Strategic human resource management (SHRM) takes a comprehensive, integrative, and long-term approach to managing an organization's human capital. It focuses on aligning HR strategies and practices with business strategies to maximize customer value and organizational performance. Key aspects of SHRM include establishing vertical and horizontal alignment between HR and business strategies, ensuring consistency between HR sub-functions, and integrating HR decisions with other functional areas. The role of HR is evolving from administrative and operational to more strategic, focusing on change management, strategic partnering, and developing intellectual capital.

1. CHARACTERISTICS OF SHRM
1. SHRM is a comprehensive approach to people management
2. SHRM is a generalist approach to people management
3. SHRM is an integrative approach to people management
4. SHRM has a long-term focus
5. SHRM focuses on customers- internal and external
6. SHRM has a market & environmental focus
7. SHRM is a combination of hard and soft models
8. SHRM elevates the status of HR
9. SHRM talks of levels of HRM
10. SHRM considers employees as most important
11. SHRM focuses on measurement
12. SHRM is a coordinating function
SHRM is concerned with establishing vertical and horizontal fit:
Vertical Fit: Ensuring integration of HRM with the strategic management process
• Conscious effort to align business with HR issues
• HRM activities designed keeping in mind organizational vision and strategy
• Inputs about HR are considered integral part of organizational strategy
• Top management take special interest in HR issues
• Information sharing mechanism between HR and senior managers
• Top-level strategic teams include HR head/executive
• HR executives are provided training in general managerial skills
Horizontal Fit: This involves two types of fit
Internal Fit: Ensuring integration between HRM sub-functions or sub-systems e.g. staffing,
compensation, training, etc.
• Presence of a long term HR vision and HR strategy
• Consistent HR policies in each other
• Presence of coordinating mechanism between HR sub-functions
• Information sharing mechanism between HR sub-areas
External Fit: Ensuring integration between HRM and other functional areas e.g. marketing
• Consistency of HR activities with other functional activities
• HR issues part of every manager’s responsibility
• HR decisions taken jointly with other managers
• Functional area managers actively involved in HR activities
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2. EMERGING HR SCENARIO
Dave Ulrich’s 4 Roles of HR Departments
Strategic
Strategic Change
Partner Agent
Process People
Adm. Employee
Expert Champion
Operation
Responsibilities/Capabilities of HR Professionals
Strategic Tactical Operational
Ensure vertical Ensure horizontal Implement strategies
integration integration Hire & fire
Lay down HR vision Create HR strategies Dispense with rewards
Create strategies Show HR deliverables Train & develop
Chalk out future plans Market the HR function Maintain and retain
Drive change Utilize people as assets staff
Scan environment
Other Roles
Facilitator, Linking Pin, Communicator, Resource Allocator, Organizer, Leader & Consultant
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3. New Age HR Departments
Change of name (Corp. HR Dept., Strategic HR Dept.)
Upward movement in hierarchy (Dir-HR, VP-HR, GM-HR etc.)
Representation at board level
Flat structure of HR departments
Team based organizational design
Outsourcing of administrative HR activities
Automation and e-HR
Non-linear Moves and Changing Face of HR Departments
An increasing number of HR executives are occupying top positions and are today CEOs:
• Mr. K Ramachandran, CEO Philips India
• Mr. Mahendra Swarup, CEO Indiatimes.com
• Mr. Raman Madhok, CEO JISCO
• Dr. Anil Khandelwal, CEO Bank of Baroda
• Mr. Sujit Baksi, CEO HCL E Serve
The heads of HR of several companies like Infosys, TCS, Satyam Marico, Crompton Greaves,
Cadbury and Nerolac are not career HR professionals.
T. V. Mohandas Pai is Member of the Board and Director-Human Resources. He served as the
Chief Financial Officer at Infosys. During his tenure as CFO, Mohan put in place the country’s
first publicly articulated financial policy for the company. The Infosys Annual Report, under his
supervision, has won the Best Presented Annual Accounts Award for ten years in succession.
Mohan was an integral part of the Infosys team that enabled the first listing of an India-
registered company on NASDAQ. He was voted ‘CFO of the Year’ in 2001 and 2002, and “Best
Chief Financial Officer in India” in the AsiaMoney Best Managed Companies Poll 2004.
Ajoyendra Mukherjee is head, global human resources Tata Consultancy Services (TCS). A
key member of the corporate leadership team, Mukherjee was earlier the vice president and head
of operations, eastern region.
