (2007): Ibidem, 74-77. 73  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management Change, the seventh C in the model, implies continuous improvement and development essential for survival. The basic premise of human resource strategy must be that continuous improvement and develop- ment are essential for survival. Competence, the eight C in the model, implies that the human resource strategy will be crafted in such a way that the organization becomes com- petent to achieve its objectives with the support of individual competen- cies. That is employee’s knowledge, skill, and abilities (KSA’s), training, and development can foster the employee to perform well. Creativity, the ninth C in the model, implies that the competitive advan- tage can also come from the ingenuity of staff. Creativity is under-em- phasized in management training but it can lead to a new product, novel applications, and cost savings. Cost-effectiveness, the tenth C in the model, refers to the reward and promotion system must be fair. This aspect has attracted considerable criticism primarily because of the obsessive way in which much of the top management has pursued “downsizing” at the expense of commit- ment to their staff. 10-C checklist of HRM is presented in the table below. TABLE 2.2. 10-C checklist of human resource management Principle Purpose Action People management must Includes all management be organized, rather than left 1 Comprehensiveness aspects to ad-hoc decisions at local level Human resource Clear link between individual management activities and 2 Coherence performance/reward and initiatives from a meaningful business needs whole Ensures performance is Participative delegation of 3 Control consistent with business achieved management, with objectives how an objective is Clear, simple, and justified Objectives understood and strategies; cascading process 4 Communication accepted by all employees; of communication with open culture with no barriers feedback to the top Staff trust top management Top management is sincere, 5 Credibility and believe in their strategies honest, and consistent 74  Relationship between strategic management and human resource management CHAPTER TWO I PART TWO Principle Purpose Action Employees motivated to Top management is 6 Commitment achieve strategic goals committed to their staff Continuous improvement Flexible people and 7 Change and evelopment essential for working systems; culture of survival innovation, skills training Organization competent Resourcing strategies, to achieve its objectives - selection techniques and 8 Competence dependent on individual human resource system in competencies place Competitive advantage System for encouraging and 9 Creativity comes from unique tapping employee ideas strategies Competitive, fair reward and Top management pays 10 Cost-effectiveness promotion system themselves equivalent to staff Source: From Price, 2007, 74. Reproduced with permission of the Author. The concept presented here proposes that the framework of strategic human resource management is made up of all activities affecting the Harvard model central four Cs where three (commitment, competence, and cost-effectiveness) are incorporated into ten principles. This rather broad concept carries several significant implications:102 First, is the attempt to highlight the strategic aspect of human resource management. A significant lack of the 10-C model is the fact that they strive to highlight a systematic framework for the arrangement and anal- ysis of the strategic aspects of managing human resource. Another implication is the advantage of its pragmatic application. 10-C model of strategic human resource management is regarded as an all-en- compassing and pragmatic model. The final implication is associated with key groups of interest. These principles are useful to human resource practitioners to determine how strategic human resource management affects three separate stakehold- ers: employee, organization, and society. Presented 10-C Model of strategic human resource management strives to highlight the strategic aspects of managing human resource. 102 Price, A. (2007): Ibidem, 75. 75  PART TWO I CHAPTER TWO Relationship between strategic management and human resource management Summary There is a strong connection between strategic management and human resource management. At the beginning of the cre- ation of strategic human resource management, there were hard variables (strategy, structure, system), while soft variables were neglected (staff, style, skills, shared values). To better under- stand the connection between strategic management and human resource management, it is necessary to understand two crucial terms – strategy-oriented human resource management and strategically-oriented human resource management. There are numerous reasons for connecting strategic management and human resource management. Based on those reasons, the gen- eral model of the connection between strategic management and human resource management is derived, which conditions and demands permanent involvement of: (a) the function which has in its scope of work all activities, processes, policies, and prac- tices that are pertinent to the employees in an organization and which influence the behavior, attitudes, and performances of the employees, (b) human resource managers who possess general knowledge and perennial experience in human resource man- agement, and (c) experts for human resource that possess spe- cialized knowledge from certain fields and which is usually the first job in the career of human resource management. 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