Strategic Human Resource Management Process
Definition: The Strategic Human Resource Management is concerned with the development
of HR strategies intended to direct the employees’ efforts towards the business goals.
1. Scanning the Environment: The process begins with the scanning of the environment, i.e. both
the external and internal factors of the organization. The external environment encompasses the
political, legal, technological, economic, social and cultural forces that have a great impact on
the functioning of the business. The internal factors include the organizational culture, hierarchy,
business processes, SWOT analysis, industrial relations, etc. that play a crucial role in
performing the business operations.
The role of the HR department is to collect all the information about the immediate competitors –
their strategies, vision, mission, strengths, and weaknesses. This can be done through the
resumes being sent by the candidates working with the other rivalry firm. Through these, HR
professionals can identify the workforce, work culture, skills of the staff, compensation levels,
reasons for exit and other relevant information about the competing firm.
2. Identify Sources of Competitive Advantage: The next step in the strategic human resource
management process is to identify the parameters of competitive advantage that could stem from
diverse sources as product quality, price, customer service, brand positioning, delivery, etc.
The HR department can help in gaining the competitive advantage by conducting the efficient
training programmes designed to enrich the skills of the staff.
3. Identify HRM Strategies: There are major four strategies undertaken by an organization to
enrich the employees capabilities:
a) Learning as Socialization: This strategy includes the techniques as training courses, coaching
sessions, education programmes to ensure that the employees abide by the rules, value and
beliefs of an organization and are able to meet the performance targets.
b) Devolved Informal Learning: This strategy helps in making the employees aware of the
learning opportunities and the career development.
c) Engineering: This strategy focuses on creating and developing communities of practice and
social networks within and outside the organization.
d) Empowered Informal Learning: Through this strategy, the HR department focuses on
developing the learning environment such as knowledge about the new processes, designing of
new work areas and the provision of shared spaces.
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4. Implementing HR Strategies: Once the strategy has been decided the next step is to put it into
the action. The HR strategy can be implemented by considering the HR policies, plans, actions
and practices.
5. Monitor and Evaluation: The final step in the strategic human resource management process is
to compare the performance of the HR strategy against the pre-established standards.
At this stage, certain activities are performed to evaluate the outcomes of the strategic decision:
establishing the performance targets and tolerance levels, analyzing the deviations, executing the
modifications.
Thus, to have an effective HR strategy the firm follow these steps systematically and ensures that
the purpose for which it is designed is fulfilled.
Strategy Formulation
Definition: Strategy Formulation is an analytical process of selection of the best suitable
course of action to meet the organizational objectives and vision. It is one of the steps of
the strategic management process. The strategic plan allows an organization to examine its
resources, provides a financial plan and establishes the most appropriate action plan for
increasing profits.
It is examined through SWOT analysis. SWOT is an acronym for strength, weakness,
opportunity and threat. The strategic plan should be informed to all the employees so that they
know the company’s objectives, mission and vision. It provides direction and focus to the
employees.
Steps of Strategy Formulation
The steps of strategy formulation include the following:
1. Establishing Organizational Objectives: This involves establishing long-term goals of
an organization. Strategic decisions can be taken once the organizational objectives are
determined.
2. Analysis of Organizational Environment: This involves SWOT analysis, meaning identifying
the company’s strengths and weaknesses and keeping vigilance over competitors’ actions to
understand opportunities and threats.
Strengths and weaknesses are internal factors which the company has control over. Opportunities
and threats, on the other hand, are external factors over which the company has no control. A
successful organization builds on its strengths, overcomes its weakness, identifies new
opportunities and protects against external threats.
3. Forming quantitative goals: Defining targets so as to meet the company’s short-term and longterm objectives. Example, 30% increase in revenue this year of a company.
4. Objectives in context with divisional plans: This involves setting up targets for every
department so that they work in coherence with the organization as a whole.
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5. Performance Analysis: This is done to estimate the degree of variation between the actual and
the standard performance of an organization.
6. Selection of Strategy: This is the final step of strategy formulation. It involves evaluation of the
alternatives and selection of the best strategy amongst them to be the strategy of the organization.
Strategy formulation process is an integral part of strategic management, as it helps in framing
effective strategies for the organization, to survive and grow in the dynamic business
environment
Levels of strategy formulation
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There are three levels of strategy formulation used in an organization:
Corporate level strategy: This level outlines what you want to achieve: growth, stability,
acquisition or retrenchment. It focuses on what business you are going to enter the market.
