External Marks: 80 Internal Marks: 20

STRATEGIC HUMAN RESOURCE MANAGEMENT PAPER CODE: MBA (407) The primary concern to this course is to develop in depth understanding of the strategic role performed by HR in business organizations and to gain insight of the alignment between different HR systems and practices and organizational outcomes Unit-I HR environment; HRM in knowledge economy; concept of SHRM: investment perspective of SHRM,evolution of SHRM, strategic HR vs. traditional HR, barrier to strategic HR(58), role of HR in strategic planning(85,101,102,104,106 Unit-II Strategic fit frameworks: linking business strategy and HR strategy, HR bundles approach, best practice approach; business strategy and human resource planning; HRM and firm performance linkages measures of HRM performance; sustained competitive advantages through inimitable HR practices Unit-III HR Systems: staffing systems, reward and compensation systems, employee and career development systems, performance management systems Unit-IV Strategic options and HR decisions Downsizing and restructuring, domestic and international labour market, mergers and acquisitions, outsourcing and off shoring Suggested Readings: 1. Mello, Jeffrey A ., Strategic Human Resource Management, Thomson Learning Inc. 2. Agarwala, Tanuja, Strategic Human Resource Management, Oxford University Press, New Delhi 3. Dreher, George and Thomas Dougherty, Human Resource Strategy, Tata McGraw Hill 4. Greer, Charles, Strategic Human Resource Management, Pearson Education 5. Belcourt, Monica and Kenneth McBay, Strategic Human Resource Planning, Thomson

SHRM Definition &Components

Strategic human resource management or SHRM is a branch of HRM. It emerged from the discipline of human resource management and is a fairly new field. It is concerned with the relationship between HRM & strategic HRM in an organization. It is an approach which relates to decisions about the nature of employment relationship, recruitment, training, development, performance management, reward and employee relations. Strategic HRM is defined as the linking of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation and competitive advantage. By Wright &McMahan SHRM is the pattern of planned human resource deployments & activities intended to enable the firm to achieve its goals. SHRM in an organization means to accept and involve the functions of HR as a strategic partner in formulating and implementing the companys strategies through human resource activities which may involve recruiting, selecting, rewarding and training company personnel. In spite of the similarity in names, HRM and SHRM are two different practices; SHRM is basically a part of the complete HRM process. Besides that SHRM focuses more on longterm objectives rather than the in-house objectives with employees dealt by HRM. In the late 1980s writers started stating strong opinions for a much more strategic approach to managing people than was the standard practice of that time. They clamored for the change of traditional management practices of industrial relations and people to the modern more improved ones. The center point of SHRM is to address and solve problems that effect management programs centering on people in the long run and more than often globally. We can say that the main goal or objective of SHRM is to increase productivity not only in the employees but in the business overall, it achieves this by focusing on business problems and obstacles outside of the human resources range. Hendry &Pettigrew put forward four meaning of SHRM= 1.The use of planning in HR management. 2.An integrated approach to the design & implementation of HR system.

3.Matching HRM policies & activities with the business strategy of the organization. 4. Viewing people as a strategic resource for the achievement of competitive advantage. So that we can say-SHRM involves matching resource with future needs, performance ,competence human resource development & deals with macro concerns like structural values, culture and commitment.
Key features of SHRM

The key features of strategic human resource management are given below: 1. Some organizing strategies or schemes link individual human resource interventions so that they are mutually supportive 2.A great amount of responsibility is transferred down the line for the management of HR 3.There is a precise link between overall organization strategy, organization environment, HR policies and practices. Components of SHRM 1. It focuses on an organization human resources as the primary source of competitive advantage of the organization. 2. The activities highlight the HR programmes, policies and practices as the means through which the people of the organization can be deployed to gain competitive advantage. 3. The pattern and plan imply that there is a fit between HR strategy and the organizations business strategy and between all of the HR activities. 4.The people ,practices and planned pattern are all purposeful, that is directed towards the achievement of the goals of the organization . So SHRM is concerned with people issues and practices that affect or are the affected by the strategic plan of the organization. An organization uses a combination of several resources-Tangible and Intangible-for gaining its objectives. 1. Physical capital resources. (The plant, equipment, and finance) 2. Organizational capital resources. (Planning, HR systems, history and organizational culture) 3.Human Capital resources(The skills,knowledge,judjement &intelligence of the organizations employees)
4. Purposeful- people,

