SHRM: alignment of HR function with business strategy

Citation

Bagga, T. and Srivastava, S. (2014), "SHRM: alignment of HR function with business strategy", Strategic HR Review, Vol. 13 No. 4/5. https://doi.org/10.1108/SHR-03-2014-0023

SHRM: alignment of HR function with business strategy

Article Type: Strategic commentary From: Strategic HR Review, Volume 13, Issue 4/5

Thought leaders share their views on the HR profession and its direction for the future

Teena Bagga and Sanjay Srivastava

SHRM Connotation

Strategic human resource management (SHRM) is, indeed, one of the most momentous concepts in the field of business and management today. The idea of SHRM is to promote high performance workplaces and human capital management. SHRM can be defined as the linking of human resources (HR) with organisations’ strategic goals and objectives so as to improve business performance and develop organisational culture that nurture innovation, flexibility and competitive advantage. In an organisation, SHRM means accepting and involving the HR function as a strategic partner in the formulation and implementation of the company’s strategies through HR activities such as recruiting, selecting, training and rewarding personnel. It basically centers on HR programs with long-term objectives i.e. instead of focusing just on internal HR issues, the major focus is on addressing and solving problems that affect people management programs in the long run. Therefore, the primary goal of strategic HR is to increase employee productivity and to identify key HR areas where strategies can be implemented in the long run to improve the overall employee motivation along with productivity. Strategic orientation of human resource management (HRM) is important for all organisations irrespective of its size and domain. It simply requires the alignment of every HR function with business strategy. It establishes relationship between HRM and strategic management of the organization and facilitates the HRM to change its image as a “cost center” to that of a “strategic business partner”. Thus, the SHRM can be defined as the organisations action plan to align HRM with strategic business objectives so that the competitive advantage can be achieved through its skilled, committed and well-motivated workforce. This can only be possible if every HR function is strategically aligned.

Strategic human resource planning

Human resource planning (HRP) is a process of analyzing and identifying the need for and availability of HR so that the organisation can meet its objectives. The need for HRP is to reduce the significant lead time between recognition of job requirement and getting a qualified person to fill that need. This means HR is required to have an idea of the job market and how it can match to hiring needs as no organization can meet its goals without recruiting talented workers. Hiring, indeed, is an important aspect of HRP, as it provides the doorway for bringing in new employees and choosing individuals suited to the company’s culture and requirement. During hiring, the HR department looks for an applicant who specifically fits the job criteria or someone who is the most versatile individual. However, today HRP is viewed as a strategic operational process and its focus has shifted from traditional Hiring and Staffing to towards forecasting and succession planning that can handle different contingencies which intern impacts the success of business operations. Effective HRP can reduce turnover by keeping employees apprised of their career opportunities within the company. The success of HRP depends on how meticulously the HR department can integrate effective HRP with the organization’s business planning process. Strategic human resource planning (SHRP) is based on close working relationships between HR department and line managers. SHRM can be defined as a deliberate attempt of HR deployment to empower the organization to meet organizational goals, objectives and consistencies. Succession planning plays an important role in strategic alignment if HRP. Through succession planning organisations recruit skilled employees, develop their knowledge, skills, and abilities further, and prepare them for advancement or promotion into ever more challenging roles. This process ensures that employees are constantly developed fill each needed role. So, that a talent pipeline is maintained.

Strategic recruitment and selection

The core responsibility of recruitment and selection processes is “identifying the right pool of talent for establishing the right candidates”. Earlier, recruitment and selection was considered as traditional function with standard approach where the focus was on person–job fit. However, now, organisations are aiming at person–organisation fit and, therefore, applicants are selected against organizational characteristics rather than job-specific criteria. Today, choosing the correct employee is, indeed, essential to the development an effective SHRM system.

Strategic recruitment and selection (SR&S) can be defined as strategic integration of recruitment and selection with long-term business objectives so that strategic demands of the organisations can be translated into an appropriate recruitment and selection specification. In this, the alignment of candidate’s objective and business’s objective has become must. However, not all the job positions in the company are strategic and are not critical for the business operation. The strategic recruitment is focused only on the key job positions in the organization. It is focused on the hiring of the job positions needed for the accelerated growth of the business. The strategic recruitment can be a separate process from the usual recruitment process for the mass job positions.

Strategic training and development

Increasingly high performing organizations today are recognising the need to use best training and development practices to enhance their competitive advantage. Training and development is an essential element of every business if the value and potential of its people is to be harnessed and grown. By definition, training and development refers to the process to obtaining or transferring knowledge, skills and abilities needed to carry out a specific activity or task. Strategic positioning of training and development directly promotes organizational business goals and objectives. Key business challenges require that organisation thoughtfully gauge their market position and determine the talent, skills and knowledge to be successful. By adopting a strategic approach to training and development rather than an unplanned and ad hoc one, training and development initiatives become more targeted, measurable and effective. The strategic training and development (ST&D) is all about identifying, designing and delivering training programmes to employees to make them capable of delivering in accordance with business strategy. In addition, the evaluation of the outcomes to check the effectiveness of the training programme based on planning to determine whether the training was effective to its contribution to the business strategy.

Strategic performance management

Traditional performance management systems often fail to deliver desired business objectives because communications from the top are not always clearly understood further down the line, leading to a mismatch between corporate strategy and how it is translated into targets at a team or individual level. Then, if the business goals and strategy and the employee motivation and culture are not in harmony, results certainly suffer. This missing link can be complemented by the strategic performance management (SPM) approach. Top management must address how they actually want to manage performance? What targets must be met and by when? And how do they want managers and employees to work to achieve them? It is important not only to identify HR competencies in accordance with the business needs and develop selection and development practices to secure those competencies but also to evolve and implement a performance evaluation plan that links the performance of the employees to the strategic goals. It is certainly essential to have strategically linked compensation system to improve firm performance and to retain employees with required competencies. SPM creates this link between the strategy and culture of an organization and its ability to manage employees’ performance to have direct impact on business performance. SPM is actually about strategy implementation to deliver value by delivering the desired outcomes in accordance with business strategy. SPM link the individual’s objectives and performance management, driving the skill and capability requirements and ensure its alignment to the core values of the organisation.

Strategic compensation and reward management

The main objective of compensation policy is to give the right rewards for employee performances, their skills, competencies, their knowledge and experience to attract and retain them. It is again certainly an important motivator to reward the employees for their market worth and also for achievement of the desired organisational results. However, the traditional compensation and reward system alone cannot ensure the fulfilment of the business objectives. Strategic compensation and reward management (SCRM) facilitate the alignment of compensation and reward policy with business, which can be achieved by taking a data-driven approach so that the pay and benefits are allocated to only those positions and workers that produce the greatest return. One of the healthier ways to motivate employees and reward the stellar performers is to have variable pay rewards system based upon the individual and team performance to their contribution towards the achievement of organisations business objectives.

About the authors

Teena Bagga is an Assistant Professor and Sanjay Srivastava are both based at Amity Business School, Amity University, Noida, Uttar Pradesh, India. Teena Bagga can be contacted at: mailto:tbagga@amity.edu