What’s next: The Role and Future of HR
While the term ‘strategic human resource management’ (SHRM) may sound like an oxymoron to some, many companies recognise that effective HRM is key to their competitiveness. It is widely acknowledged and accepted in business that the sources of sustained competitive advantage lie not only in access to finance or capital, but within the organisation, in people and processes, capable of delivering business strategies such as customer satisfaction or rapid innovation (Bawany, 2004).
HR professionals who have the business acumen to contribute to business strategy at the highest organisational levels are leading the shift in the HR profession from administrators to strategic advisors. Those HR professionals who understand the language of business, who speak in financial terms and who express the value of their work in relation to its impact on the bottom line, make HR a compelling component in strategy discussions. A CEO quickly connects with the head of HR, who can present an investment and return, rather than an expense view of the function.
All too often, human resource (HR) organisations transform themselves in a strategic vacuum, responding to the business’ day-to-day operating needs without a clear view of the big picture. To be effective, HR needs to align its improvement efforts with the company’s business strategy. This requires an HR transformation strategy that is realistic and executable – with accurate plans, schedules, resource requirements and estimated benefits that the company can rely on.
The nature of the linkage between human resource management and business strategy has attracted considerable interest over a long period (Purcell, 1989; Schuler and Jackson, 1997; Gratton, 1999). In this article, we seek to move the debate forward by further developing the nature of HRM’s strategic role and contribution in managing the organisation of today and tomorrow.
There is a considerable debate about what ‘Strategic Human Resource Management’ (SHRM) actually means. There are many definitions, including:
‘A human resource system that is tailored to the demands of the business strategy’ (Miles and Snow 1984).
‘The pattern of planned human resource activities intended to enable an organisation to achieve its goals’ (Wright and McMahan 1992).
Such definitions range from a portrayal of SHRM as a ‘reactive’ management field where human resource management is a tool with which to implement strategy, to a more proactive function in which HR activities can actually create and shape the business strategy.
As the world’s population grows, the global workforce is getting younger, older, and more urbanised.
The range of activities and themes encompassed by SHRM can be seen, for example, in Mabey et al (1998), which looks at the subject from four perspectives:
- The social and economic context of SHRM – including the internal (corporate) and external environments that influence the development and implementation of HR strategies;
- The relationship between SHRM and business performance, emphasising the measurement of performance;
- Management style and the development of new forms of organisation; and
- The relationship between SHRM and the development of organisational capability, including knowledge management.
HR Role as a Strategic Business Partner Revisited
Strategy defines what we are going to do, why we are doing it, and how we will know we are done. What business will we be in? Who are our customers and what are their needs? How will we reach them? What products and services will we offer? How will we compete – by low price or by differentiating in other ways? How will we create value for customers, investors, and employees?
There are many faces of business strategy, ranging from very formal and explicit planning processes to informal, implicit, shared understanding of future direction and priorities. Strategy may emphasise external competitive analysis and positioning or, as is the current emphasis in many companies, the development and leveraging of internal resources and capabilities to gain and sustain a competitive advantage. Strategy may be very aggressive, calling for radical business repositioning and transformation, or it may be relatively passive, adapting to changes in the business environment as they unfold.
Most discussions of our strategic partner role focus on human resource implications of business strategy – aligning people with strategies to enable strategy implementation. We recruit, develop, and retain required talent. We build organisational capabilities. We communicate performance expectations and goals, and we provide rewards for results achieved. We adapt human resource practices to support new business priorities and to facilitate strategic change.
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