activities, and plans are directed toward the achievement of

1. Human ResourcePrimary source of competitive advantage of the firm.

SHRM

3. Pattern and Plan- There

is a fit between HR strategy and the firms business strategy and between all HR activities.

2. Activities-HR programme and practices are the means for deploying people of a firm to gain competitive advantage.
HRM (early 1970) SHRM( early 1980) 1.Convergence between HRM &and business strategy .2.Proactive HRM. 3.Concerned with organizational effectiveness &performance

Evolution Of SHRM
Personnel Management(1947)1.Part of mechanistic organization,2.Bureaucratique. 3.High formalization.4.Lw
flexibilities.

1.Part of organic organisation,2.Cross hierarchical,3.Decentralizatio n,4.Low formalization 5.Flexible

Difference between SHRM &Traditional HRM Points Traditional HRM 1.Responsibility for HR Staff Personnel in the HR department programmers 2 Focus of activities Employee relations-ensuring employee motivation &productivity, compliance with laws. 3.Role of HR Reactive and transactional. SHRM HR manager Partnerships with internal external groups.

4.Initiative for change 5.Time horizon 6.Control

Slow but not integrated with large issues. Short -term Bureaucratic control through rules and policies. Focus on scientific management principle-division of labour &specialization Capital,production,technology&finance

Proactive &transformational, change leader. Fast ,flexible and systematic. Various time frames as necessary situation. Organic control through flexible rules. Broad job design ,flexibility teams and groups & cross -training People and their knowledge ,skill& abilities Investment center

7.Job Design

8. Important Investments 9 Accountability

Cost center

Objectives of SHRM 1.To ensure the availabity of a skilled ,committed and highly motivated workforce in the organization to achieve sustained completive advantage . 2.To provide direction to the organization so that both the business needs of the organization and individual and collective needs of its workforce are met .This is achieved by developing and implementing HR practices that are strategically aligned. SHRM identifies important human resource areas where strategies can be implied for the improvement of productivity and employee motivation. To achieve good results communication between human resource and top management of the organization is of utmost importance as cooperation is not possible without active participation.

Development in SHRM
In recent times HRM professionals have been facing challenges with employee participation, performance management, employee reward systems, high commitment work systems and human resource flow because of globalization. Traditional models and techniques have no place in todays business world; also local companies which go global cannot use the same tactics in the global business world. Top managements and HR professionals that are involved in strategic human resource management face a wide range of issues which include some of the following: Rapid change in technology Introduction of new concepts of general management Globalization of market integration Increased competition, which may not necessarily be local Resultant corporate climates Constantly changing ownership Cross-cultural issues Economic gravity- shifting from developed to developing countries. Strategic human resource management is crucial large as well as small companies. In small companies this process may be as simple as the manager or the owner himself taking time to observe employees, along with assisting, assessing and giving regular reviews. However larger companies will require a whole department to be in charge of such activities for the development of employees. The quality of staff members can be improved by meting their needs in such a way that it may benefit the company. Investing in employees and providing

them with tools they need to thrive and prosper in the company proves to be a good investment in the long run for the company. Purcell and Boxall argue that, Strategic HRM is concerned with explaining how human resource management influences the performance of an organization. They also point out that, Strategy is not the same as strategic plans. Strategic planning defines how things need to be done and it usually takes place in larger organizations in the form of a formal process. However, it is also true that strategy exists in all organizations regardless of their size; though it may not necessarily be written down or expressed. SHRM defines how the organization behaves and tries to cope with its business environment. Because strategic human resource management is based on human resource management principles it always incorporates the concepts of strategy; which proves that human resource management is actually a coherent approach to the management of workforce [people].

