Strategic HRM Frameworks / Models & Theoretical Foundations PDF

STRATEGIC HRM FRAMEWORKS / MODELS AND THEORETICAL FOUNDATIONS Prepared by: Maria Lourdes J. Javier, MIR Topics for Discussion ✓Models of SHRM ✓The Role of HR in Strategic Planning ✓Link HR Strategy with Business Strategy ✓HR Strategies Who is Richard Bran...

STRATEGIC HRM FRAMEWORKS / MODELS AND THEORETICAL FOUNDATIONS Prepared by: Maria Lourdes J. Javier, MIR Topics for Discussion ✓Models of SHRM ✓The Role of HR in Strategic Planning ✓Link HR Strategy with Business Strategy ✓HR Strategies Who is Richard Branson? A British entrepreneur Best known as the founder of the Virgin Group, which encompasses a wide range of businesses, including Virgin Records, Virgin Atlantic Airways, and Virgin Galactic recognized for his adventurous spirit and innovative approach to business  As Lynda Gratton (2000) commented: ‘There is no great strategy, only great execution.’ Strategic Human Resource Management Because all strategies are great Because all strategies are planned out carefully Because all strategies are for improvement and progress It’s all about execution It’s all about sustainable application It’s all about consistency of implementation Importance of Observation It provides the opportunity to monitor or assess a process or situation and document evidence of what is seen and heard Is a flexible approach to data collection and recording of data, suitable for a broad range of contexts Can produce a mix of qualitative and quantitative data Structured observation helps provide measures or records of behaviours, without relying on people’s (those being observed) capacity to report what they do or estimate how often they do it Importance of Observation Can be a low impact way to collect data The discussion of feedback from observation can lead to valuable reciprocal professional learning conversations Models of SHRM Michigan Model Harvard Model Resource-Based View The Best Practice Model The Best Fit Model High-Performance Work Systems 1. Michigan Model Originated from the writings of C. Fombrun, Noel Tichy, and M. A. Devanna, who discussed it in their book titled Strategic Human Resource Management, published in 1984 The model is called the ‘matching model’ because it depicts the relation between HRM and organizational strategy The model shows how activities within HRM can be unified and designed in order to support the organization’s strategy 1. Michigan Model Divided into two parts: First Part: HR–strategy integration Depicts that organizational effectiveness is achieved by ensuring a tight fit between corporate/business strategy and HRM strategy The model emphasizes a ‘tight fit’ between organizational strategy, organizational structure, and HRM It argues that all issues associated with HR should be derived from strategy 1. Michigan Model Divided into two parts: Second Part: HR cycle Shows how HR functions, such as selection, appraisal, development, and reward, can be mutually geared to produce the required type of employee performance It basically talks of the concept of one-way fit between HRM and business strategy by prescribing the design for HRM policies in the light of strategy 1. Michigan Model 2. Harvard Model Proposed by Michael Beer, Bert Spector, P. Lawrence, Quinn Mills, and Richard Walton of Harvard University in 1984 through their book Managing Human Assets The model recognizes the different stakeholder interests that impact HRM policy choices The type of HRM policies and practices an organization prefers should be dependent on its organizational vision, mission, strategy, goals, and objectives 2. Harvard Model The model classifies HRM policies and practices into four themes 1. HR flows: Recruitment, selection, placement, promotion, appraisal and assessment, promotion, termination, and so on 2. Reward systems: Pay systems, non-monetary recognition schemes, and so on 3. Employee influence: Clarification of responsibility, authority, hierarchy, and delegation of powers 4. Work systems: Definition of work and alignment of people 2. Harvard Model The four HR practices are centered on four Cs: 1. Competence of Employees: Competence creates a positive attitude towards learning and development and, thereby, gives employees the versatility in skills and the perspective to take on new roles and jobs as needed 2. Commitment of Employees: Commitment means that employees will be motivated to ‘hear, understand, and respond’ to management’s communications relating to the organization of work. 2. Harvard Model The four HR practices are centered on four Cs: 3. Congruence between the goals of employees and the organization: There must be congruence between and among various HRM policies as well as practices in operation 4. Cost effectiveness of HRM practices: Cost effectiveness means that ‘the organization’s HR costs have been kept low’. HRM policies must be evaluated in terms of costs and benefits 2. Harvard Model 3. Resource Based View The strategic capability of a firm depends on its resource capability It is based on the ideas of Penrose (1959) who wrote that the firm is ‘an administrative organization and a collection of productive resources’ Developed by Penrose (1959) and expanded by Wernerfelt (1984) provides ‘a durable basis for strategy’ (Grant, 1991) and ‘builds on and provides a unifying framework for the field of strategic human resource management’ (Kamoche, 1996). 