Strategic Human Resource Management is a concrete plan created to direct the development and improvement of HR policies, processes, and approach. It has been further defined by Paul Kearns as “A conscious and explicit attempt to maximize organizational value by gaining a sustainable competitive advantage from human capital.” [i] The creation and implementation of an effective HR strategy has been closely linked with an increase in the value of HR programs, higher levels of revenue, and greater profitability. Organizations that possess and apply effective HR strategies have shown HR to have a greater impact on the organization as a whole. This in turn has resulted in overall competitive advantage.
Strategic Human Resource Management Overview
Research shows that with equal access to funding, equipment, and intellectual property the firm with the best managed talent will succeed. Developing an HR strategy enables companies to exercise greater control over their budgets and resource allocation, focus more time and attention on strategic value-added activities, utilize HR information systems more effectively, and experience expected return on HRIS investments.[ii]
Dave Ulrich looked at the premise of HR value in the HR Value Proposition. In order to provide value to your organization and obtain a competitive advantage you should develop your HR strategy around the business not around HR itself. HR’s objectives must align with corporate objectives and HR practices must support the requirements of both internal and external stakeholders.
A link must be established between employee commitment, customer attitudes, and investor returns before others will see a value in the strategy.[iii]
Strategic Human Resource Management Disconnect
The problem with Strategic Human Resource Management is that there is often a disconnect between HR’s goals and activities and the overall business strategy. It can be argued that there is no “HR Agenda” per se; the Strategic Human Resource Management must be fully aligned with the objectives of the business strategy and thus, the two are ultimately one and the same. [iv] Organizations should refrain from separating the HR strategy from the business strategy and stop referring to them as two separate plans. From this perspective, the phase ‘integrated business and HR planning’ is redundant.
Because of the importance of human capital in the ability of a firm to carry out its strategy, HR’s greatest opportunity to add value may be in the development of the corporate strategy. Every corporate strategy should define the human capital resources required to support strategic initiatives, lead the development of the capabilities required to enact the strategy, and play a strong role in implementation and change management.[v]
The HR Maturity Scale was developed by Paul Kearns in the U.K. It is a five point scale, ranging from 0 – 5, aimed towards helping an organization determine where they are now (in terms of HR maturity), what the strategic implications of that position are, and what stage they need to reach in order to become a high-value organization.
- Stage 0 – No Personnel Management; represents organizations that have no form of HR management in place and do not adhere to the guidelines of employment legislation.
- Organizations that are at Stage 1 – Personnel Administration put forth minimal effort to manage and control people costs. The processes consist of hiring, firing, payroll, and basic record keeping.
- Stage 2 – Good Professional Practice represents organizations that may or may not have an HR manager; however, they recognize that professional management practices make a difference and have implemented proper recruitment, selection, and appraisal processes and procedures.
- Stage 3 – Effective HR Management corresponds to firms who make a conscious move towards a systematic and structured approach and have proper recruiting, training, compensation, and performance management programs in place.
- Organizations that are classified at Stage 4 – Integral HR Management made human resources management integral to their operations and allow HR to take on the role of a proactive HR Business Partner.
- Lastly, Stage 5 – Strategic Human Resource Management denotes organizations that have transitioned to advanced systems thinking and high value-added business performance. Stage 5 organizations have an adaptive culture that supports advanced continuous learning.[vi]
The Business of Strategic Human Resource Management
There are six areas (themes) where HR can really add value to the organization. These themes were presented by Mark Withers in his 2010 book, Transforming HR. They include: being at the heart of organizational development, creating high performance work environments, designing new organizational architectures, understanding the workforce and its cost, using technology to advance knowledge sharing and innovation, and building a compelling employer brand.[vii]
Organizational development focuses on the idea of creating and building future organizational capability, defining and shaping organizational strategy and plans, enhancing organizational health, utilizing change management tools and techniques to deliver the strategy, and improving resourcing flexibility.
Creating a high performance work environment enhances an organization’s talent management initiatives, develops career paths, enhances proactive redeployment for talent, identifies and addresses leadership development needs, supports ongoing skills development and key position succession planning, strengthens team working and collaboration, and shapes the thinking on finding better ways to reward people.
Designing new organizational architectures allows an organization to take a whole systems creative view towards restructuring and bring OD skills and tools to the table. Furthermore, it aligns the organization with the strategy and helps to build organizations around the customer experience.
Understanding the workforce and its costs provides HR with the opportunity to help the business cut costs by optimizing the cost base to do more with less. In order to optimize the cost base, a firm will need to evaluate and change cost structures in a way that creates sustainable long term value and simultaneously delivers cost reductions.
Using technology to advance knowledge sharing and innovation includes the need to be fluent in Web 2.0 social media technologies (i.e. Facebook, LinkedIn, and Twitter). HR must understand the impact that social media can have on recruiting, corporate branding, orientation, communications, employee engagement, and learning initiatives. Organizations should make advanced technology an inherent part of their HR service delivery model.
Lastly, organizations need to build a compelling employer brand and market the brand as an Employee Value Proposition to not only attract new talent and shape their expectations, but to enhance the psychological contract with existing employees to drive higher levels of engagement and commitment.
Tim McConnell, MPA, SPHR
[i] Kearns, Paul. HR Strategy. (Butterworth-Heinemann, Oxford, 2010)
[ii] “Setting and Executing HR Strategy.” (Corporate Leadership Council, 2004)
[iii] Ulrich, Dave. The HR Value Proposition. (Harvard Business Press, Boston, 2005)
[iv] Withers, Mark et al. Transforming HR. (Butterworth-Heinemann, Oxford, 2010)
[v] “HR as a Strategic Partner.” Edward E. Lawlor & Susan A. Mohrman (Human Resource Planning, September 2003)
[vi] Kearns, Paul. HR Strategy. (Butterworth-Heinemann, Oxford, 2010)
[vii] Withers, Mark et al. Transforming HR. (Butterworth-Heinemann, Oxford, 2010)