Why Does HRM Need To Be Strategic?

A Consideration of Attempts to Link

Human Resources & Strategy
Martin Wielemaker, Doug Flint. The Business Review, Cambridge. Hollywood:
Summer 2005. Vol. 3, Iss. 2; pg. 259, 6 pgs

Abstract (Summary)
There is a move in HRM to position itself as strategic, based on the increased importance
of people in gaining competitive advantage according to the Resource Based View of the
firm. However, we argue that even if an organization's human resources are deemed
important, i.e. strategic, that doesn't automatically elevate the HRM-function in an
organization, - embodied by the HR manager - from a supportive to a strategic level. Not
surprisingly, the field of HRM has proposed a number of suggestions and tactics to
capitalize on the proposed new role of human resources in organizations such as the use
of strategy discourse in HR, the use of performance measures, and the use of integrative
tools such as the balanced score card or strategy map. Yet, these tactics still fall far short
of situating the HR manager in the room where strategy is formulated. This leads to the
question whether HRM should focus its efforts on a superior way to make HR strategic or
whether it should accept the support role it currently plays in executing strategy.
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[Headnote]
ABSTRACT
There is a move in HRM to position itself as strategic, based on the increased importance of
people in gaining competitive advantage according to the Resource Based View of the firm.
However, we argue that even if an organization's human resources are deemed important, i.e.
strategic, that doesn't automatically elevate the HRM-function in an organization, - embodied by
the HR manager - from a supportive to a strategic level. Not surprisingly, the field of HRM has
proposed a number of suggestions and tactics to capitalize on the proposed new role of human
resources in organizations such as the use of strategy discourse in HR, the use of performance
measures, and the use of integrative tools such as the balanced score card or strategy map. Yet,
these tactics still fall far short of situating the HR manager in the room where strategy is
formulated. This leads to the question whether HRM should focus its efforts on a superior way to
make HR strategic or whether it should accept the support role it currently plays in executing
strategy.

INTRODUCTION
The field of Human Resource Management (HRM) has recently seen the human
resources that it selects, trains, and retains move from a supportive (Porter, 1996) to a
strategic role (Bartlett and Ghoshal, 2002) in organizations. This occurred because in
Strategic Management sources of competitive advantage were no longer sought in the
external, but in the internal environment of a firm, namely in its resources, particularly its
human ones. Accordingly the field of HRM reconsidered its own role, resulting in the
emergence of a new distinct discipline (Dyer, 1985; Dyer and Holder, 1988; Fisher, 1989;
Schuler and Jackson, 1987) termed Strategic Human Resource Management (SHRM). It
intended to link HRM "with the strategic management process of the organization
(Wright and McMahan: 298)." But, as opposed to much of the SHRM literature (i.e.
Bartlett and Ghoshal, 2002), we argue that it is not clear that a strategic role for human
resources implies that the Human Resource Management function has also become
strategic.
THE STRATEGIC ROLE OF HUMAN RESOURCES & HUMAN RESOURCE
MANAGEMENT
A shift in thinking in Strategic Management about the location of sources of competitive
advantage has put the spot light on human resources as the strategic resource in a firm.
Initially, sources of competitive advantage were sought outside of the firm, i.e. in a
superior positioning of a firm in attractive markets and keeping contenders out (Porter,
1980; Mintzberg, 1990). In this view, termed the positioning school, the role of the
human resources is one of implementation and support (Bartlett and Ghoshal, 2002).
More recently a new school of thought, called the resource-based view of the firm
(Barney, 1986, 1991; Penrose, 1959; Teece, Pisano, and Shuen, 1990; Wernerfelt, 1984),
argued instead that the source of competitive advantage lies within the firm, in
idiosyncratic resources that cannot be imitated by competitors. Because these resources,
capabilities, and competencies "are dependent on people (Bartlett and Ghoshal, 2002:
35)" and in the case of capabilities and competencies located in the minds of people
human resources are deemed valuable (Pfeffer, 1995) if not the "the key strategic
resource (Bartlett and Ghoshal, 2002: 35)." This shift in Strategic Management has
elevated the role of human resources from a supportive to a strategic one (see figure 1).
In light of this elevated status for human resources in the Strategic Management field,
many have reasoned that the HRM function had acquired a new strategic role as well.