3. Resource Based View It is the range of resources in an organization, including its human resources, that produces its unique character and creates competitive advantage (Hamel and Prahalad, 1989). 3. Resource Based View Resource-based strategic HRM can produce what Boxall and Purcell (2003) refer to as human resource advantage. The aim is to develop strategic capability. This means strategic fit between resources and opportunities, obtaining added value from the effective deployment of resources, and developing people who can think and plan strategically in the sense that they understand the key strategic issues and ensure that what they do supports the achievement of the business’s strategic goals. 4. The Best Practice Approach Based on the assumption that there is a set of best HRM practices and that adopting them will inevitably lead to superior organizational performance They are universal in the sense that they are best in any situation 4. The Best Practice Approach A number of lists of ‘best practices’ have been produced, the best known of which was produced by Pfeffer (1994), namely: 1. Employment security 2. Selective hiring 3. Self-managed teams 4. High compensation contingent on performance 4. The Best Practice Approach A number of lists of ‘best practices’ have been produced, the best known of which was produced by Pfeffer (1994), namely: 5. Training to provide a skilled and motivated workforce 6. Reduction of status differentials 7. sharing information 4. The Best Practice Approach The following list was drawn up by Guest (1999): 1. Selection and the careful use of selection tests to identify those with potential to make a contribution 2. Training, and in particular a recognition that training is an ongoing activity 3. Job design to ensure flexibility, commitment and motivation, including steps to ensure that employees have the responsibility and autonomy fully to use their knowledge and skills 4. The Best Practice Approach The following list was drawn up by Guest (1999): 4. Communication to ensure that a two-way process keeps everyone fully informed 5. Employee share ownership programmes to increase employees’ awareness of the implications of their actions on the financial performance of the firm 5. The Best-Fit Approach Emphasizes that HR strategies should be contingent on the context, circumstances of the organization and its type ‘Best fit’ can be perceived in terms of vertical integration or alignment between the organi zation’s business and HR strategies There is a choice of models, namely life cycle, competitive strategy, and strategic configuration. 5. The Best-Fit Approach The life cycle model is based on the theory that the development of a firm takes place in four stages: start-up, growth, maturity and decline which is in line with product life cycle theory The basic premise of this model was expressed by Baird and Meshoulam (1988) as follows: ‘Human resource management’s effectiveness depends on its fit with the organization’s stage of development 5. The Best-Fit Approach The life cycle model As the organization grows and develops, human resource management programmes, practices and procedures must change to meet its needs Consistent with growth and development models it can be suggested that human resource management develops through a series of stages as the organization becomes more complex.’ 5. The Best-Fit Approach Best fit and Competitive Strategies Three strategies aimed at achieving competitive advantage have been identified by Porter (1985): 1. Innovation – being the unique producer 2. Quality – delivering high-quality goods and services to customers 3. Cost leadership – the planned result of policies aimed at ‘managing away’ expense. 5. The Best-Fit Approach Strategic Configuration Another approach to best fit is the proposition that organizations will be more effective if they adopt a policy of strategic configuration (Delery and Doty, 1996) by matching their strategy to one of the ideal types defined by theories such as those produced by Mintzberg (1979) and Miles and Snow (1978) This increased effectiveness is attributed to the internal consistency or fit between the patterns of relevant contextual, structural and strategic factors 5. The Best-Fit Approach Strategic Configuration The typology of organizations produced by Mintzberg (1979) classified them into five ideal types: simple structure, machine bureaucracy, professional bureaucracy, divisionalized form and adhocracy 5. The Best-Fit Approach Strategic Configuration Miles and Snow (1978) identified four types of organizations, classifying the first three types as ‘ideal’ organizations: 1. Prospectors, which operate in an environment characterized by rapid and unpredictable changes. 