HUMAN RESOURCE MANAGEMENT
New CIPD factsheet on strategic HRM
Everyone is talking about strategy and the need for HR to be more strategic but what does this mean in practice? To help answer this question the Chartered Institute of Personnel and Development has recently updated one of its factsheets examining strategic human resource management (HRM) providing a useful insight into this complex subject.
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The report examines the subject from a more academic slant compared to many of the institute’s other factsheets, discussing the various definitions, interpretations and relationships with similar approaches. In addition, it provides a more concrete viewpoint by presenting the CIPD’s own opinion on the subject.
More specifically, it:
provides a definition of what is meant by the term “strategic human resource strategy”
examines the difference between strategic HRM and HR strategy
looks at relationships between strategic HRM, business strategy and human capital management
considers the impact of strategic HRM on business performance.
No agreed definition
An important point the factsheet makes about strategic human resource management is that its definition and relationships with other aspects of business planning and strategy are not absolute and opinions vary between writers. Nevertheless, the CIPD definition is:
“That it is a general approach to the strategic management of human resources in accordance with the intentions of the organisation on the future direction it wants to take. It is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need”.
It goes on to explain in more detail that it has been defined as:
All those activities affecting the behaviour of individuals in their efforts to formulate and implement the strategic needs of business.
The pattern of planned human resource deployments and activities intended to enable the forms to achieve its goals.
The factsheet also discusses alternative definitions and views, and states that the approach can encompass a number of HR strategies. These may be strategies to deliver fair and equitable reward, to improve performance or to streamline structure, for example. However, it says, in themselves, these strategies are not strategic HRM. Instead, strategic HRM is the overall framework which determines the shape and delivery of the individual strategies.
Strategic HRM and business strategy
The CIPD factsheet argues that firms are increasingly recognising that it is people factors that are the key to business success so they are placing more emphasis on developing their staff. In fact, the intangible value of an organisation which lies in the people it employs is gaining increasing recognition from a growing population now stretching beyond HR specialists to groups such as accountants and investors. This recognition, the factsheet says, is one of the driving factors behind the evaluation and reporting of human capital data and the need for better information to feed into the business strategy formulation process.
The factsheet therefore states that it is too simplistic to say that strategic human resource management stems from the business strategy. Instead, the two must be mutually informative so the way in which people are managed, motivated and deployed, and the availability of skills and knowledge will all help shape the business strategy. As a result, it is now more common to find business strategies which are inextricably linked with and incorporated into strategic HRM, defining the management of all resources within the organisation with each feeding into one another in both directions.
Strategic HRM and human capital management
Also discussed are the differences and similarities between strategic HRM and human capital management (HCM). The factsheet asserts that there are similarities, most notably that both rest on the assumption that people are treated as assets rather than costs and both focus on the importance of adopting an integrated and strategic approach to managing people. Further, both assume that this is the concern of all the stakeholders in an organisation not just the people management function.
Nevertheless, it concludes that the concept of human capital management complements and strengthens the concept of strategic HRM rather than replacing it and outlines the various ways in which it does this. As a result, it states that both HCM and HRM can be regarded as vital components in the process of people management and both form the basis for achieving human capital advantage through a resource-based strategy.
Strategic HRM and business performance
In addition, the factsheet reflects on how strategic HRM relates to business performance, concluding that HR practices alone do not create business performance, rather that they can create “human capital” or a set of individuals who are highly skilled, highly motivated and have the opportunity to participate in organisational life by being given jobs to do.
However, it argues, this will only feed through into higher levels of business performance if these individuals have positive management relationships with their superiors in a supportive environment with strong values. In turn, all these factors will promote “discretionary behaviour”, the willingness of the individual to perform above the minimum or give extra effort. It is this discretionary behaviour that makes the difference to organisational performance.
A final word
The CIPD concludes with its own viewpoint on the subject, stating that:
“It is useful for all organisations to manage their people within a planned and coherent framework which reflects the business strategy. They can ensure that the various aspects of people management are mutually reinforcing in developing the performance and behaviours necessary to achieve business success. There is no single HRM strategy that will deliver success in all situations. Organisations need to define a strategy which is unique to their own situation in terms of context, goals, and the demands of organisational stakeholders.”
Want to know more?
Title: Strategic Human Resource Management: Factsheet, Chartered Institute of Personnel and Development, May 2008.
Availability: To download the factsheet, go to www.cipd.co.uk/onlineinfodocuments/factsheets.htm.
The Chartered Institute of Personnel and Development has more than 130,000 members and is the leading professional institute for those involved in the management and development of people. To find out more visit www.cipd.co.uk.