Strategic Human Resource Management: A General Managerial Approach (2nd Edition)
PrefaceThis book deals with the interaction between strategy and human resources, as approached from a general managerial perspective. This approach has been adopted for its relevancy to managers in general, as opposed to only human resource specialists. Major features of the book include an investment orientation toward human resources and comprehensive discussions of the environment of human resources, strategy formulation, human resource planning, strategy implementation, the performance impact of human resource practices, and human resource evaluation. Extensive examples of applications of strategic human resource management in specific companies are provided throughout the book.This book is designed for use by MBA and Executive MBA students, graduate students in specialized human resource management programs, and other graduate students focusing on administration. The book is also suitable for advanced undergraduate courses focusing on the strategic aspects of human resource management. In keeping with the general managerial perspective, discussions are presented from a practical point of view. The cases at the end of each chapter are designed to stimulate thought and discussion of important strategic issues.The conceptual framework for this book is composed of a mission statement and nine components corresponding to individual chapters that draw from the principles of human-capital theory, strategic management, strategic planning, environmental analysis, human resource planning, strategy implementation, and principles of evaluation. It also incorporates principles of rational and comprehensive strategic planning. The framework begins with an assumption that the company has a mission of obtaining an appropriate rate of return for shareholders while complying with the interests of the company's other stakeholders, including employees and governmental agencies. Assuming such a mission, the framework of this book begins with development of an investment perspective for guiding managerial decisions regarding strategic human resource issues. The investment perspective is consistent with mission statements of economically rational organizations. This perspective provides a rational, financially justifiable basis for analyzing the value of alternative human resource strategies, policies, and practices.A thorough understanding of the investment perspective is critical for human resource executives and managers who wish to play a strategic role in their organizations. As will be discussed in Chapter 1, senior mangers are accustomed to evaluating returns on investments in various endeavors. Human resource executives are being required to provide better justifications for the resources devoted to human resource programs. Just as financial outlays for plant and equipment are evaluated from an investment perspective, expenditures on human resource activities, such as training and development, also should be evaluated in terms of return on investment. Additionally, the investment perspective provides a valuable general managerial framework for evaluating programs, policies, and activities in terms of their ability to enhance and preserve the organization's investment in its human resources.The second and third components of the conceptual framework are the general environment and legal environment of human resource management, respectively. An informed awareness of environmental trends and developments is required before managers can examine intelligently the potential opportunities and threats to which strategies must be directed. Because the environment of human resource management and the broader economic environment have changed so dramatically, a great deal of attention has been devoted to these developments in Chapter 2. In addition to these massive changes, the legal environment of human resources continues to evolve and expand. As will be discussed in Chapter 3, in some respects the legal environment itself has become a source of uncertainty. Although in the past human resource strategists may not have incorporated the legal environment in their conceptual frameworks, further expansions of the law into areas of employer and employee relationships have made it a critical component of strategic analysis. For example, whether an employer chooses to manufacture in the United States or locate production facilities offshore may be highly dependent on trends in the U.S. legal environment.Strategy formulation is the fourth component in the framework. The framework's investment perspective drives the formulation of strategies for dealing with opportunities and threats in the environment. Human resources and human resource management can play major roles in the organization's overall strategy, particularly when human resources are viewed as providing a major competitive advantage. As will be discussed in Chapter 4, some authors define strategic human resource management as the effective application of the organization's human resources to accomplish the organization's overall strategies. Such definitions have only an implementation perspective, while other authors also see strategic human resource management as being integrated with strategy formulation. The latter perspective will be .employed in this book. Human resource strategies are narrower in focus than the domain of strategic human resource management. Human resource strategies define the manner in which the organization's practices, programs, policies, and activities will be aligned to obtain consistency with the organization's overall strategies. Such strategies play an implementation role and are valuable means of obtaining direction, consistency, and coherence in human resource efforts.Human resource planning is the fifth component in the conceptual framework. Through such planning, which is discussed in Chapter 5, organizations prepare to match resources with the requirements needed for implementation of strategies. Human resource planning is positioned after strategy formulation although it can occur before or simultaneously with strategy formulation. Such planning can provide strategic input for strategy formulation when it identifies a competitive advantage deriving from the organization's human resources. Nonetheless, in many organizations, strategy formulation occurs first, and then human resource planning is conducted to either determine the feasibility of the strategy or as a prelude to implementation of the strategy. The planning feedback loop to strategy formulation in Figure P-1 indicates the function's formulation roles of feasibility assessment and identification of competitive advantage.The sixth and seventh components are involved with strategy implementation. These components consist of two broad groups of human resource practices through which human resource strategy is implemented. The first deals with the efficient utilization of human resources, employee shortages, employee surpluses, and special challenges. Included in these broad groups of implementation activities are cross-training and other actions that create flexibility in the utilization of the workforce, strategic recruiting, minority and female recruiting, selection, flexible retirement, redeployment, early retirement, downsizing, layoffs, terminations, and special actions for dealing with dual-career couples. These activities are discussed in Chapter 6. The second broad group, which is discussed in Chapter 7, includes reward systems and development activities. The discussion of reward systems includes performance measurement and several strategically oriented compensation approaches such as skill-based pay, broadbanding, compensation systems, and team-based pay. The discussion of developtment includes training programs, training methods, apprenticeships, and management development programs.The eighth component, which describes the impact of human resource practices on firm performance, is presented in Chapter 8. The discussion reports research results on the question of whether the performance effects of human resource practices and systems are contingent on business strategies and contextual factors.The ninth and final component is human resource evaluation. This component includes general approaches to evaluation and specific applications to various human resource practices and activities. As will be discussed in Chapter 9, in the past organizations did not place much emphasis on evaluating human resource management. However, global competitiveness pressures have created increased needs for justifying the use of resources. As a result, there should be much greater emphasis on evaluation in the human resources area in the future. As noted in Figure P-1, after evaluations are conducted, the results are fed back into the investment component in an iterative manner. The evaluation of human resource programs and activities then becomes an input in the next round of strategic decision making.As the reader will note, numerous examples of human resource practices are provided throughout this book. These examples often involve companies that are exemplary in some aspect of strategic human resource management. Nonetheless, given the dynamic environment in which these companies currently operate, it is acknowledged that over time some of these companies may encounter difficulties. Hopefully, the reader will not discredit the principles for which the examples are offered because of difficulties in other aspects of a company's performance. In addition, in an attempt to provide a more comprehensive treatment of the issues addressed in this book, numerous endnotes have been used to give credit to the sources of the material and to provide sources where the reader may find more information. All endnotes cite references, and none is for supplemental or explanatory purposes. Thus, the reader need not refer to the endnotes except in those cases in which there is interest in learning more about a particular issue.