Meaning and Definition of SHRM
The term Strategic Human Resource Management (SHRM) is made up of two words — ‘Strategic’ and ‘Human Resource Management’. The term ‘Strategic’ means formulating an extensive decision plan which gives direction to the organisation and helps the organisation to utilise its resources appropriately.
‘Human Resource Management’ is a planned process of development and an integrated strategy to effectively use its human resources, for fulfilling organisational goals.
It can be represented as: Strategic Human Resource Management = Strategic + Human Resource Management.
Therefore, Strategic Human Resource Management (SHRM) refers to the human resource management in a proactive manner, and describes the organisational objectives and strategies in order to make effective utilisation of human resources for attaining the business goals. It integrates strategic aims of the organisation With the human resources, for increasing business profits and building up an organisational culture, which promotes creativity, adaptability, and competitive advantage. SHRIM can be also defined as a planned sequence of human resource operations and activities designed to attain organisational objectives. Developing high performance human resource management functions which are able to increase strategic value to the business of an organisation is the key function of strategic human resource management.
According to Wright and Snell, “SHRM can be defined as the organisational Systems designed to achieve sustainable competitive advantage through people”.
Context Of SHRM Framework
Figure 1.6: contextual SHRM Framework
The contextual SHRM framework has two aspects of SHRM; one is ‘context’ side and other is ‘SHRM side’. Three main factors Of the organisations are included in the context side which are stated below:
- The competitive framework.
- Institutional framework (which is extended to incorporate the political and regulatory factors apart from the SCL dimensions).
- The heritage framework of any organisation.
There has been some extension in the SHRM side of the framework so that a comprehensive description of the employee activities can be incorporated. The main logic for these and Other changes are illustrated below:
There has been a clearer depiction of the results obtained from the competitive, institutional and heritage mechanisms. Particularly, these are seen as ‘organisational capabilities’ and ‘legitimacy’ factors. The manner in which the organisation is handling its reality is expressed by it and quite commonly depicting an expected State. For example, if we look from the viewpoint Of institutional mechanism, some laws might be there which may necessitate the participation of the manpower in the corporate decision making, For having validity, a work council may be conceptualised by the organisation in order to attain the expected level of employee opinions. The law is the element Of the institutional framework which has a direct influence on the organisation but in order to accomplish the validity, it will require from the organisation to fulfil the expectation for legitimacy (which is expressed at the exchange level which lies in between the society and organisation and in case of fairness level, it lies between the employer and the manpower). In similar context, an organisation might have to operate in a very limited market which has ever-changing customers’ demand. This competitive reality has to be witnessed by the organisation and this will explain the expected things to sustain in the marketplace and because of this, the organisation can opt to develop flexibility in the form of main organisational competence in order to address the truth. The organisation shows its response towards the known competitive and institutional mechanism in the form of objectives and targets in the organisational competences and legitimacy. When the heritage mechanism is developed more it can be witnessed that organisational capability and legitimacy both are influenced by it. For example, the level of the manpower present in any organisation can have a major role in the accomplishment of higher efficiency and innovations.
Focusing on the various alignment or potential in the framework is also equally significant.
- First of all the organisation’s heritage and SHRM System has an association which can be depicted as ‘organisational fit’. It develops a connection between the HRM system and various other important organisational systems along with production, control and technological system.
- Secondly, competitive mechanisms and the SHRM system have a ‘strategic fit’ (vertical connection). This makes sure that there is proper association between the business strategy and the given system and it is quite helpful in the successful strategic execution.
- ‘Environmental fit’ is the next sort of fit which indicates that a suitable association of the SHRM system and institution environment Of the organisation is developed which also consists Of social, cultural, political, and legal contexts.
- At last, the system will inherently include the ‘internal (horizontal) fit’ as there must be a proper fit among the different elements so that the System synergies can be maximised.