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Business level strategy: This level answers the question of how you are going to compete. It
plays a role in those organization which have smaller units of business and each is considered
as the strategic business unit (SBU).
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Functional level strategy: This level concentrates on how an organization is going to grow. It
defines daily actions including allocation of resources to deliver corporate and business level
strategies.
Hence, all organizations have competitors, and it is the strategy that enables one business to
become more successful and established than the other.
TYPES OF HR STRATEGIES
These are: 1) overarching strategies; and 2) specific strategies relating to the different aspects of
human resource management.
Overarching HR strategies
Overarching 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. They are likely to be expressed as broad-brush
statements of aims and purpose, which set the scene for more specific strategies. They are
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’, developing high-performance work processes and generally creating ‘a great
place to work’.
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The following are some examples of overarching HR strategy statements:
AEGON:
The Human Resources Integrated Approach aims to ensure that from whatever angle staff now
look at the elements of pay management, performance, career development and reward, they are
consistent and linked.
B&Q:
l Enhance employee commitment and minimize the loss of B&Q’s best people.
l Position B&Q as one of the best employers in the UK.
Egg:
The major factor influencing HR strategy was the need to attract, maintain and retain the right
people to deliver it. The aim was to introduce a system that complemented the business, that
reflected the way we wanted to treat our customers – treating our people the same. What we
would do for our customers we would also do for our people. We wanted to make an impact on
the culture – the way people do business.
Specific HR strategies
Specific HR strategies set out what the organization intends to do in areas such as:
Talent Management – how the organization intends to ‘win the war for talent’
Continuous Improvement – providing for focused and continuous incremental
innovation sustained over a period of time;
Knowledge Management – creating, acquiring, capturing, sharing and
using knowledge to enhance learning and performance;
Resourcing – attracting and retaining high-quality people;
Learning And Developing – providing an environment in which employees are encouraged to
learn and develop;
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;
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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.
The key components of the HR strategy are:
l Investing in people – improving the level of intellectual capital.
l Performance management – integrating the values contained in the HR strategy into
performance management processes and ensuring that reviews concentrate on how well people
are performing those values.
l Job design – a key component concerned with how jobs are designed and how they relate to
the whole business.
l The reward system – in developing rewards strategies, taking into account that this is a very
hard driven business.
CRITERIA FOR AN EFFECTIVE HR STRATEGY
An effective HR strategy is one that works in the sense that it achieves what
it sets out to achieve. In particular, it:
l will satisfy business needs;
l be founded on detailed analysis and study, not just wishful thinking;
l can be turned into actionable programmes that anticipate implementation
requirements and problems;
l is coherent and integrated, being composed of components that fit with
and support each other;
l takes account of the needs of line managers and employees generally as
well as those of the organization and its other stakeholders.
As Boxall and Purcell (2003) emphasize: ‘HR planning should aim to meet the
needs of the key stakeholder groups involved in people management in
the firm.’
Here is a comment on what makes a good HR strategy:
A good strategy is one which actually makes people feel valued. It makes them knowledgeable
about the organization and makes them feel clear about where they sit as a group, or team, or
individual. It must show them how what they do either together or individually fits into that
strategy. Importantly, it should indicate how people are going to be rewarded for their
contribution and how they might be developed and grow in the organization.
(Chief Executive, Peabody )
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Strategy Implementation
Strategy implementation is also defined as the manner in which an organization should develop,
utilize, and amalgamate organizational structure, control systems, and culture to follow strategies
that lead to competitive advantage and a better performance. Organizational structure allocates
special value developing tasks and roles to the employees and states how these tasks and roles
can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of
competitive advantage. But, organizational structure is not sufficient in itself to motivate the
employees.
An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational
performance.
Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs
shared by organizational members and groups.
Following are the main steps in implementing a strategy:
1. Developing an organization having potential of carrying out strategy successfully.
2. Disbursement of abundant resources to strategy-essential activities.
3. Creating strategy-encouraging policies.
4. Employing best policies and programs for constant improvement.
5. Linking reward structure to accomplishment of results.
6. Making use of strategic leadership.
Excellently formulated strategies will fail if they are not properly implemented. Also, it is
essential to note that strategy implementation is not possible unless there is stability between
strategy and each organizational dimension such as organizational structure, reward structure,
resource-allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an organization.
