Lesson 2_ SHRM Perspectives & Theories.pdf

STRATEGIC HUMAN RESOURCE MANAGEMENT PERSPECTIVES & THEORIES Prof. Rachelle O. Sabella, MA Psych, LPT, RPm  SHRM PERSPECTIVES Universalistic Perspective Proponents of the Universalistic view of SHRM propose a best practice approach to SHRM. According to researchers, some HR pract...

STRATEGIC HUMAN RESOURCE MANAGEMENT PERSPECTIVES & THEORIES Prof. Rachelle O. Sabella, MA Psych, LPT, RPm  SHRM PERSPECTIVES Universalistic Perspective Proponents of the Universalistic view of SHRM propose a best practice approach to SHRM. According to researchers, some HR practices are always better than others. There are best practices in HR that universally lead to better performance across organizations. Example: Practices like performance-based compensation, employee engagement programs, and continuous learning are seen as universally beneficial. Contingency Perspective Proponents of the contingency perspective in SHRM argue that a firm can be effective if its HR practices and strategy are aligned with other aspects and strategies of the firm. Contingency perspective is also called “fit-alignment perspective”. HR strategies should align with specific organizational contexts, including the industry, company size, and business environment. Example: A startup might adopt flexible work practices, while a large corporation may focus on structured, formalized HR processes. There are two forms of fit alignment – vertical and horizontal. The vertical alignment (external alignment) is the level of alignment between the components of the organizations human resource strategy and core features of its business strategy. Horizontal fit (internal alignment) measures the level of alignment among components of the organizations HR strategies such as recruitment, selection, training and compensation. Configurational Perspective The Configurational Perspective in Strategic Human Resource Management (SHRM) emphasizes that the effectiveness of HR practices depends on how they are systematically aligned and configured to support each other and the organization’s overall strategy. It rejects the idea that individual best practices can universally apply to all companies. Instead, it suggests that HR practices need to work in concert to create a synergistic effect, enhancing overall organizational performance. Example: Combining high-involvement work systems (HIWS) with employee empowerment, training, and performance management can create a synergistic effect on performance. HR practices are seen as a system rather than isolated activities. This perspective emphasizes how different practices interact and reinforce each other. Example: Recruitment, training, and performance appraisal systems should complement each other to create a coherent strategy. Resource-Based View (RBV) The Resource-Based View (RBV) in Strategic Human Resource Management (SHRM) focuses on the idea that an organization’s competitive advantage is derived from its ability to acquire and manage valuable, rare, inimitable, and non-substitutable resources—particularly human capital. It emphasizes the importance of internal resources (employees, knowledge, skills) over external market factors when it comes to maintaining a sustainable competitive advantage. Example: Developing unique employee skills and fostering organizational knowledge is seen as critical to sustaining a competitive edge. RBV places a strong emphasis on retaining top talent, as losing highly skilled employees can mean losing a key competitive resource. Example: Google’s retention strategies, including perks, stock options, and a stimulating work environment, help ensure that their talent, a valuable resource, is retained. Behavioral Perspective The Behavioral Perspective in Strategic Human Resource Management (SHRM) focuses on managing and shaping employee behaviors to align with the organization's strategic objectives. Rather than concentrating purely on systems or resources, this perspective emphasizes how employees’ behaviors can directly impact the success of a company. The idea is that by influencing behaviors, HR can help drive business performance and achieve strategic goals. The behavioral perspective suggests that HR practices can directly influence employee behavior by setting clear expectations, providing incentives, and creating a supportive environment. Practices: Implementing policies and systems that encourage desired behaviors, such as performance-oriented behaviors, collaboration, or customer-focused attitudes. The premise is that different organizational strategies require different types of employee behaviors. The role of HR is to design policies and practices that promote the specific behaviors needed to support the company’s strategy. Example: If a company’s strategy is innovation-driven, HR would design policies that encourage risk-taking, creativity, and collaboration. Human Capital Perspective The Human Capital Perspective in Strategic Human Resource Management (SHRM) views employees as key assets whose skills, knowledge, and abilities (human capital) are essential to achieving organizational goals and sustaining competitive advantage. This perspective emphasizes the strategic importance of investing in employees' development, seeing them not as a cost but as valuable resources that contribute to the organization's success. Human capital refers to the skills, knowledge, competencies, and attributes of employees that contribute to an organization's performance. It is seen as a resource that can be cultivated to create value. Example: A tech company’s success may largely depend on the coding skills, creativity, and problem-solving abilities of its engineers and developers. THEORIES IN SHRM Best Fit (Contingency) Theory The Best Fit (Contingency) Theory in Strategic Human Resource Management (SHRM) emphasizes that HR strategies should align with an organization's specific context, particularly its business strategy, external environment, and organizational structure. The core idea is that there is no one-size-fits-all approach to HR management. Instead, HR practices need to be tailored to fit the unique circumstances of each organization to optimize performance. The effectiveness of HR strategies depends on how well they fit the organization's unique context. This includes factors such as industry dynamics, organizational size, culture, technology, and market conditions. HR policies that work in one organization may not work in another due to these contextual differences. Best Fit Theory emphasizes that organizations should continuously adapt their HR practices as external and internal environments change. As the business grows or faces new challenges, HR strategies should evolve to meet these changes. HR policies and practices should be designed to support the overall business strategy. This means that HR strategies will differ based on whether the company follows a strategy of cost leadership, differentiation, or focus. For example, if a company adopts a cost leadership strategy (focusing on minimizing costs), its HR practices may include lean staffing, standardized job roles, and a focus on efficiency. Conversely, a company that follows a differentiation strategy (focusing on innovation or unique products) might implement HR policies that promote creativity, flexibility, and employee empowerment. OTHER