Business strategy and SHRM

All good business strategies, at least the ones which have a chance of succession are formed by the people factor. One of the main factors behind reporting human capital data and evaluation is the need for proper information; to be fed into the business strategy formation procedure. People have become the biggest asset in the majority of organizations. This requires for the skills, abilities and knowledge to be organized and implemented for maximum effect so that the organization may create value. The intangible value of organizations lies in the people that it employs. This value is being recognized by investors and accountants and in now generally accepted that it has signs of sustained performance in the long run. In this case it would be too simplistic to suggest that strategic human resource management is part of business strategy. In this case, the two must be mutually informative in the way people are motivated, managed, deployed and the availability of knowledge and skill should shape business strategy. It has now a regular occurrence to find strategic human resource management inextricably linked with and also incorporated into business strategies. Strategic human resource management takes on the main modern challenges which are faced by human resource management. This may include the following: Knowledge management Aligning human resource with core business strategies Demographic trends on employment as well as the labor market Integrating soft skills in human resource departments

So, strategic human resource management is designed to assist organizations to meet the needs of their employees in the best way they can so that company goals can be promoted. We can also say that SHRM is actually managing people proactively because it requires planning ways for an organization to meet the needs of its employees, thinking ahead, and also helping the employees to meet the needs of the organization. This process changes the outlook and affects the way things are done at a business site, in other words it helps to integrate modern ideas and models into the traditional human resource practices to come up with better solutions which not only benefit the employees but the organization. This is mainly a process where everything is improved, from the hiring of employees, to the training, assessment and discipline techniques used by the HRM department. HR environment It consists of economic, legal, technological and socio culture .Both internal and external environment changes are driving a reassessment of HR policies, practices and procedures. External &Internal environmental trends affect employment relationship. So emerging trends which are influencing HR functions and increasing its strategic role. The environment today is much more complex & difficult than it was 20 years ago. With globalization, organizations are no longer only governed by legal and political environments of their own country. Environment normally consists of all the conditions, circumstances and any other influences which surrounds & affects an organization in different ways for different purposes. Each type of environment influences HRM practices though the type of influences process may be different-Some influences may be similar to all types of organizations while other influences may affect a group of organizations in one way & other groups of organizations in another way. It depends upon nature of industry and the influencing factors. 1. Economic Environment- It covers all those factors which influence the development of economic activities. It includes factors like nature of economic conditions, economic policies, and factors of production including HR. Factors that influence HR strategy are A,-Population and WorkforceB,-Workforce Market ConditionsC,-National IncomeD,-Inflationary Pressures2.Legal Environment- It consists of various laws formulated by govt, both central level as well as at state level. It affects HRM practices in the following waysA. There cannot be discrimination among employees on the basis of sex, caste, religion or place of origin. B. In certain sectors, at least prescribed percentage of total employees must be selected from personnel belonging to backward classes, scheduled caste/tribes, and physically handicapped. C. Employee remuneration, safety, working conditions and industrial relations systems must conform to various legal prescriptions.

3.Technological Environment-It includes inventions and techniques which can be helpful in doing different things. There are two ways in which an impact may be p-reduced by technology on an organizationA, Defining the nature of jobs-HR professionals has to select and train HR accordingly. B, Affecting HRM Practices-It has changed HRM practices in the following areas1. In recruitment and selection. 2. In training and development. 3. In communication. 4.Socio-Cultural Environment HR decisions needs to consider culture in selection decisions to ensure fit between individual and organizational culture .It broadly includes norms ,religion ,values and beliefs of the society including implicit ways of work habits and others.