Bartlett and Ghoshal (2002) explain that rather than being supportive - by focusing on
recruiting, training, and taking care of benefits - HRM's role became strategic: building
and using human capital to ensure competitive advantage. Consequently, the school of
though that had raised the status of human resources, namely the resource-based view
(RBV) of the firm, was used to legitimize a strategic role for HRM. As Wright, Dunford,
and Snell (2001: 702) put it "though the field of SHRM [Strategic Human Resource
Management - explained below] was not directly born of the resource-based view (RBV),
it has clearly been instrumental to its development." The Arrow T in figure 1 represents
this thinking that a strategic role for HR goes hand-in-hand with a strategic role for HRM.

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Figure 1. The Supportive and Strategic Role of Human Resources and the HRM function

We suggest that a strategic role for HR does not necessarily imply a strategic role for
HRM. The two are not identical but perform different functions in an organization.
Human resources may either support a firm's processes or may constitute strategic
resources that allow the firm to achieve competitive advantage. Such a shift in the status
of human resources is represented by arrow '2'in figure 1. Similarly, the HRM function
may either support a firm's human resources by selecting, training, and retaining them, or
it can theoretically represent an HRM capability that gives the firm a competitive
advantage over others. Such a shift in the status of the HRM function is represented by
arrow '3'in figure 1. Given these two separate dimensions, when human resources become
strategic, the HRM function may very well maintain its supportive role. As such, the
issue of whether HRM is strategic should be considered separately from that of the role
of the human resources.
LEGITIMIZING SHRM
The notion of the HRM function being strategic is embodied in the distinct field (Dyer,
1985; Dyer and Holder, 1988; Fisher, 1989; Schuler and Jackson, 1987) of Strategic
Human Resource Management (SHRM). Rather than being supportive it consists of (1)
"linking [HRM] with the strategic management process of the organization," and (2)
"emphasizes the coordination or congruence among the various human resource
management practices (Wright and McMahan, 298)." In other words, rather than
executing strategy formulated by others, it attempts to be involved in the formulation of
the strategy. These attempts consist amongst others of (1) use of the label 'strategic,' (2)
linking role behaviors to strategy types, (3) linking competency profiles to core
competencies, (4) using HR measures to justify performance contribution, (5) adapting
strategy tools to encompass the HRM function. We argue that these attempts to become
strategic, i.e. "a more strategic resource to senior and line management (Kochan, 1997),"
have to this day not been very successful.
Use of the word 'strategic'
The initial attempts in HRM simply inserted the label 'strategic' in front of their
functional areas of selection, training, appraisal, and rewards (Fombrun, Tichy, Devana,
1984). This resulted in the terms such as 'strategic selection,' 'strategic appraisal,'
'strategic training,' or 'strategic rewards' (Galbraith and Nathanson, 1979). Within the
field itself these attempts were ridiculed (Wright and McMahan, 1992) because there was
no integration between them (Dyer, 1985; Schuler and Jackson, 1987), an essential
feature of strategy. Yet beyond the inappropriate usage of the term 'strategic,' Wright and
McMahan (1992:297) found that the field itself had 'not evolved with great levels of
integration across the various functions.' As such, the need for better integration of the
different functional areas in HRM is still very much alive and necessary before the field
can argue a strategic role.
Linking role behaviors to strategy types
The field has also attempted to link itself with the firm's strategy making process. One
such an attempt has lead to the development of so-called role behaviors in HRM (Schuler
and Jackson, 1987; Schuler and Macmillan, 1984). Firm's can formulate an unlimited
number of strategies. Because of this sheer amount, strategic management has developed
classifications or types of general strategies ranging from Porter's grand and generic
strategies (Porter, 1985), to Miles and Snow's (1978) defender, prospector, and analyzer
strategies. Within the HRM field, these strategy 'types' (Gubman, 1998) have been
translated into sets of appropriate role behaviors that would ensure employee behaviors
fit the desired strategies of the firm (Schuler and Jackson, 1987). For example, based on
Porter's (1985) generic business strategies of 'cost leadership' and 'differentiation,' Arthur
(1992) suggested two HR systems to enable them, one called 'cost reduction' and the
other 'commitment maximizing.' These role behaviors were alternatively called industrial
relations systems (Arthur, 1992), HR systems (Miles and Snow, 1984), and HR strategies
(Wright and Snell, 1991). Although at a conceptual level role behaviors linked to
strategy, they lacked specifics and detail making them less useful. The lack of empirical
work on HR strategies for business types and their effect on performance underscores this
point (Lengnick-Hall and Lengnick-Hall, 1988; Arthur, 1994; Wright and McMahan,
1992).