2. Defenders, which operate in a more stable and predictable environment than prospectors and engage in more long-term planning. 5. The Best-Fit Approach Strategic Configuration Miles and Snow (1978) identified four types of organizations, classifying the first three types as ‘ideal’ organizations: 3. Analyzers, which are a combination of the prospector and defender types 4. Reactors, which are unstable organizations existing in what they believe to be an unpredictable environment. 6. High-Performance Work System As defined by Appelbaum et al (2000), high-performance work systems are composed of practices that can facilitate employee involvement, skill enhancement and motivation Research conducted by Armitage and Keeble Allen (2007) indicated that people management basics formed the foun dation of high- performance working 6. High-Performance Work System They identified three themes underpinning the HPWS concept: 1. An open and creative culture that is people-centred and inclusive, where decision taking is communicated and shared through the organization 2. Investment in people through education and training, loyalty, inclusiveness and flexible working 3. Measurable performance outcomes such as benchmarking and setting targets, as well as innovation through processes and best practice. 6. High-Performance Work System Characteristics of HPWS A high-performance work system is described by Becker and Huselid (1998) as an ‘internally consistent and coherent HRM system that is focused on solving operational problems and implementing the firm’s competitive strategy’ They suggest that such a system ‘is the key to the acquisition, motivation and development of the underlying intellectual assets that can be a source of sustained competitive advantage 6. High-Performance Work System This is because it: Links the firm’s selection and promotion decisions to validated competency mode Develops strategies that provide timely and effective support for the skills demanded by the firm’s strategy implementation Enacts compensation and performance management policies that attract, retain and motivate high-performance employees 6. High-Performance Work System This is because it: Links the firm’s selection and promotion decisions to validated competency mode Develops strategies that provide timely and effective support for the skills demanded by the firm’s strategy implementation Enacts compensation and performance management policies that attract, retain and motivate high-performance employees 6. High-Performance Work System This is because it: Links the firm’s selection and promotion decisions to validated competency mode Develops strategies that provide timely and effective support for the skills demanded by the firm’s strategy implementation Enacts compensation and performance management policies that attract, retain and motivate high-performance employees Strategic Role of HR The Strategic Nature of HR: The work of HR practitioners can be divided into two main areas: transactional activities and strategic activities ✓ Transactional activities consist of the service delivery aspects of HR – recruitment, training, dealing with people issues, legal compliance and employee services ✓ HR strategic activities support the achievement of the organization’s goals and values and involve the development and implementation of forward-looking HR strategies that are integrated with one another and aligned to business objectives. Strategic Role of HR The Strategic Role of HR Directors To promote the achievement of the orga nization’s business goals by: 1) Developing and implementing HR strategies that are integrated with the business strategy and are coherent and mutually supportive and 2) Ensuring that a strategic approach is adopted by the HR function that supports the business and adds value Strategic Role of HR The Strategic Role of HR Directors To carry out this role the HR director should: Understand the strategic goals of the organization Appreciate the business imperatives and performance drivers relative to these goals Comprehend how sustainable competitive advantage can be obtained through the human capital of the organization and know how HR practices can contribute to the achievement of strategic goals; Strategic Role of HR The Strategic Role of HR Directors To carry out this role the HR director should: Contribute to the development of the business strategy on an ‘outside-in’ basis as described in Chapter 4 by emphasizing how the organization’s distinctive human resources can make an impact Contribute to the development for the business of a clear vision and a set of integrated values Strategic Role of HR The Strategic Role of HR Directors To carry out this role the HR director should: Ensure that senior management understands the HR implications of its business strategy Be aware of the broader context (the competitive environment and the business, economic, social