Emerging Trends
1 Globalization It means more competition and more competition means more pressure to lower costs, make employees, more productive ,and do things better and less expensively. Hofstede explained Cultural differences along four dimensions1. Individualism versus Collectivism 2. Power Distance. 3. Uncertainty Avoidance. 4. Masculine versus Feminine Tendencies. 2.Changing Nature of Employment Relationship Individuals invest their time and other resources in acquiring knowledge and skills and primarily aim at enhancing their productivity in different processes. The features of emerging Relationship are1 Employability 2.Reciprocal Flexibility 3. Communication. 3.Increasing Role of Knowledge Workers. New HRM systems need to look into what motivates knowledge workers. Tampoe indentified four key motivators for knowledge workers. 1. Personal Growth 2. Operational Autonomy3. Task Achievement4. Money Rewards, 4.Changing Workforce Demographics To understand labour marketing and demographics as most important variable in new human resource management system, two important propositions need to be emphasized.

1. The tight labour markets results in greater HRM innovation and higher the proportion of the firms labour force employed in high skill, technical, 2. Professional, occupations will result in greater HRM innovation .It is acceptable that tight labour markets serve as an important driving force.

5. Impact of Technology- uncertainty over the effects of technology on work organization is perhaps the most important variable of new HRM.Innovations in micro electronics, information technology and others are enabling production of new products and services and also affecting the no. of jobs. 6. Increasing Quality Consciousness- Now a days more and more
organizations are becoming conscious about the quality of their products and services. From operational point of view, quality means focusing on creation of Increasingly better products and services at progressively more competitive price. 7. Merger an Acquisition- These have become the most common from adopted by corporate word to impart higher growth to organizations. 1. Assesing new markets. 2. Maintaining growth momentum. 3. Buying cutting edge technology rather than import it. 4. Acquiring visibility and international brands. 5. Developing new product mixes. 6. Improving operating margins and efficiencies. 7. Taking on the global competition. 8. Outsourcing and Flexible Work Arrangements- Flexibility in work hours is a requirement for with many employees these days. Few HR practices which can support this trend are1. Individualized work schedule. 2. Flexible working week. 3. Part time work. 4. Job Sharing.

HRM in knowledge economy

It is believed that in the present era, the competitive advantage of organizations in linked to knowledge. There is a lot of emphasis upon knowledge work , knowledge worker & the nature of knowledge within organization. So if the HRM function has to add value, it must respond to changes brought about by the shift from a traditional economy to a knowledge-based economy. HRM plays an important role in creating, developing and managing the organizational capabilities that are necessary for competing successfully in the knowledge economy.HR Managers have to create effective teams within a divers workforce-tap talent throughout the organization by recruiting, retaining and

developing people at all levels and develop employee commitment toward organizational vision. HRM is confronted with major challenges in the knowledge economy. Challenges Facing HRM In The Knowledge Economy1. Attracting & retaining Knowledge workers, who are the intellectual capital of the firm. 2.Obtaining commitment from workers in the context of a changed employer employee contract. 3. Ensuring the availability, development, and utilization of human capital to enhance its value. 4. Motivating knowledge workers. 5. Ensuring maximum utilization of temporary or contingent employees. 6. Encouraging employees to continuous learning. 7. Facilitating sharing of knowledge within organization. 8. Facilitating work-life balance. 9. Rewarding knowledge acquisition and knowledge sharing. 10. Enhancing cross functional teamwork and team identification. 11. Creating a flexible HRM team that sets and Supports the agenda for change. 12. C0-ordinating between organizational functions. HRM Roles in the knowledge Economy1. Human Capital Steward- It recognizes the value of intellectual capital and ensures the availability, conservation and retention of the collective knowledge ,skill and abilities within a firm so that it grows in value. 2. Rapid Deployment Specialist- It creates an environment that develops competencies and commitment among employees, build a reservoir of talent among employees and makes the best people want to stay. 3. Knowledge Facilitator- It facilitates management of knowledge and learning and development and creates an environment of sharing knowledge between employees and departments throughout the organization and also among customers and suppliers. 4. The Relationship Builder- It develops partnerships and networks among employees within and across functions in the organization . So this economy demands that HRM should develop and deploy human capital and manage knowledge to develop the core competencies of the firm that distinguish it from its competitors. Role of HR in Strategic Planning A changing Function 1. Roles Associated with Management HR. 2. Partnership of HR and Line Managers..l.p 3. Administrative Expert. 4. Operational Role.