Mr. S.V. Krishnan is head Human Resources at Satyam Computer Services. Mr Krishnan led
large business teams and was heading the GE business relationship for Satyam.
Mr. Hari T (HR head eralier) is leading Global Marketing and Communications at Satyam. Mr
Hari T helped the company grow multi-fold over the last 9 years as HR Head.
Pari Sadasivan made a non-linear move taking over as V-P, HR, at IBM India after 20 years of
long career in operations.
Rajiv Dube, CEO, Rallis India, moved to Mahindra & Mahindra as head of HR.
Shrikant Gupte, ex-CEO, Modi Lotteries, and ex-head of personal care in Marico, joined as
group head of HR at Nicholas Piramal.
G Krishnamurthy was a business development executive in L&T before joining as EVP, HR,
in the same company.
Ramesh Samtani was operations director before heading HR.
Rakesh Pandey, Marico’s previous head of HR, too came from operations background.
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4. V. Chandramouli is Director (HR & Strategy) at Cadbury India. HR was earlier an
independent function. Now it is integrated with corporate strategy.
Today, HR head in a company need not be a specialist. Instead, he could be a talent from line
function, such as finance or marketing. Having a perspective on the clients and the business
units helps in reorienting the HR needs within the organization and aligning them with the
market needs. The reverse is also happening. HR executives are taking up other assignments.
Many companies differentiate between operational and strategic HR. While the operational
aspect of HR is being handled by traditional HR executives, the strategic part is being given a
business dimension by introduction of people from non-HR streams. In some companies,
traditional HR activities are outsourced and strategic activities are performed by HR executives.
Old Myths about HR
1. People go into HR because they like people.
2. Anyone can do HR.
3. HR deals with the soft side of a business and is therefore not accountable.
4. HR focuses on costs, which must be controlled.
5. HR's job is to be policy police and the health-and-happiness patrol.
6. HR is full of fads.
7. HR is staffed by nice people.
8. HR is HR's job.
New Realities about HR
1. HR departments are not designed to provide corporate social therapy.
2. HR professionals must master both theory and practice.
3. The impact of HR practices on business results can and must be measured.
4. HR professionals help not just reduce cost but add value.
5. HR professionals must create the practices that make employees more competitive, not just
more comfortable.
6. HR professionals must see their current work as part of an evolutionary chain
7. At times, HR practices should force vigorous debates. HR professionals should be
confrontative and challenging as well as supportive.
8. HR professionals should join other managers in championing HR issues.
The HR function traditionally has spent more time professing than being professional. It is
time to talk less and do more; time to add value, not write value statements; time to build
competitive, not comfortable, organizations; time to be proactive, not reactive. It is time to
perform, not preach.
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5. EVOLUTION OF SHRM
Exhibit 1: Paradigm Shift in People Management
Period Era Workforce Status Activity End Result
1900-20 Industrialization Bonded PA Hiring & Firing Birth of Products
1920-40 Trade Unionism Blue Collar PM Compensation & Mass Production
Training
1940-60 Corporatization White Collar I & HR Labour-Mgmt. Mass Marketing
Issues
1960-80 Rise of MNCs Professional HRM Human values Customization
1980-2K IT Revolution Knowledge HRD Competency- Mass
Worker building Customization
2K Borderless World Intellectual SHRM Integration Customerization
onwards Asset
Compiled for Class Discussion: FTA
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6. Exhibit 2:Traditional Vs. Strategic HRM
Traditional HRM Strategic HRM
Beliefs Conformity Can-do outlook
Guidelines Contracts & rules Vision/Mission
Objectives Organizational interest Organization & Individual interest
Scope Personnel Department General Managers
Methodology Technical, specialist Professional, managerial
Approach Segregated, staff function Systems approach
Functions Traditional, administrative Modern, developmental
Nature Short-term, constrained Evolving strategic role
Thrust Monitoring Nurturing
Status Implementer, reactive Formulator, proactive
Role Attain goals Design goals
Compiled for Class Discussion: FTA
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7. Exhibit 3: Influence of Different Movements on SHRM
Movement Period Proponents Philosophy Contribution to
PM/HRM
Social Reformer 1790s Robert Owen People’s behaviour is a Better working
function of their treatment conditions, safety
Scientific 1870s Frederick Need for scientific Incentive system,
Management Taylor selection & development manpower planning
of workers
Industrial 1900s Hugo Analysis of jobs in terms Job analysis, selection
Psychology Munsterberg of their mental and techniques, statistical
emotional requirements validity of tests
Human 1920s Elton Mayo Productivity was a Workers participation,
Relations function to the extent of Industrial Democracy
which people worked as a
team.