The mere linkage of role behaviors to strategy types has been considered enough of a
basis to legitimize HRM's strategic role. For example, Snell (1992:292) says, "It provides
a clear explanation for why [HRM] would and should - be linked to strategy; [...] it helps
researchers tie traditional human resource theories like role behavior to the strategic
posture of firms." Yet, although these role behaviors are linked to the strategy of a firm, it
is evident that the HRM function is merely playing a supportive role by executing the
firm's strategy, i.e. by translating the strategy into role behaviors. In no way does the
notion of role behaviors imply that the HRM function is involved in the formulation of
the firm's strategy.
Linking competency profiles to (core) competencies
Another attempt at linking HRM with the firm's strategy making process has been
through so-called competency profiles (McClelland, 1973, 1998; Boyatzis, 1982;
Woodruffe, 1990; Spencer and Spencer, 1993; Antonacopoulou and Fitzgerald, 1996).
Competency profiles originated out of the failure of intelligence tests to predict future job
performance (McClelland, 1973). Instead, the testing of job-relevant competencies was
proposed (McClelland, 1973). Although its assumptions and methodology have been
criticized, particularly harshly by Barret and Depinct (1991), it has brought to the HRM
field the concept of competencies (McClelland, 1973, 1998; Boyatzis, 1982; Spencer and
Spencer, 1993). Although not explicitly stated, competency profiles appear to be more
specific and detailed than role behaviors, thus making them more suitable to the rollout of
strategy. Not surprisingly, competency-based HR systems have become center stage
amongst many firms (Gendron, 1996).
Competency profiles seemed to tie in really well with the notion of competencies as put
forward by the RBV in Strategic Management (Lado and Wilson, 1994). This was even
more so with the concept of core competencies that was part of the RBV (Prahalad and
Hamel, 1990). In the HRM field Lepak and Snell (1999) had proposed that certain
employee groups were more essential than others. Certain job classes with their
accompanying competency profiles were thus more core than others. There seemed a
perfect fit between competency profiles and the RBV. Yet, just as was the case with role
behaviors, a better fit with strategy concepts facilitates the execution of the strategy; it
doesn't imply that the HRM function is now involved in strategy formulation.
That competency profiles have the same problems as role behaviors with respect to their
strategic role is not surprising given that the difference with role behaviors remains
vague. First, there is a lack of proper and consistent definitions (Barret and Depinct,
1991). Some definitions seem to include behavior as part of competencies. For example,
Gendron (1996:3) mentions a definition of competencies as "the set of skills, knowledge,
and behaviors" and Boyatzis (1982: 21) says "it may be a motive, trait, skill, aspect of
one's self-image or social role." Yet others (Wright, Dunford, and Snell, 2001) make a
distinction between knowledge, skills, and abilities versus behaviors. As such, the
difference between role behaviors and competencies is debatable and reminiscent of the
differences in strategic management between activities (Porter, 1996), behaviors
(Leonard-Barton, 1995), capabilities (Stalk, Evans and Schulman, 2001), dynamic
capabilities (Teece, Pisano, and Shuen, 1990), competencies (Hall, 1993), distinctive
competencies (Hitt and Ireland, 1985), and core competencies (Prahalad and Hamel,
1990). As such, the HRM concepts of competency profiles and role behaviors face the
same setbacks when it comes to claiming a 'strategic' role.
Using metrics to justify performance contribution of HRM
The HRM field has also argued its strategic importance by highlighting its contribution to
firm performance (Becker and Huselid, 1998,1999; Ulrich, 1997). This attempt focuses
on creating measures to prove this. In fact, some see the use of measures as the only way
to legitimize the HRM function (Ulrich, 1997), as is so nicely worded by Pfeffer
(1997:359), "without measures, what hope does HR[M] have to be taken seriously in the
senior councils of organizations?" The measurement of HRM practices has focused on a
whole range of issues (Hayton, 2003), such as human resource accounting (Brogden and
Taylor, 1950; Flamholtz, 1985; Flamholz, Searfoss and Coff, 1988; Applebaum and
Hood, 1993; Roslender, 1997), utility analysis (Boudreau, 1991), and human capital
return on investment (Becker, Huselid, and Ulrich, 2001; Cascio, 1999; Fitz-Enz, 2000).