New power relationships are predicted and achieved. New groups (formal as well as informal)
are formed whose values, attitudes, beliefs and concerns may not be known. With the change in
power and status roles, the managers and employees may employ confrontation behaviour.
Strategic Evaluation
The process of Strategy Evaluation consists of following steps1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter
questions such as - what benchmarks to set, how to set them and how to express them. In
order to determine the benchmark performance to be set, it is essential to discover the
special requirements for performing the main task. The performance indicator that best
identify and express the special requirements might then be determined to be used for
evaluation. The organization can use both quantitative and qualitative criteria for
comprehensive assessment of performance. Quantitative criteria includes determination
of net profit, ROI, earning per share, cost of production, rate of employee turnover etc.
Among the Qualitative factors are subjective evaluation of factors such as - skills and
competencies, risk taking potential, flexibility etc.
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2. Measurement of performance - The standard performance is a bench mark with which
the actual performance is to be compared. The reporting and communication system help
in measuring the performance. If appropriate means are available for measuring the
performance and if the standards are set in the right manner, strategy evaluation becomes
easier. But various factors such as managers contribution are difficult to measure.
Similarly divisional performance is sometimes difficult to measure as compared to
individual performance. Thus, variable objectives must be created against which
measurement of performance can be done. The measurement must be done at right time
else evaluation will not meet its purpose. For measuring the performance, financial
statements like - balance sheet, profit and loss account must be prepared on an annual
basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with
standard performance there may be variances which must be analyzed. The strategists
must mention the degree of tolerance limits between which the variance between actual
and standard performance may be accepted. The positive deviation indicates a better
performance but it is quite unusual exceeding the target always. The negative deviation is
an issue of concern because it indicates a shortfall in performance. Thus in this case the
strategists must discover the causes of deviation and must take corrective action to
overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is
essential to plan for a corrective action. If the performance is consistently less than the
desired performance, the strategists must carry a detailed analysis of the factors
responsible for such performance. If the strategists discover that the organizational
potential does not match with the performance requirements, then the standards must be
lowered. Another rare and drastic corrective action is reformulating the strategy which
requires going back to the process of strategic management, reframing of plans according
to new resource allocation trend and consequent means going to the beginning point of
strategic management process.
Importance of strategic Management
Strategic human resource management is a part of human resource management.
Rather than focusing on internal issues of HR, SHRM focus on addressing and solving problems
what effect people management related issues in the long run globally. So the main importance
of strategic human resources is to increase employee skills by focusing on business problems that
happens outside of human resources. The actions that needed to be taken at first for a strategic
human resource manager is to identify key HR areas ,where strategies will be implemented in the
future to improve employees productivity, motivation and skill.
Human Resource managers are facing with some issues such as performance management,
employee participation, human resource flow, reward systems and high commitment work
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systems in the context of globalization. These are some of the major issues that HR management
involved in SHRM that implemented in the first decade of the 21st century:
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Internationalization of market integration.
Significant technological change.
New concepts of general management.
Cross-cultural factors
The economic trend transferring from developed to developing countries in the world.
SHRM also reflects some of the contemporary challenges faced by Human Resource
Management. Such as aligning HR with core business strategy, demographic trends on
employment and the labour market, integrating soft skills in HRD and finally Knowledge
Management.
Importance of Strategic Management
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It guides the company to move in a specific direction. It defines organization’s goals and fixes
realistic objectives, which are in alignment with the company’s vision.

It assists the firm in becoming proactive, rather than reactive, to make it analyse the actions of
the competitors and take necessary steps to compete in the market, instead of becoming
spectators.
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It acts as a foundation for all key decisions of the firm.

It attempts to prepare the organization for future challenges and play the role of pioneer in
exploring opportunities and also helps in identifying ways to reach those opportunities.
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It ensures the long-term survival of the firm while coping with competition and surviving the
dynamic environment.
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It assists in the development of core competencies and competitive advantage that helps in the
business survival and growth.
The basic purpose of strategic management is to gain sustained-strategic competitiveness of the
firm. It is possible by developing and implementing such strategies that create value for the
company. It focuses on assessing the opportunities and threats, keeping in mind firm’s strengths
and weaknesses and developing strategies for its survival, growth and expansion.