and legal factors that affect it) in which the organization operates Strategic Role of HR The Strategic Role of HR Directors To carry out this role the HR director should: Understand the kinds of employee behavior required successfully to execute the business strategy Think in terms of the bigger and longer-term picture of where HR should go and how to get there Strategic Role of HR The Strategic Role of HR Directors To carry out this role the HR director should: Believe in and practice evidence-based management Be capable of making a powerful business case for any proposals on the development of HR strategies Strategic Role of HR The Strategic Role of Heads of HR Functions The strategic role of heads of HR functions is fundamentally the same for their function as that of HR directors for the whole organization They promote the achievement of the organization’s business goals by developing and implementing functional strategies that are aligned with the business strategy and integrated with the strategies for other HR functions and adopt a strategic approach in the sense of ensuring that HR activities support the business and add value. Strategic Role of HR The Strategic Role of Heads of HR Functions To carry out this role heads of HR functions should: Understand the strategic goals of the organization as they affect their function Appreciate the business imperatives and performance drivers relative to these goals Help senior management to understand the implications of its strategy for the HR function Strategic Role of HR The Strategic Role of Heads of HR Functions To carry out this role heads of HR functions should: Know how HR practices in the function can contribute to the achievement of the strategic goals Ensure that their activities provide added value for the organization Be aware of the broader context (the competitive environment and the business, economic, social and legal factors that affect it) in which the function operates Strategic Role of HR The Strategic Role of Heads of HR Functions To carry out this role heads of HR functions should: Think in terms of the bigger and longer-term picture of where HR strategies for the function should go and how to get there Believe in and practice evidence-based management Be capable of making a powerful business case for any proposals on the development of HR strategies for the function Strategic Role of HR The Strategic Role of Business Partners The strategic role of HR business partners is to promote the achievement of the business goals of the organizational unit or function in which they operate Strategic Role of HR The Strategic Role of Business Partners To carry out this role they should: Understand the business and its competitive environment Understand the goals of their part of the business and its plans to attain them Ensure that their activities provide added value for the unit or function Strategic Role of HR The Strategic Role of Business Partners To carry out this role they should: Build relationships founded on trust with their line management clients Provide support to the strategic activities of their colleagues Align their activities with business requirements Believe in and practice evidence-based management Strategic Role of HR The Strategic Role of Business Partners To carry out this role they should: Be proactive, anticipating requirements, identifying problems and producing innovative and evidence-based solutions to them See the broad picture and rise above the day-to-day detail Strategic Role of HR The Strategic Contribution of HR Advisers or Assistants The role of HR advisers or assistants is primarily that of delivering effective HR services within their function or as members of an HR service center While they will not be responsible for the formulation of HR strategies they may contribute to them within their own specialty They will need to under stand the business goals of the departments or managers for whom they provide services in order to ensure that these services support the achievement of those goals Linking HR Strategy with Business Strategy The integration of business strategy and HR strategy is particularly important for success in the long run With the recognition of the potential contributions of HR, senior managers have taken on greater responsibilities for these planning efforts. Integration of strategic planning and HR planning is gaining currency It is an activity that demands integration of the skills and knowledge of the human resource for attaining strategic goals Various approaches to this integration can be visualized depending on the degree of fit between HR and organizational strategy Linking HR Strategy with Business Strategy There are two predominant approaches to HRM and strategy integration: ✓ One group of authors talk about the reactive role of HRM, viewing organizational strategy as the driving force determining HRM strategies, that is, derived from an instrumental approach to SHRM ✓ A second group of authors have suggested that HR should play