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Strategic HRM: Building the Bridge between HR and Business Strategies

Hwanwoo Lee and Steve Werner

The importance of strategic human resource management (SHRM), which emphasizes the role of human resource management (HRM) in facilitating business strategies and achieving organizational goals, has increased steadily over the last two decades. Although the concept of SHRM has gained considerable traction among human resource (HR) professionals, there is little guidance available on different HR strategies and when they may be best given the business strategy being adopted. It is easy to say that a company should have an HR strategy that is aligned with business strategy to achieve competitive advantage. However, specifying action plans that link HR strategies and practices with business strategies has been more difficult.

SHRM integrates corporate strategy and human resource management,1 thus drawing business strategy and strategic perspectives into HRM is not a novel concept. Nonetheless, although numerous authors have emphasized the need to integrate business strategy and HRM,2 it is surprising to see a persistent gap between business strategy and HRM in practice. Many believe that an organization's business strategy is the major determinant of its HR strategy.3 Indeed, HR strategy is traditionally seen as being the most important link between business strategy and HRM in the SHRM research. However, there is little literature that dissects HR strategy, functional HR strategies, and HR practices, and integrates them with business strategy to create a set of choices that can guide managers.

Providing a bird's-eye view of business strategy and HRM to HR professionals is a way of facilitating evidence-based management (EBM).4 The goal of this chapter is to use EBM to provide professionals with a tool for designing HR strategy and implementing a hands-on action plan. Providing HR professionals with versatile and practical guidelines for integrating strategy and HR so they can apply them immediately could have important implications for firms and HR professionals. The chapter begins by briefly exploring the history of SHRM and discussing conceptual issues in SHRM. A framework that maps out different HR strategies and strategic management perspectives is then provided. We then develop an organizing framework for the horizontal alignment of HR functional strategies and vertical alignment of HR strategies and business strategies. The chapter will also specify the HR practices appropriate with each HR functional strategy, providing a blueprint for designing strategic HR sets.

HISTORY OF SHRM

The history of SHRM includes the overcoming of stereotypical HR roles in organizations. Emerging from the function of "welfare secretary" at the turn of the 20th century, personnel management had by the first quarter of the century become the locus of all activities having to do with employee relations.5 With the surge of the human relations movement (1930s-1950s) and the onset of operations research and systems rationalization (1960s-1970s), personnel directors saw their roles expand to include issues such as collective bargaining and management by objectives. Nevertheless, though the roles of the HR directors expanded, HR did not embrace the notion of strategy until the 1970s. By the early 1980s, some researchers viewed the effective management of human resources as the key to ensuring quality and a critical source of competitive advantage. They called for the personnel function to take on a more strategic and business-oriented role. The origin of SHRM viewed aligning HR practices vertically with firm strategies. SHRM also considered the bundling of HR practices in such a way that there was a synergy among them. This was known as horizontal alignment. These two dimensions of alignment moved the HR function from personnel management to SHRM.

 
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