After going through the context side of the Contextual SHRM Framework, we can develop the concept of internal association for finding out the SHRM side of the framework. In it, we will try to find out the important decision-makers who will be accountable for the strategic HRM system formulation rather than concentrating on precious, unavoidable, rare and non-substitutable HRM strategies ( depending on RBV theories). The main objective is to develop the HRM competencies which can help the capabilities of the firm which are obtained from institutional, heritage and competitive mechanism. HRM competencies can be seen as “the procedures which are included in the implicit and implied knowledge Of the organisational members Who are working towards the acquisition, development, deployment and redeployment of manpower in a dynamic competitive environment. On the other hand, the focus of HRM strategy remains on the narrow outlines of the processes and policies adopted by the organisation. Various individuals proposed an idea that entire strategic HRM system must be developed. HRM results are the outcome of the manpower related activities in the firm, attitudes of the manpower and the conduct in response to the SHRM system. A wide variety Of employee job satisfaction, turnover, absenteeism, engagement, organisational citizenship behaviours, and commitment are obtained by these attitudes and behaviours. When a number of HRM processes are implemented which are influenced by a number of restraining and facilitating contextual factors, HRM outcomes are obtained. For example, when performance management System is carried Out, the manner in which the manpower will think about the organisation and modify their conduct will be greatly influenced by the fact that where the performance management system is seen as rational and just (i.e., organisational justice will act as a mediator of the system-outcome relationship). Thus, the individual level perception of the employee will decide their reaction toward HRM system;
optimistically it will be as it was expected when the system was developed. When a new work-life plan is initiated by the firm, the objective may be to have better job satisfaction. Line management have to execute this policy and a totally new combination Of activities will be witnessed by the manpower. In fact, there are chances that line managers may not fully implement what exactly was expected and/or the new policy may be treated by the manpower as useless in order to have an improved work-life balance. This will show the variation in intended, actual, and experienced HRM.
The response of the manpower may be depicted in the form Of high or low level of job satisfaction which will rely On their experience Or perception about the policy rather than the proposed objectives Of the policy. Our objective here is not to explain the detailed organisational behaviour literature which throws light on this process. The HRM system experienced by the employees will determine the conduct and attitude of the manpower which will have an effect on their productivity, efficiency, flexibility, timeliness, involvement, etc., that will in fact result in the comprehensive performance Of the organisation. When it comes to contextual SHRM framework, the main focus is given to the inclusive aspect of the performance of the organisation, having equilibrium in the financial performance and employee welfare and both of these concepts have their influence on the comprehensive societal welfare. Balancing the managerial perspective is significant which concentrate on the financial performance parameters such as, customer satisfaction, sale and profit, productivity with the perspective Of the manpower which mainly focuses on the employee welfare, happiness, relationship and health, The most perfect situation will be the one in which both of these perspectives support each other however there are some events which indicate that there can also some sort of clash between these two. The impact of societal welfare is on the organisational performance (both in terms of financial and employee welfare) which in fact influences the society. It was regularly observed that organisations do not function in isolation. They not only affect the context but also assist in the development of context (society). The organisational societal implications in a way result into the context where the organisation is conducting its functions and thus getting converted into a precursor to the institutional, competitive, and heritage setups faced by the organisation.
Need of SHRM
The managerial role is improved more evidently and accurately due to SHRM. The factors responsible for the origin Of SHRM are discussed below:
- Identification of Significance of Human Resources: Numerous organisations plan strategically for the attainment of their missions and objectives. The attainment of these missions and objectives is very important for the workers and managers. Also, an essential role is played by HRM department in the accomplishment Of the targets Of the company. The advent Of SHRM because Of increased demand for responsibility and effectiveness Of the organisation shows the significance Of efficient information systems.
- Emphasis on Work and Employees instead Of position Management: The focus Of the managers has moved in the direction of work management because of economic and political factors, Another reason is that employees need flexible working environment, rewards, and appraisal from their superiors when they perform a commendable job. In the form of modification in the pay systems, there has been a continuous demand Of fair allocation Of reward and flexibility from the side Of HR professionals. This trend corresponds with requirements Of employees for growth, recognition, and utilisation.
- More Innovation: A cut throat competition is present among each and every organisation in this evolving world of business. It is impossible for the business organisations to exist for a longer period Of time Without innovation. The labour force should be handled by the manager in a way which offers new information and promotes the execution of new things in order to get more enhancements in the labour force. Long-term efficacy to nurture innovation in an organisation necessitates a reward system in which risk-taking is encouraged and failures are not punished. However, these are two features which are not easily found in most Of the organisations.
- Cost Control and Asset Development: The decrease in labour cost and development or recruitment of such workers which can prove advantageous for the organisation in the long-tenn is the key function Of the organisations. One reason for the rise in innovation and professionalism amongst public HR managers has been the necessity to grow and implement evidently contrasting HR strategies, i.e., policies for “asset employees” formulated to confirm loyalty, involvement, and growth and the policies for “kleenex employees” formulated to regulate costs.