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Minhaj University Lahore






Human resource management (HRM) is the strategic and rational approach to

the management of an organization's most valued assets - the people
working there who individually and collectively contribute to the achievement
of the objectives of the business. Many HR professionals see the HR function
as a separate entity, and are not involved in finding business solutions. For
example, HR planning often takes places separately from the overall strategic
planning process and only at set intervals. (e.g.,annually) Additionally, HR
planning is done as a means of convincing top management to allocate
sufficient resources for HR rather than to enhance the organizational
performance process. However, Human Resources Strategy is aligning all of
the people in the business sphere towards business success. HR professionals
should integrate their management of administrative functions as the manner
in which they gain insight, of how to develop business tactics that enhances
their competitive advantage

HRM-type themes, including 'human capital theory' and 'human asset

accounting', can be found in the literature from the 1970s. However, the
modern view of human resource management first gained prominence in
1981 with its introduction on the prestigious MBA course at Harvard Business
School. Simultaneously, other interpretations were being developed in
Michigan and New York.

Sparrow and Hiltrop (1994) picked out four main approaches from this period:

• The Michigan and New York Schools: strategic matching theories

• The Harvard school: a multiple stakeholders theory

• The Warwick School: a political and change process theory

• The Schuler School: a behavioural transformation theory

D I F F E R E N T I N T E R PR E T A T I O N S O F H R M .

The Harvard interpretation sees employees as resources. However, they are

viewed as being fundamentally different from other resources - they cannot
be managed in the same way. The stress is on people as human resources.

The Harvard Map or model outlines four HR policy areas:

• Human resource flows - recruitment, selection, placement, promotion,

appraisal and assessment, promtion, termination, etc.

• Reward systems - pay systems, motivation, etc.

• Employee influence - delegated levels of authority, responsibility,


• Work systems - definition/design of work and alignment of people.

Which in turn lead to the 'four C's' or HR policies that have to be achieved:

• Commitment

• Congruence

• Competence

• Cost effectiveness


A different view is associated with the Michigan Business School. The

Michigan model has a harder, less humanistic edge, holding that employees
are resources in the same way as any other business resource. They must be:

• obtained as cheaply as possible

• used sparingly

• developed and exploited as much as possible

Sparrow and Hiltrop (1994), pointing out that this is a 'matching' model of
strategic HRM originally outlined by Tichy, Fombrun and Devanna (1982),
state that:

"The philosophy does not limit itself to direct employees of an organization.

Therefore humans or people - as opposed to just employees - need to be
managed in a way that is consistent with broad organizational requirements
such as quality or efficiency. Personnel policies and organization structures
have to be managed in a way that is congruent with organizational strategy
and organizational effectiveness depends on there being a tight 'fit' between
human resource and business strategies. HRM strategies are all about
making business strategies work and so emphasis is placed on how to best
match and develop 'appropriate' HRM systems."
The Michigan theorists highlighted the following as being the most important
HR issues to achieve such a match:

• Selection of the most suitable people to meet business needs

• Performance in the pursuit of business objectives

• Appraisal, monitoring performance and providing feedback to the

organization and its employees

• Rewards for appropriate performance

• Development of the skills and knowledge required to meet business


The New York variation on the matching model, outlined by Schuler and
Jackson (1987), looked at Michael Porter's generic competitive strategies
(quality enhancement, innovation and cost leadership or reduction) and
developed a set of 'needed role behaviours' for each strategy which,
according to Sparrow and Hiltrop (1994):

"varied across a number of dimensions and then (they) stipulated a set of

hypotheses about the personnel and industrial relations practices that were
needed. They identified the most important HRM practices about which
strategic decisions had to be made and for each practice noted the
dichotomous but logical alternatives that could be applied. HRM could be
seen as a menu of strategic choices to be made by HR executives intended to
promote the most effective role behaviours that are consistent with the
organization strategy and are aligned with each other."

Schuler and Jackson (1987) listed these choices under a number of

categories, e.g.

Planning choices: Informal ... Formal; Short-term ... Long-term; Explicit ...
Implicit job analysis; Job simplification ... Job enrichment; Low employee
involvement ... High employee involvement

Strategic Human Resource Management (SHRM) is an effort to align human
resource strategy to business strategy. Strategic Human Resources starts
with understanding the goals of the business so that the people decisions are
aligned with the business objectives. Dave Ulrich, a professor of business at
the Ross School of Business, University of Michigan said, “Value is defined by
the receivers of HR work more than by the givers.” HR can provide value and
deliver strategic human resources through practices that attract, retain,
reward and develop top talent. The quality of talent in a business can be a
true differentiator.Becton & Schraeder., (2009)

SHRM is in its evolution phase and has different approaches to understand.