Behavioural 1940s Rensis Likert Understanding human Job satisfaction,
Science behaviour is central to all motivation, QWL
management problems
Organization 1960s Warren Man has complex and Change management,
Development Bennis shifting needs which team building
require a humanistic
organization
Corporate 1980s Tom Peters & Excellent companies are Shared values, corporate
Culture Waterman people oriented and image, mission/vision
emphasize mutuality
Core 1990s Prahlad & Winning will spring from Strategic HR, vertical
Competence Hamel human capabilities and and horizontal fit
competencies
Compiled for Class Discussion: FTA
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8. Models of SHRM
The Michigan Model
Michigan model of HRM has originated from the writings of C. Fombrun, Noel Tichy and M.A. Devanna, who
discussed it in a detailed fashion in their book titled Strategic Human Resource Management, published in 1984.
The model of Fomburn et.al. is also called as 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. It is divided into two parts: first which shows HR-strategy integration and
second which depicts the HR cycle. The assumption that HRM is derived from corporate and business level
strategy leads to the matching model, according to which organizational effectiveness is achieved by ensuring a
tight fit between corporate / business strategy and HRM strategy.
The model provides a simple framework to depict how HRM policies are derived from mission and strategy of the
organization, which is in turn influenced by external factors. The second part of the model to show how HR
functions like selection, appraisal, development and reward can be mutually geared to produce the required type
of employee performance. It basically talks of the concept of the one-way fit between HRM and business strategy
by prescribing design of HRM policies in light of strategy.
The Michigan model has a harder, less humanistic touch, holding that employees are resources in the same way as
any other business resource. They must be obtained (i) as cheaply as possible, (ii) used sparingly and (iii)
developed and exploited as much as possible. From this point of view, for example, the object of formal human
resource planning can be just that-largely a factor of production, along with land and capital.The hard model of
HRM emphasizes the quantitative, calculative and business strategic aspects of managing the headcount resource
in a rational way as for any other economic factor.
This model stresses upon the crucial importance of the close integration of HR policies, systems and activities
with business strategy. The Michigan theorists highlighted the following as being the most important HR issues to
achieve such a match:
• Selection of the most suitable people to meet business needs.
• Performance in the pursuit of business objectives.
• Appraisal, monitoring performance and providing feedback to the employees.
• Rewards for appropriate performance.
• Development of skills and knowledge required to meet business objectives.
Managerial Implications
The model:
is focused on individual and organizational performance.
based on strategic control, organizational structure, systems for managing people
concentrates on managing human assets to achieve strategic goals.
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9. contributes to human resource performance.
has components such as organization structure, mission and strategy, human resource selection,
performance appraisal, rewards and development.
requires that personnel policies, practices and systems are not only consistent with the business objectives
of the firm but should also have coherence among various sub-systems of HRM.
The Harvard Model
The Harvard Model propounded by Michael Beer, Richard Walton, quinn Mills, P. Lawrence ans Bert Spector in
1984 is another significant model of SHRM. The model recognizes the different stakeholder interests which
impact HRM policy choices, and also lays emphasis on situational or environmental factors, which help shape
human resource strategic choices. According to Beer et al., “Human resource management involves all
management decisions and actions that affect the nature of the relationship between the organization and its
employees -- its human resources. General management make important decisions daily that affect this
relationship”.
The type of HRM policies and practices an organization prefers should be dependent upon its organizational
vision, mission, strategy, goals, and objectives. In quite a few cases, such HR practices shall also be devised and
adopted in tune with external environment of organizations. In other words, HR policies and practices are subject
to be influenced by internal and external environment of organizations. The Model, argues that human resources
policies are to be influenced by two significant considerations:
1. Situational factors. The internal and external environment factors of organizations that include (i) labour
market conditions, (ii) societal values, (iii) business strategies, (iv) technologies, (v) management
philosophies, and (vi) market conditions will constrain the formation of HRM policies.
2. Stakeholders’ interests. The stakeholders influence the short-term HRM policies. They include (i)
management employees, (ii) unions, and (iii) government agencies.
Further, the model classifies HRM policies and practices into four themes as follows:
• HR flows. Recruitment, selection, placement, promotion, appraisal and assessment, promotion,
termination and the like.
• Reward systems. Pay systems, non-monetary recognition schemes and so on.
• Employee influence. Clarification of responsibility, authority, hierarchy and delegation of powers.