a more central and proactive role by becoming involved in the strategy formulation phase, that is, derived from a humanistic approach to SHRM Linking HR Strategy with Business Strategy Torrington and Hall have talked of five such possible types of integration: Approach A There is no relationship at all between organizational and HR strategies in the organization. This is a typical picture that existed several years ago and still exists today in several small and traditional organizations Approach B There is a growing recognition of the importance of employees, and HR strategy is designed to fit the organization’s strategy Linking HR Strategy with Business Strategy Torrington and Hall have talked of five such possible types of integration: Approach C It takes the relationship one step further, as it recognizes the need for a reciprocal relationship between strategy and HRM. Strategy may not always be feasible and alternative possibilities need to be reviewed Approach D It shows a much closer involvement between organizational and HR strategies. It considers HR as the key to competitive advantage. Organizational and HR strategies are developed together in an integrated way. Linking HR Strategy with Business Strategy Torrington and Hall have talked of five such possible types of integration: Approach E It offers an alternative form, different from integration, which places HR strategy in the prime position. The argument is that if people are the key to competitive advantage, then there is a need to build on people’s strengths HR Strategies What are HR Strategies? HR strategies set out what the organization intends to do about its human resource management policies and practices and how they should be integrated with the business strategy and each other. They are described by Dyer and Reeves (1995) as ‘internally consistent bundles of human resource practices’ In the words of Peter Boxall (1996) they provide ‘a framework of critical ends and means’ HR Strategies What are HR Strategies? Richardson and Thompson (1999) suggest that ‘A strategy, whether it is an HR strategy or any other kind of management strategy, must have two key elements: there must be strategic objectives (ie things the strategy is supposed to achieve), and there must be a plan of action (ie the means by which it is proposed that the objectives will be met)’ Because all organizations are different, all HR strategies are different HR Strategies What are HR Strategies? Research into HR strategy conducted by Armstrong and Long (1994) and Armstrong and Baron (2002) revealed many variations. Two basic types of HR strategies can be identified: 1) overall strategies such as high performance working; and 2) specific strategies relating to the different aspects of human resource management such as learning and development and reward. HR Strategies What is the Purpose of HR Strategies? The purpose of HR strategies is to articulate what an organization intends to do about its human resource management policies and practices now and in the longer term, bearing in mind the dictum of Fombrun et al (1984) that business and managers should perform well in the present to succeed in the future HR strategies may set out intentions and provide a sense of purpose and direction, but they are not just long-term plans. As Lynda Gratton (2000) commented, ‘There is no great strategy, only great execution.’ HR Strategies Overall HR Strategies Overall strategies describe the general intentions of the organization about how people should be managed and developed and what steps should be taken to ensure that the organization can attract and retain the people it needs and ensure so far as possible that employees are committed, motivated and engaged HR Strategies Overall HR Strategies Four Categories of Overall Strategy: 1. An emergent, evolutionary and possibly unarticulated understanding of the required approach to human resource management. This will be influenced by the business strategy as it develops, the position of the organization in its life cycle, and the organizational configuration (prospector, defender or analyser). It will also be affected by the views, experience and management style of the chief executive, senior managers and the head of HR, whose influence will depend on position and credibility. HR Strategies Overall HR Strategies Four Categories of Overall Strategy: 2. Broad-brush statements of aims and purpose that set the scene for more specific strategies. They will be concerned with overall organizational effectiveness – achieving human resource advantage by, as Boxall and Purcell (2003) point out, employing ‘better people in organizations with better process’ and generally creating ‘a great place to work’. HR Strategies Overall HR Strategies Four Categories of Overall Strategy: 3. Specific and articulated plans to create ‘bundles’ of HR practices and develop a coherent HR system 4. The conscious introduction of overall approaches to human resource management such as high-performance