One way is to understand how employees and customers serve business
objectives, understanding the challenges faced by the company's core
customers, and assessing the company's competition, in order to deliver
value to all stakeholders. Strategic Human Resources balances the needs of
employees with the needs of the organization and proactively develops
policies, procedures and makes tailored, as opposed to standardized,
decisions to address these specific needsHammonds, (2007)

HR can ensure observance to the business strategy through the following

measures: i. Determine the appropriate organizational structure, job designs
for the company. ii. Emphasize key attributes of successful candidates during
recruitment and selection. iii. identify key competencies in all performance
management programs. Iv. Ensure that all training and development
programs build company bench strength. V. Design compensation and
rewards systems that reward desired behaviors. Vi .Create employment
branding initiatives that communicate desired customer
experiencesHammonds, (2007)

C. A. Lengnick-Hall & Lengnick-Hall, (1988) have given three approaches

while finding a link between the Strategy and Human Resource Management;
(i). Matching managerial style or personnel activities with strategies, (ii).
forecasting manpower requirements given certain strategic objectives or
environmental conditions, and (iii) presenting means for integrating human
resource management into the overall effort to match strategy and structure.

SHRM can also provide value through the study of organizational

effectiveness and by developing engagement strategies Beer, P.R.Mills, D.Q.,
& Walton, (1984). A headcount report has little value to a team of executives,
however presenting engagement strategies that reduce turnover and reduce
replacement costs can be measured and reported in a defined dollar value
Schuler, R.S, Jackson, & (1987). By tracking engagement strategies and the
change in turnover SHRM can report the cost of the programs and dollars
saved in reduced turnover and this does get the attention of the executive
team. N. Tichy, Fombrun, & Devanna, (1982)

Strategic human resource management is a complex process which is

constantly evolving and being studied and discussed by academics and
commentators. Its definition and relationships with other aspects of business
planning and strategy is not absolute and opinion varies between writers
P.Sparrow & Hiltrop, (1994). Strategic HRM can be regarded as a general
approach to the strategic management of human resources in accordance
with the intentions of the organization on the future direction it wants to take.
It is concerned with longer-term people issues and macro-concerns about
structure, quality, culture, values, commitment and matching resources to
future need. It has been defined as: Strategic human resources is generally
made up of many individual business and human resources-related
strategies, N. M. Tichy, Fombrun, & Devanna, (982). "There may be strategies
to deliver fair and equitable reward, to improve performance or to streamline
structure. However, in themselves these strategies are not strategic HRM.
Strategic HRM is the overall framework which determines the shape and
delivery of the individual strategies." [cipd.co.uk] (MG)


Today it has been recognized that it is not just financial and technological
capital that provide companies with the competitive edge, but people, or
human capital. Without attracting and retaining the right people, in the right
jobs, with the right skills and training, an organization cannot succeed.
Therefore, people have been recognized as companies’ most important asset.
As the Federal Government moves toward a performance-based
management approach, we, too, need to realize the importance of our human
resources. A huge percentage of agencies’ budgets are spent on human
resources -- salaries, benefits, training, work life programs, etc. Nowhere else
do you make that substantial an investment and not measure the return. Not
only do a strategic use of human resources provide the competitive edge, but
several recent studies have confirmed that the quality and innovation of HR
practices impact business results Delery & Doty, (1996). These studies were
able to draw a correlation between increased quality of HR practices and
increased business success, M. Lengnick-Hall, Lengnick-Hall, Andrade, &
Drake, (2009). Among other benefits, HR alignment with mission
accomplishment increases HR’s ability to anticipate its customers’ needs,
increases the agency’s ability to implement strategic business goals, and
provides decision-makers with critical resource allocation information.

Jackson & Schuler, (1995) are of the view that HRM can’t be understood in
isolation, we have to first understood the context. The theoretical Perspective
based in sociology, economics, management and psychology focus on
different aspects of the domain of RM in context. The perspectives which
have guided most of empirical studies are; (i). General System Theory, (ii).
Role Behavior Perspective (iii). Institutional Theory (iv). Resource
Independence Theory (v). Human Capital Theory (vi). Transaction Costs
Theory (vii). Agency Theory (viii). Resource Based Theory .

On the other hand Internal Contexts of the HRM include (i).Technology

(ii).Structure (iii). Size of the organization (iv ). Life Cycle Stages (v). Business
Strategy and the external Contexts of the HRM include (i). Legal, Social and
Political Environments (ii). Unionization (iii). Labour Market Conditions (iv).
Industry Characteristics (v). National Culture . Jackson & Schuler, (1995)

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management: Tests of universalistic, contingency, and configurational
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Figure 01