• Work systems. Definition of work and alignment of people.
The above HR practices are centered on four C's as described in the following:
Competence of employees: Competence creates a positive attitude towards learning and development and,
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10. thereby, gives employees the versatility in skills and the perspective to take on new roles and jobs as
needed. HRM policies and practices will exist in such a way that they attract, develop and retain
employees with valuable skills and knowledge.
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. HRM policies must
contribute for infusing employee commitment to organization. The commitment will yield two benefits.
Firstly, it will enhance the employee performance and loyalty to his/her work. Secondly, it will enhance
the individual self-respect and worth.
Congruence between the goals of employees and the organization: Higher congruence is a reflection of
policies which bring about a higher coincidence of interest among management, shareholders and
workers, in turn, reducing adversarial relations. There must be congruence between and among various
HRM policies as well as practices in operation
Cost effectiveness of HRM practices: Cost effectiveness means that ‘the organization’s human resource
costs - wages, benefits, and indirect costs such as strikes, turnover, and grievances - have been kept equal
to or less than competitors. HRM policies must be evaluated in terms of wages, benefits, turnover,
absenteeism, strikes, benefits etc
Managerial Implications
The model helps HR managers in charting HR strategy for their organizations. This model offers three significant
insights for practice. Firstly, HRM policies should be defined keeping in view the environmental factors and
stakeholders' concerns. In other words, there must be a good fit between organizational environment and HR
policies. Secondly, such HRM policies and practices must have a goal to achieve employee commitment,
competence development, coherence among themselves and embrace cost effective methods. Thirdly, HRM that
stems from environmental factors and is drawn based on four C's will result in employee and organizational
effectiveness. This is a soft model as it is based on stakeholders' concerns and their commitment to organizational
goals.
The model is different from the Michigan model because it takes into account different sets of interests,
philosophies and assumptions (e.g. employee and union interest) that may be operating and thereby likely to
influence HRM decisions directly. It talks of HRM policy choices leading to favourable HR outcomes thereby
impacting long-term organizational consequences. It talks of the concept of the two-way fit between HRM and
business strategy as it takes into consideration employee interests
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11. THE MICHIGAN MODEL
Political Forces
Economic Forces
Cultural Forces
Strategy
Structure HRM
HRM-Strategy integration
Rewards
Selection Performance
Appraisal
Development
The HR Cycle
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12.
THE HARVARD MODEL
Stakeholders
Shareholders
Management
Government
Employees
Suppliers
Society
HRM Policy HR Outcomes Goals
Influence Commitment
HR Flow Competence Individual
Rewards Congruence Organizational
Work System Cost saving Societal
Situational factors
Strategy
Philosophy
Values
Law
Market
Technology
Economy
Workforce Profile
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13. Schools of Thought
Two divergent approaches to SHRM can be identified based on the Michigan and Harvard models. Both these
schools/approaches talk about fit between strategy and HRM. They are also called as contingency schools because
they assume that HRM is contingent on organizational strategy. These two approaches are:
Instrumental approaches to SHRM: This approach draws upon the ‘rational-outcome’ model of strategic
management to view HRM as something that is driven by and driven directly from corporate, divisional or
business level strategy, and geared almost exclusively to enhancing competitive advantage. Instrumental
approaches place the emphasis firmly on human ‘resource’ management. They basically talk of the concept of the
one-way fit between HRM and business strategy by prescribing design of HRM policies in light of strategy. The
Michigan model of HRM is an example of this approach. This is referred to as the ‘hard’ version of HRM.
Thus, taken from this perspective, HRM is concerned with the integration of human resource issues into business
planning. All decisions about the acquisition, processing and management of human resources must, like any
other organizational input, be tailored to increase or restore competitive advantage. The key question must be:
'What HRM strategy will maximize competitive advantage, optimize control, and minimize unit and labor
replacement costs'. According to this approach, all issues associated with the management of human resources
should be derived issues.
Question marks have been raised over the model due to its simplistic response to organizational strategy. The
question what if it is not possible to produce a human resource response that enables the required employee
behavior and performance is not addressed. This model has also been criticized because of its dependence on a
rational strategy formulation approach and because of the nature of the one-way relationship with organizational
strategy. There is the charge that it tends to be overly rationalistic, that strategy is assumed to be formulated in
advance of action and then unproblematically implemented. It fails to perceive the potential for a reciprocal
relationship between HR strategy and business strategy. The theory seems to ask too little of HRM. Surely, any
chief executive with long-term vision would want to use HRM not just to woodenly implement a preconceived
business strategy, but to create a climate in which valuable strategizing occurs.