management, high- involvement management and high-commitment management HR Strategies Overall HR Strategies Four Categories of Overall Strategy: 3. Specific and articulated plans to create ‘bundles’ of HR practices and develop a coherent HR system 4. The conscious introduction of overall approaches to human resource management such as high-performance management, high- involvement management and high-commitment management HR Strategies Specific HR Strategies 1. Human capital management. Obtaining, analyzing and reporting on data, which inform the direction of value-adding people management strategic, investment and operational decisions 2. High-performance management. developing and implementing high performance work systems 3. Corporate social responsibility. A commitment to managing the business ethically in order to make a positive impact on society and the environment HR Strategies Specific HR Strategies 4. Organization development. The planning and implementation of programs designed to enhance the effectiveness with which an organization functions and responds to change 5. Engagement. The development and implementation of policies designed to increase the level of employees’ engagement with their work and the organization 6. Knowledge management. Creating, acquiring, capturing, sharing and using knowledge to enhance learning and performance HR Strategies Specific HR Strategies 7. Resourcing. Attracting and retaining high-quality people 8. Talent management. How the organization ensures that it has the talented people it needs to achieve success 9. Learning and Development. Providing an environment in which employees are encouraged to learn and develop HR Strategies Specific HR Strategies 10. Reward. Defining what the organization wants to do in the longer term to develop and implement reward policies, practices and processes that will further the achievement of its business goals and meet the needs of its stakeholders 11. Employee Relations. Defining the intentions of the organization about what needs to be done and what needs to be changed in the ways in which the organization manages its relationships with employees and their trade unions. Examples of HR Strategies Examples of HR Strategies Examples of HR Strategies Examples of HR Strategies Developing HR Strategies Five fundamental questions that need to be asked in formulating HR strategies have been posed by Becker and Huselid (1998): 1. What are the firm’s strategic objectives? 2. How are these translated into unit objectives? 3. What do unit managers consider are the ‘performance drivers’ of those objectives? Developing HR Strategies Five fundamental questions that need to be asked in formulating HR strategies have been posed by Becker and Huselid (1998): 4. How do the skills, motivation and structure of the firm’s workforce influence these performance drivers? 5. How does the HR system influence the skills, motivation and structure of the workforce? Developing HR Strategies The following six-step approach is proposed by Gratton (2000): 1. Build the Guiding Coalition. Involve people from all parts of the business 2. Image the Future. Create a shared vision of areas of strategic importance 3. Understand Current Capabilities and Identify the Gap. Establish ‘where the organization is now and the gap between aspirations for the future and the reality of the present’ Developing HR Strategies The following six-step approach is proposed by Gratton (2000): 4. Create a Map of the System. ‘Ensure that the parts can be built into a mean ingful whole’ 5. Model the Dynamics of the System. Ensure that the dynamic nature of the future is taken into account. Developing HR Strategies The following six-step approach is proposed by Gratton (2000): 6. Bridge into Action. Agree the broad themes for action and the specific issues related to those themes, develop guiding principles, involve line managers and create cross-functional teams to identify goals and performance indicators Barriers to the Implementation of HR Strategies Each of the factors listed by Gratton et al can create barriers to the successful implementation of HR strategies Barriers to the Implementation of HR Strategies Other major barriers include: ✓ Failure to understand the strategic needs of the business, ✓ Inadequate assessment of the environmental and cultural factors that affect the content of the strategies ✓ Development of ill-conceived and irrelevant initiatives, possibly because they are current fads or because there has been an ill- digested analysis of best practice that does not fit the organization’s requirements. Overcoming the Barriers To overcome these barriers it is necessary to: 1. Conduct a rigorous prelim inary analysis of needs and requirements 2. Formulate the strategy 3. Enlist support for the strategy 4. Assess barriers 5. Prepare action plans Overcoming the Barriers To overcome these barriers it is necessary to: 6. Project manage implementation 7. Follow up and evaluate progress so that remedial action can be taken as necessary