The overall strategy of an organization refers to the competitive approach implemented by an organization in the market. The word ‘strategy’ and its usage is derived from a military term, meaning a plan of action that is formulated and designed to achieve a long-term goal or objective. This was then later on integrated into the business scheme of things so that all the organizational units function and operate in a coordinated fashion in support of the overall business strategy. Strategic Human Resource Management (SHRM) is based on the principles of HRM but incorporates the concept of strategy into its process. It is a fairly new concept which has branched out from its parent discipline of Human Resource Management. Strategic HRM stands in contrast to conventional HRM, which confers to an organization at its operational level.
Great vision without great people is irrelevant. SHRM is not merely a subsidiary function of HR department, rather all the managers and executives need to be committed to their involvement as the role of the workforce is vital for a company to gain competitive advantage.
Strategic Human Resource Management requires the following involvement: –
- The Human Resource policies should co-exist both across the policy areas and across the managerial hierarchies
- Line managers and employees should adjust, accept and utilize Human Resource practices as part of their daily work.
- To enhance the financial performance of a firm, a human resource architecture should be formulated and adopted.
- Human resource management should be fully integrated and aligned with the strategic requirement of the firm.
During the mid-1980s, it was the responsibility of the personnel department to hand over applications, provide employees of the organization with insurance enrollment forms and processing payroll. It was the personnel department who played an administrative role back then. Over the course of the next two decades, the role and functioning of the personnel administration became a lot more involved with the overall business goals of the organization. Companies started recruiting human resource leaders who had the distinct capability of managing the department in a much more strategic manner. This is how personnel administration gradually evolved into a business, one which came to be known as human resource management.
Going Beyond the Traditional Human Resource Functions with its Distinct Features
- It provides complete visibility and rich monitoring insights of all employees through its Business Intelligence (BI) reporting, thereby leveraging the complete potential of Big Data
- It provides organizations with predictive analytics to identify the best performers and fight-off any imminent risks, allowing HR professionals a much more proactive approach to talent management.
- It helps in simplifying the payroll structure with its Smart Tax Search that sorts complex tax codes automatically.
Compensation and Benefits
The compensation and benefits structure of an employer partially determines the company’s business reputation and status within the industry. Additionally, the decision HR managers make, concerning pay scales, compensation and employee benefits can dramatically influence employee satisfaction, as well as the capability of the organization to recruit skilled professionals. HR managers need to consider a host of factors including labor market situation, shortage of workforce, budgetary constraints and job evaluation, before formulating a strategic plan to ensure pay and benefits. Another strategy of HRM includes weighing an employer’s choices between satisfying its workforce and pleasing the stakeholders at the helm of the company.
Effectiveness of Human Resource
SHRM teaches Human Resource professionals on how they can streamline the HR systems and processes of the organization. HR management can access insightful guides that explain how to strengthen employee solidarity by providing them mentoring guides and company activities, encouraging recruitment referrals, and designing individual teams. SHRM enables HR professionals to incorporate job expectations and organizational principles into the employee recruitment process. Thus, Strategic Human Resource Management helps in improving the efficiency of the Human Resource department through its valuable insights. Incorporating these strategies are of immense importance for cost conscious companies. Benefits account for 30% of the total overall benefits for the employees, in which health insurance accounts for the largest costs, paid leave, savings and retirement
Strengthening the relationship between an employee and his/her employer is a critical area of focus for the HR department. Through SHRM, Employee relations could be boosted by influencing each and every discipline, including benefits, compensation, salaries, security, training and employee development. Implementing an on-premise investigation and imposing a fair employment process, are the two key components of an employee relations program and this becomes far less sophisticated with the incorporation of SHRM.
Reaping the Future Potential of SHRM
Strategic Human Resource Management enlightens organizations with a newly formulated plan and consistent work framework, in accordance with their business goals, needs, and strategies. Whether it be employee management, employee training and development, performance monitoring or accomplishing company goals, SHRM influences organizations in various aspects to lead them towards achieving business success. Primarily, a strategic human resource manager identifies the key HR areas where the already formulated strategies can be implemented in the future, to enhance the overall productivity and motivation of an employee. With changing skill set requirements, advancing technologies, workforce diversity and globalization implications, it is imperative for organizations to realize the potential of Strategic HRM and incorporate the same into their Human Resource department.