It encourages a narrowness of focus. It concentrated on four 'generic' functions: selection, reward, appraisal and
development. While these undeniably have a central role, a strong case can also be made for the inclusion of other
dimensions such as welfare, equal opportunities, employee involvement and industrial relations.
Finally, there is the claim of excessive ‘unitarism’. The so-called ‘unitary frame of reference’ describes an
approach towards the management of people which regards the work organization as a harmonious unit
characterized by a common purpose within which managerial authority is taken to be legitimate. Any challenge to
this authority (such as trade unionism) is viewed as fundamentally destructive. From this perspective, interests
and concerns of employees are frequently ‘written-out’ of the equation, it being taken for granted that what top
management considers best for the organization will automatically or ultimately be best for the workforce.
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14. Thus, from this viewpoint: HRM appears as something that is ‘done to’ passive human resources rather than
something that is ‘done with’ active human beings. In many respects, Humanistic variants off HRM can be seen
as responses to these potential difficulties.
Humanistic approaches to SHRM: This approach utilizes the 'process' theory to emphasize the reciprocal nature
of the relationship between strategic management and HRM and the latter's role in ensuring that competitive
advantage is achieved through people, but not necessarily at their expense. These approaches are closely
associated with what has become known as the ‘Harvard School’ of HRM. As the humanistic label implies, the
emphasis is on the ‘soft’ aspects of HRM associated with organizational culture and employee commitment and,
as such, its orientation is broader and less rigidly ‘functional’. The emphasis is on ‘human’ resource management.
The Harvard Model recognizes the different stakeholder interests which impact on employee behavior and
performance, and also gives greater emphasis to factors in the environment, which will help to shape human
resource strategic choices identified in the ‘situational factors’ box. The model has potential for international or
other comparative analysis, as it takes into account different sets of philosophies and assumptions that may be
operating. Humanistic approaches draw explicitly on a process model of strategic decision-making which
emphasizes the emergent, political and frequently non-rational nature of this process. This leads to a less
prescriptive and more people-centered approach than that found in Instrumental orientations and a more
realistically pluralist view of employment relations.
INSTRUMENTAL APPROACH HUMANISTIC APPROACH
Michigan Model Drawn from Harvard Model
Hard version
Soft version
Emphasis on Human ‘resource’ Emphasis on ‘Human’ resource
Rational- outcome model Process model
Organizational goals Organizational & individual goals
HRM to be driven by SM HRM to drive and be driven by SM
One-way link Two-way link
Reactive Proactive
Quantitative and calculative Qualitative and intuitive
HRM is things ‘done to’ HR HRM is things ‘done with’ HR
Unitarist Pluralist
HR as implementer HR as formulator & implementer
While the above two schools fall under the Best Fit schools of thought, or contingency schools of thought
(because here HR is contingent on strategy) there is another broad school of thought viz. Best Practice school.
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15. The Best Practice School
The Best Practice school is also called as the Universalistic perspective. It is the simplest SHRM model. It posits
that some HR practices are universally better and result in improved organizational performance. Research
evidence is there suggesting that certain HR practices have a positive effect on performance. The best practices
approach advocates universal HR practices, i.e. they have an effect on business performance regardless of the
context in which they are applied.
The most influential best practice set is associated with the 7 practices identified by Pfeffer (1994) viz.
employment security, selective hiring, self-managed team, pay contingent on company performance, extensive
training, reduction of status differences and sharing information. Osterman (1994) included practices such as
teams, job rotation, quality circles. This perspective emphasizes employee empowerment, recognition,
information-sharing, team-building, socialization, human values, communication, partnership, collaboration,
innovation and these are found to be positively linked with firm performance. Best practices were found to be
highly correlated to customers’ ratings of service quality. Likewise, employee empowerment and communication
practices enhanced employee trust.
Criticisms: The universal perspective is not without its critics. Organizations that do not adopt best HR practices
can also generate greater returns. The universal school does not address the role of strategy as a contingency.
Findings suggest that the strategy-HR interaction accounts for more variation in firm performance than the main
effect of HR. Another controversy involving this issue is whether there exists a set of ‘best practices’ that are
universally effective across contexts and industries. Several best practices have failed in a number of cultures.
There has been little evidence that provides a definitive prescription as to which HRM practices should be
included in a best practices system. Whether the best practices are applied to all the employees uniformly is not
clear.
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