Alignment of HR practices with organizational strategies.

AuthorRao, G. Venkat
PositionHuman resource


Human resource management is a varied subject and interlinked with internal and external dynamics. Human resource management as a profession has gathered enough material and faced changes to meet the strategic requirements (Sparrow & Pettrigew, 1990). Human resources management cannot be viewed in isolation and has to be systematically assessed with organizational goals. The role of a HR manager is to be a strategic partner (Ulrich, 1998). The strategic requirements are be addressed by the human resources management. The globalization effect has created impacts on workforce demographics, bottom-line, market reach, technological changes, intellectual capital, and the importance of managing human resources (Devanna, Fombrum & Tichy, 1981; Wright & Snell, 1998).

Speaker (2000) views activities of relations, compensation and planning as strategic with high value. Sparrow (1986) postulates strategic human resource management as implementation of practices that generate the behaviors and competencies to gain its strategic goals. The welfare management has graduated to strategic human resource management, and the concept has originated from resource based view. Strategic human resource management provides people oriented solutions to business problems.

Organizational & HRM Strategies

Organizational strategy is a detailed assessment from which it derives its evolution and the objectives of existence. The strategy spells out the direction of the business. The corporate strategy is that strategy made at corporate level to create competitive advantage in the marketplace. Evaluation of the competitive implications of broad trends, analysis of competitors, identification of growth opportunities and creation of successful brands are involved in the corporate strategy. Porter's (1980) corporate strategies are growth, stabilization and retrenchment. Growth is the expansion, development and creation of new assets and business. The business through consolidation acquires stabilization and retrenchment strategy involves rightsizing the business. Porter (1980) clarifies business strategy as planned deployment of resources and creation of an environment to achieve stated objectives. The business strategy is the action plan which designs, executes and evaluates the course to attain the stated objectives. Patra (2011) clarifies that business strategy is the purpose, goals, objectives and plans to attain the business goals. Therefore the term is to be understood in the perspective of business environment.

Porter (1980) classifies business strategies as generic and competitive strategies. The cost leadership strategy focuses on either low cost or high cost premium market. The strategy derives direction from the strategic intents; the sources for these intents are vision, mission and organization objectives. The vision is a statement of the future of the organization that is compelling and driving force, mission is more articulate, measurable, written and focused over time. The objectives are framed with above intentions. The primary objective of HRM may be categorized into four objectives societal, organizational, functional and personal. The societal objectives refer to legal compliance, benefits, union-management relations; organizational objectives are categorized as human resource planning, employee relations, selection, training and development, appraisal, placement, assessment; the functional objectives may be appraisal, placement, assessment; and the personal objectives are training and development, appraisal, placement, assessment. HRM is strategic by its very nature and all its elements have strategic linkages (Wright & McMahan, 1992).The core competencies refer to those unique qualities of the human resources that determine the organizations competitive advantage. The core values are the standards of morality for which the organization stands.

The HRM practices are procurement, development, compensation, integration and maintenance (Edwin Fillipo, 1980). Harvard Business Review model defines practices as HR flow, work flow and reward flow. HRM practice refers to organizational activities directed at managing the pool of human resources and ensuring that the resources are employed towards the fulfillment of the organizational goals. The contribution of HRM to organization strategy is best achieved by having the best fit. This strategic fit aims at utilization of human resources to achieve organizational goals. Salaman Graeme (2000) view fit as planned deployment of human resources and its activities. This fit refers to two kinds, horizontal fit and vertical fit. Horizontal fit is the alignment of HRM practices and vertical fit refers to the alignment of these practices with the management strategy. Porter (1980) clarifies that these practices and alignment brings organizational excellence.

The determinants of horizontal fit and vertical fit may be classified as:

* HR function factors: HR policy, option, investment and budget.

* Capability and ability factors: HR manager's capability, top manager's ability and support, employee's knowledge and skills.

* Firm level factors: nature of strategy, values and culture.

The approaches to integration of strategies may be grouped into three types': contingency approach, best practice approach and bundled approach (Salaman Graeme, 2000). Contingency approach is based on situational variables namely decision, espoused values and situation. The best practice approach relies on such practices which are universal, proved as the best and on application provides comparatively superior performance. The bundling approach refers to combination of best practices and contingency practices as per the requirement. Each of the HR practices operates as complementary or supplementary to each other. The empirical studies by Huselid and Becker (1997) have established relationship between financial returns, human resource management (HRM) system, operational excellence and alignment with business strategic goals. Further, perceptual performance is high when HR strategies are aligned with organizational strategies (Youndt, Snell, Dean, & Lepak, 1996). Smith (1982) has examined the HR practices followed at different stages of organizational growth and Schuler and Jackson (1987) have classified generic strategies of HR practices as dynamic growth, extract growth and turnaround strategy. Sumantra Ghoshal and Christopher Bartlett (1997) emphasize on McKinsey's 7-S framework and the need for the alignment of seven organizational variables; superordinate goals, strategy, structure, systems, staff, skills, and style. Core...

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