Role of HRM in strategic management
Role of HRM in strategic management: We have already mentioned that strategic business
plan is formulated to achieve competitive advantage. From this specific strategy for each
functional area viz., marketing, finance, production operations and human resources need to be
drawn in alignment with strategic business plan to carry out the organisational plan. In other
words, the formulation of organisational strategy is integrative with the formulation of functional
strategies. Here, human resource strategy assumes more importance because it provides human
resources for other functional areas also. Lengnick Hall and Lengnick- Hall in this respect argue
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in ‘Strategic Human Resource Management’ that reciprocal interdependence between an
organisation’s business strategy and human resource strategy underlines the proposed approaches
to the strategic management of human resources. This suggests that we must recognize that
human resources integrally affect the overall strategy of an organisation. With this in mind, we
are now discussing the integrative role played by human resources in the strategic management
of an organisation.
COMPETITIVE CHALLENGES OF HUMAN RESOURCE MANAGEMENT ( HRM )
In a global, complex, dynamic, highly competitive and extremely volatile environment most
organizations are facing several global challenges related to:
1. Workforce diversity: For multinational companies who have operations on a global scale and
employ people of different countries, ethical and cultural backgrounds, it is extremely essential
to manage workforce diversity effectively. The challenge for Organizations is to capitalize on the
diverse body of talent and transform it into an asset. People coming from diverse cultural
backgrounds, gender, age, language, ethnicity, lifestyle can bring in innovative ideas and
perspectives to the Business. The goal is to develop effective working relationships with people
from diverse backgrounds at work. Organizations should identify and overcome the barriers that
have inhibited the employment, retention, development and promotion of diverse groups in the
workplace.
2. Technology: Technology changes the way businesses operate. Technological advances often
create employee resistance because new technology frequently benefits some employees while
leaving others behind. This is because technological advances reduces the number of jobs that
require little skill and increases the number of jobs that require considerable skills. This means
displacement of some employees and retraining for others. In addition, information technology
has influenced HRM through human resource information system ( HRIS) that helps in the
processing of data and making employee information more readily available to the employees.
3. Training: HRM is confronted with dynamic changes in approaches and methodologies in training
and development. In the global scenario, training has taken a new connotation. It is more than
identifying the training needs and giving the appropriate training. It is foreseeing and anticipating
the requirementsand develop suitable training so that the employees are well equipped to handle
the challenges beforehand. Companies have to invest in training delivery methods that facilitate
digital collaboration.
4. Worker productivity: Increasing worker productivity through HR programmes, policies and
techniques remains a challenge. Progressive and innovative managers now achieve productivity
gains with human resource management techniques that go beyond pay incentives. Increased
worker motivation and satisfaction can increase worker productivity. This can be achieved by
introducing quality of work life concepts and by tailoring benefits to meet the needs of
employees.
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5. Quality improvement: Implementing TQM was earlier the sole responsibility of specialists.
However, today making quality improvements across the entire firm can be an important
function of the HRM department. If the HRM department fails to recognize and act on this
opportunity ,it may result in the loss of TQM responsibilities o other departments with less
expertise in training and development. The ultimate result would be an ineffective TQM strategy.
Thus, it is essential for HRM to act as a pivotal change agent necessary for the successful
implementation of TQM. The HR department needs to develop and deliver the long term training
and development necessary for the major organizational culture shift required by TQM.
6. Retention : Key employee retention is critical to the long term health and success of an
organization. Many Organizations fail to identify the intrinsic motivators for employees, thus
failing to attract them. It is therefore, important for organizations to plan and implement new
approaches and employee retention plans to retain the most effective manpower. It is also
essential to have a valuing and positive attitude towards employees. Retention requires
competitive salary and great benefits.
7. Outsourcing : Organizations, both big and small are realizing that outsourcing is a key to bring
down costs and add value to the business. It allows businesses to focus on its core competencies
and thereby identify new areas for growth. Organizations that can manage diversity better tend to
be more flexible and are more open-minded.
8. Talent management: Managing talent has become a critical human resource challenge.
Organizations in both developed and developing economies are facing increased competition for
high performers. In order to address this challenge, companies have to boost global sourcing of
staff. Talent management challenges relate to talent flow, managing two generations of
employees i.e. the older or mature workers and younger workers; and a shortage of needed
competencies. The ability to attract, develop and retain a needed supply of critical talent is a
challenge facing all organizations. Managing global talent and maximizing the talent of
individual employees can create a unique source of competitive advantage.
