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The Role of Strategic Management Related to SHRM

Many view SHRM as largely dependent on strategic management. This contingency perspective maintains that particular sets of HR practices are likely to yield better performance if they are matched with specific objectives, conditions, and strategic interests.6 It thus makes sense to look at some of the current perspectives in strategic management and their implications for SHRM. One commonly held perspective considers the firm's internal characteristics. The resource-based view (RBV)7 is based on the notion that a firm's continued success is largely a function of its internal and unique competitive resources.8 In contrast, past perspectives tended to focus externally, toward industry structure and competitive position in the industry. These perspectives have not, however, been considered by HR professionals with respect to SHRM. We maintain that they should be since HRM assists the business strategy, which is driven by a particular strategic perspective. We propose that if the CEO or the top management team (TMT) is oriented toward one or other of these perspectives in defining how their company will outperform competitors, it will affect not only the business strategy but also the overall as well as functional HR strategies.

HR Strategy and Vertical Alignment

We define SHRM as a process and HR strategy as an intended outcome. The reason we see SHRM as a process is that it is fundamentally the same as strategic management. Strategic management has been defined as a process that deals with the entrepreneurial work of the organization, organizational renewal and growth, and, more particularly, with developing and utilizing the strategy used to guide the organization's operations.9 In strategic management, strategy has two meanings. Strategy is a plan or equivalent—a direction, a guide, or course of action into the future, a path to get from here to there. Strategy is also a pattern or the consistency in behavior over time. The former is intended strategy and the latter is realized strategy.

We define HR strategy as the intended implicit or explicit outcomes created through the process of SHRM, which aligns with the adopted strategic management perspective of the TMT. Hence, this chapter argues that HR strategy can vary across firms but should be aligned with the adopted perspective of the firm. As a result, it is important to present possible HR strategies given different strategic management perspectives. This notion is called vertical fit. Schuler and Jackson claimed that different strategy types (cost reduction, quality improvement, and innovation) require different types of employee role behaviors, and HR practices should be used to ensure those behaviors occur.10 Moreover, Lengnick-Hall and LengnickHall suggested that for human resources to affect strategy there needs to be a fit between an organization's business strategy and its HR strategy.11 Vertical alignment has various levels (e.g., fit between business strategy and HR strategy, or fit between HR strategy and HR practice). However, little attention has been given in the past to the vertical alignment between HR strategy and functional HR strategy in SHRM. This chapter will address this shortcoming by showing the various vertical alignments, such as business strategy, HR strategy, functional HR strategies, and HR practices, as a set of choices.

Horizontal Alignment

The concept of consistency among HR practices is not novel. Increasing interest in HRM "bundles" is a reflection of the value that derives from such consistency HR.12 Consistency can be characterized in at least three different ways.13 First, single-employee consistency reflects the need for different elements of HR policy that bear on a single employee to be consistent with one another. Second, among-employee consistency stresses that if employee A is treated in a particular manner, a similarly situated employee B should be treated the same way. Finally, temporal consistency means that the HRM philosophy and practices of the organization should demonstrate some degree of temporal continuity. Most people's conception of consistency is of the first type, which is known as horizontal alignment.

There are at least four good reasons for having horizontal alignment. First, there are obvious technical benefits of horizontal alignment. For example, if a firm invests significantly in its recruitment processes, it does not need to have an extensive training system. Since the two can accomplish the same thing, doing both can create redundancy. Second, horizontal alignment has implications for perception and cognition. HRM is directly related to the contract between an employer and its employees.14 Many believe that HR practices contribute to and shape employee beliefs regarding the psychological contract they have with their employer. Multiple HR practices should thus be aligned in the messages they send and thus form a contract that not only works but can be sustained. Third, HR practices have social implications. For example, Asian companies might want to set up plants in small towns and rural locations in the United States because in these environments the strong group ethic and family atmosphere sought at work may mirror workers' roles outside of the workplace. Fourth, consistent HR practices can shape recruitment, selection, and retention. A company hopes that prospective employees understand the nature of employment that may be offered because a mismatched worker may leave. Reinforcing messages through consistent HR practices allows prospective employees to understand expected behaviors once they have been employed.

In summary, strategic management perspective, HR strategy and vertical alignment, and the horizontal alignment of HR practices are all key drivers of SHRM in organizations. In the next section, we introduce a framework that CEOs or TMTs can use to select specific strategic perspectives for their companies.

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