5. Employee Champion. 6. Partner in Business Strategy. 7. Change Agent. 8. Customer Orientation.

Investment Perspective of SHRM ,Evolution of SHRM

Investment Perspective of SHRM The term investment is most often used in the fields of economics, business ,management and finance. In the field of business management ,the term investment has several related meanings and it may be related to saving or deferring consumption. It also refers to making use of the assets in order to earn income in the future. In term of business management it refers to different tangible and intangible assets. (Tangible assets are included machinery, equipment and building while the intangible assets that are included are copyrights, patents &goodwill etc. In terms of finance it refers to purchasing of different financial assets and securities from the capital market. It also encompasses money market or real properties with high market liquidity. This requires valuation of the employee as assets, which is and can be difficult to do. Factors Influencing Investment Orientation of an Organization 1. Mangement Values 2. Ability of Risk taking 3. Organization Vision &Mission 4. Economic Scenario 5. Availability of Outsourcing 6. Nature of Employment Skill 7.Utilitarian 1. Management Values it is one of the most important factors which influence investment decision .These are brand names, distribution channel, real estate ,facilities and equipment and information system. It also depends on whether or

not the companys mission statement and strategic objectives, espouse the value of human assets. It is critical to understand how the organizations strategy mandates investment in particular assets relative to other physical assets. 2.Ability of Risk Taking It depends upon the organization ability to take risk. Higher the risk, higher the return, lower the risk, lower the return is that fundamental principle of investment decision. 3.Organization vision and Mission Organization frames business strategy and objectives based its vision and mission, that guide the various activities necessary towards business. 4. Economic Scenario Investment orientation is a result of possible opportunities in the market. Organization investment orientation also decreases in absence of return from investment options. 5.Nature of Employment Skill It depends on the nature of employment skills required in their businesses. Skill set requirements, its nature, complexity and advancement influence investment decision of firms. 6.Availability of outsourcing When making different investment decisions, the organization will also compare the results of their investment decisions with other organizations. 7.Utilitarian In utilitarian or bottom line perspective, evaluation of investments is by cost benefits analysis which is by using utility analysis of the employees on which investments are being made. Its important to consider that there are many investments which are not possible to quantify with the current available system of measurement. For example, an organization may not be able to justify the cost of its investments when it is planning to invest in social concern or a public utility.

VALUATION OF ASSESTS
Resources have been defined as the tangible and intangible assets a firm uses to choose and implements its strategies 1. This broad definition includes human, organizational, financial and physical assets. The tangible assets are the ones which have a physical existence such as cash, equipment, real estates and

accounts receivable. The non-tangible assets are actually a non physical form of claim to some future value or benefits. Intangible Assets They cannot be physically touched but are of value to the organization and usually are very hard to evaluate. Goodwill, patent right, permits, copyright, trademarks, trade names and licenses are some of the examples. Some of the examples are knowledge assets and intellectual capital. The value of the intangible assets is generally greater than the tangible assets. So human assets can ensure long term success for an organization. Investment in Intangible Assets- When investments are made by a company in some of the material or infrastructural assets, then entry will be made in the balance sheet under assets. In case of intangible assets, the values are generally not recorded as an asset in the balance sheet. When sponsoring the education of their employees, organizations must treat it as cost and not as an investment. Thus with unique features of intangible assets ,so far cash outlay for knowledge acquisition and measurement have not been standardized. Measuring Intangible Assets Unless HR provides senior level management with value-added human capital investments, its recognition an assets always be deliberate. It is important to measure intangible assets in some form. Human assets are the most difficult to measure. Financial Physical Market Operational Human Difficult Easiest

A.Widely Six Step Model Of Valuation These are the guidelines of measuring human capital. 1.Indentify Specific Business problem that HR can Impact2. Calculate actual cost of the problem-

3. Choose an HR solution that addresses all or part of the problem4. Calculate the cost of the solution5. After implementation, calculate the value of the Improvement6. Calculate the Specific return on investment-