EXAMPLE SCENARIOS: Growth Strategy: A company pursuing rapid expansion needs HR practices that support talent acquisition, leadership development, and employee retention. In this case, recruitment and training policies should be aggressive and aligned with the demand for skills needed to support growth. Innovation Strategy: A technology company that seeks to differentiate itself through innovation will need HR practices that promote creativity. This might involve flexible working arrangements, employee autonomy, and rewards for innovative ideas. Harvard Framework The Harvard Framework is a prominent model in Strategic Human Resource Management (SHRM) that emphasizes the importance of aligning HR practices with broader organizational goals while considering multiple stakeholders' interests. Developed by Michael Beer and his colleagues at Harvard University in the early 1980s, the framework highlights a holistic approach to HR management and its impact on organizational performance. Stakeholder Interests: The Harvard Framework recognizes that multiple stakeholders are involved in and affected by HR policies, including: Employees: Their needs and expectations regarding job satisfaction, development, and fair treatment. Management: Their need for efficient and effective HR practices that align with business goals. Shareholders: Their interest in profitability and return on investment. Society: Broader social and ethical considerations. This model proposes that HR should focus on both soft and hard outcomes. It advocates for involving multiple stakeholders in the management of human resources and ensuring that HR policies align with broader organizational goals. Example: Balancing employee well-being (soft outcomes) with cost control (hard outcomes) during a merger or downsizing process. Principle: HR decisions should consider multiple perspectives and ensure a balance between short-term operational efficiency and long-term organizational sustainability. Retail Company Example: A large retail chain might use the Harvard Framework to design its HR policies by: Considering Stakeholder Interests: Engaging employees in the design of reward systems to ensure they feel valued and motivated, while also aligning with shareholders' goals for profitability. Policy Choices: Implementing training programs that enhance employee skills and performance, creating a structured career development path, and designing a fair compensation system. HR Outcomes: Focusing on employee commitment through recognition and development opportunities, ensuring competence through ongoing training, and achieving cost-effectiveness by optimizing workforce deployment. AMO Theory (Ability, Motivation, Opportunity) The AMO Theory in Human Resource Management stands for Ability, Motivation, and Opportunity. It suggests that employee performance is a result of three key factors: the ability of employees to perform their tasks, their motivation to do so, and the opportunities they have to apply their skills effectively. Developed by John Purcell and his colleagues, the AMO Theory emphasizes that for employees to perform at their best, organizations need to address all three components. Key Components of AMO Theory: Ability(A): refers to the skills, knowledge, and competencies that employees need to perform their job roles effectively. HR Practices: Training and Development: Providing employees with the necessary training and development opportunities to enhance their skills and competencies. Recruitment and Selection: Ensuring that the recruitment process is designed to select individuals who have the required abilities or the potential to develop them. Motivation(M) refers to the drive and willingness of employees to put in effort and achieve their job objectives. It includes both intrinsic and extrinsic factors that influence employee engagement and performance. HR Practices: Incentives and Rewards: Implementing performance-based reward systems, bonuses, and recognition programs to incentivize high performance. Job Enrichment: Designing jobs that are fulfilling and provide meaningful work to boost intrinsic motivation. Work-Life Balance: Creating a supportive work environment that helps employees balance their work and personal lives, thereby increasing motivation. Opportunity(O) refers to the chances employees have to use their skills and knowledge to contribute to the organization. It involves the organizational context and structures that enable employees to perform effectively. HR Practices: Empowerment: Allowing employees to take initiative and make decisions related to their work, thereby providing them with the opportunity to utilize their abilities fully. Participation: Involving employees in decision-making processes and providing them with opportunities to contribute to organizational goals. Resources and Tools: Ensuring that employees have the necessary tools, resources, and support to perform their tasks efficiently. Psychological Contract Theory Psychological Contract Theory focuses on the unwritten, informal agreements and expectations between employees and employers. Unlike formal contracts that are legally binding, psychological contracts are based on mutual beliefs, perceptions, and informal agreements about the nature of the employment relationship. Developed by Chris Argyris and further explored by scholars like Denise Rousseau, this theory highlights how these implicit expectations impact employee behavior and organizational outcomes. Key Components of Psychological Contract Theory: Employee Expectations: Employees have expectations about what they will receive from their employer in return for their contributions. These can include job security, career development, fair treatment, and recognition. Employer Expectations: Employers also have expectations about employee behavior and performance. These might include productivity, commitment, loyalty, and adherence to company policies.  Perceived Fulfillment: The extent to which employees feel that their expectations are being met by the employer. When expectations are fulfilled, employees are likely to be more engaged and committed. Breach and Violation: A breach occurs when employees perceive that their expectations are not being met, while a violation is a more severe form of breach where the psychological contract is significantly broken, leading to negative emotional reactions. High-Performance Work Systems (HPWS) High-Performance Work Systems (HPWS) refer to a set of HR practices and policies designed to enhance organizational performance by maximizing employee involvement, skills, and motivation. The concept of HPWS is based on the idea that certain HR practices, when implemented together as a cohesive system, lead to superior organizational outcomes such as increased productivity, quality, and employee satisfaction. HPWS theory advocates for a set of HR practices that enhance employee performance, such as selective hiring, extensive training, performance-based rewards, and participatory decision-making. Principle: When integrated into a system, HR practices can improve overall organizational performance by maximizing employee skills and motivation. Example: A company that implements a combination of performance-based rewards and employee empowerment practices may see increased innovation and productivity. THANK YOU!