9. Balancing work life: work life balance has become a predominant issue in theworkplace.
Employers need to understand that achieving a balance can lead to great results with a well
motivated workforce delivering quality services. Employees are now making job choices based
on flexible working hours and emotional gratification. The responsibility is on employers to
think creatively about how it can be best used to benefit both the staff and the organization.
10. Globalization: Globalization has an impact on the number and kinds of jobs that are available in
the economy. In this scenario it is important for Organizations to address issues related to
managing people in different geographies, cultures, legal environment, and business conditions.
HR functions such as selection, recruitment, compensation , training and the like have to be
adjusted to take into account the differences in global management. Due to globalization HR
managers have an opportunity to recruit employees from around the world and they also the
responsibility to ensure an appropriate mix of employees in terms of knowledge, skills and
culture. Globalization poses challenges in terms of workforce diversity, managing outsourcing
and downsizing of employees, managing productivity, quality, and flexible working hours.
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11. Organizational restructuring: In order to become more competitive, a growing number of
organizations are going for restructuring like mergers and acquisitions, closing facilities etc. The
focus has been to flatten organizations by removing several layers of management and to
improve productivity, quality and service while also reducing costs. As a result jobs are being
redesigned and employees affected. One of the challenges that HRM faces here is dealing with
the human consequences of change. Change appears threatening to many people, which makes it
difficult to gain their support and commitment to implementing changes. However, there are a
number of steps managers can take to overcome resistance to change like education and effective
communication.
PHILOSOPHIES OF HRM
1. Hold the employees at the center stage of the organization - EMPLOYEE CENTRIC
POLICIES
2. Provide a learning platform, freedom to think, innovate, challenging areas of work.
3. Understand and predict human behavior
4. In a particular organization context HRM philosophy shapes the way the employees are
managed in that organization
I have two HR philosophies; “Keep It Simple” and “Deal With the Problem”. My that I mean
that people always seem so scared of dealing with something going wrong because they see it as
conflict and that they will upset the person involved. The way I approach it is, something has
happened, and that is what we need to address. I’m not going to belittle them, or attack them, we
just need to address the issue as soon as possible. ~Leeanne, a dedicated upstartHR reader
Keep it simple
When people come to HR with an issue, they expect a complicated answer, whether one is
required or not. I will never understand the unnecessary over-complication that many in this
profession leap to, because it doesn’t do a single thing to endear us to the rest of the organization.
Give a long-winded and unhelpful answer often enough, and people will stop coming to you for
help, advice, answers, etc.
Look at the problem. Help dig up all of the potential pitfalls and snags. Ask good questions (be
curious, not demanding or accusatory). Then help the person arrive at a conclusion, whether you
provide it or they come to it organically.
Bottom line: stop trying to make things more complex because it makes you feel smarter. It
makes people hate you. That might hurt, but it’s true.
Deal with the problem
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If you’ve been in HR for any length of time, you know we run into conflict on some level fairly
often. Probably every seven minutes on average. :-) Seriously, it’s just a part of the job. How you
handle it (as with the suggestions above) can help to improve the situation or make it much,
much worse.
Look back at the directions for asking questions above: be curious. Be genuinely curious. Detach
yourself from the situation, pull the emotions out of it, and try to determine the response that will
result in a winning solution for all parties involved. Sometimes there are situations where that
just isn’t possible, but it’s amazing how often you can arrive at a solution that the “problem”
person will be happy with.
Recently I had to help a supervisor counsel an employee, and the employee went out of their way
to thank the supervisor for bringing it to their attention, showing them that they cared, and not
giving up on them during their difficult times.Yes, a disciplinary action followed by a “thank
you.” It can be done, if you and the manager care enough to make it work. That’s not to say the
situation is immediately and permanently resolved, but if you give respect you’ll often get it in
return.
A few more things to keep in mind: don’t demand answers immediately, be focused on the facts
(instead of only opinions), and mentally put yourself in the position of both the “problem” person
and their manager. How would you want someone to advise you if you were in one of those
positions? Don’t just say, “This is the policy. Follow it.” Any idiot can point to a policy, grunt,
and go on with their day. It takes courage and wisdom to handle these situations with more
attention and care than that. These are the people that drive your business. Don’t they deserve at
least that much from you?
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