Yet, notwithstanding its wideranging nature, all these metrics are infested with numerous
measurement problems. They tend to be cost focused, causing human resources to
become an expense not worthwhile investing in. Their comprehensiveness renders them
"useless for influencing or directing behavior (Pfeffer, 1997; 362). But most importantly,
as Pfeffer (1997;362) explains, "human resources, as a staff function, has little direct
effect on many of these measures." The mere usage of metrics signals the HRM function
is not strategic because (Pfeffer, 1997:359) "one indicator of a function's power is the
extent to which its role is taken for granted and not assessed using a variety of
micromeasures."
Using strategy discourse in HRM
The above attempts can also be interpreted as attempts at coopting the discourse or
language of strategy. First, the term strategy was coopted. Then the idea of generic
strategies was coopted by linking role behaviors to them. The notion of competencies was
coopted by introducing competency profiles. Core competencies were linked with job
classes. As such, the HR manager became very professional at using the same language
as the strategist. The discourse cooptation involved more than coopting the jargon of
Strategic management. Strategic tools, such as the balanced score card or strategy maps
(Kaplan and Norton, 1996, 2000a, 2004) were also coopted by adapting them to
incorporate the HRM function (Becker, Huselid, and Ulrich, 2001). Yet, although
mastering the discourse of Strategic Management certainly helps in the HRM function
support strategy execution, it again doesn't mean the field is involved in strategy
formulation.
Citing strategic roles of HR Managers
Another attempt to legitimize the SHRM field has been by providing examples of the
how HR Managers were crucial to the strategy formation in a firm (Ulrich, 1997; Becker
and Huselid, 1999). The idea being that if HR managers were indeed crucial then surely
there is a strategic role for HRM. Yet the examples are not solid proof. For example,
Lado and Wilson (1994: 708) claim that "HR management can play a key role in the
articulation of strategic vision," but justify this using the role of middle managers. It is
quite doubtful that middle managers, generally line management, equate to HR managers.
Similarly, Becker and Huselid (1999: 290) state that "we have examples such as
Quantum, which as a start-up in 1980 established its 'people' strategy as the first step in
its business plan." Again, it seems they are referring to the importance of their human
resources rather than the HRM function. What role, if any, did the HRM function have in
the writing of the business plan?
In summary, none of the various attempts has managed to legitimize a strategic role for
the Human Resource Management function. Whilst human resources are increasingly
deemed strategic (see figure 1), the Human Resource Management function has made
futile attempts at leaving behind its servant role (Wintermantel and Mattimore, 1997).
CONCLUSION
If the above attempts aren't working, what then should HRM do? What should its role be?
Basically, as figure 1 indicated it has two options, (1) to perform a strategic role or (2) to
accept its supportive role.
Performing a strategic role entails more than "enabling] an organization to achieve its
goals [and...] linking with the strategic management process of the organization (Wright
and McMahan, 1992: 298)." Such a definition, used by the SHRM field, would make
almost anything, no matter how trivial, strategic. Enabling the achievement of goals, for
example, can perfectly well fit the description of non-strategic, i.e. supportive activities
such as that of the Human Resource Management function. Since everything is linked to
the strategy in an organization, so is the HRM function. Evidently, the current definitions
of the Strategic in SHRM are insufficient.
A better way of being strategic is to either (a) be involved in the formulation of strategy
or (b) be a core competency. The first way of performing a strategic role, namely by
being involved in strategy formulation, is not occurring right now. Attempts are being
made by the HRM function to sit at the table, but they have been fruitless so far. Even if
HRM is not involved in the decision-making, then perhaps it can demonstrate its
importance by being a core competence for the firm. Yet the first HR system that is
valuable, rare, non-substitutable, and inimitable (Barney, 1986, 1991) still needs to be
invented.
If there is no strategic role for the HRM function, then perhaps it should just accept its
supportive role as originally assigned to it by Michael Porter in his value chain (1985).
Why would HRM actually need to be strategic? After all, it is a staff function. The
SHRM discourse almost makes one believe there is something wrong with being
supportive.
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[Author Affiliation]
Dr. Martin Wielemaker and Dr. Doug Flint, The University of New Brunswick, Fredericton, NB