25
2
Strategic Human Resource
Management
Key concepts and terms
• Best fit • Resource-based view
• Best practice • Strategic configuration
• Bundling • Strategic fit
• Competitive advantage • Strategic HRM
• Configuration • Strategic management
• Human resource advantage • Strategy
• Lifecycle model
Learning outcomes
On completing this chapter you should be able to define these key concepts.
You should also understand:
• The conceptual basis of strategic • The fundamental characteristics
HRM of strategy
• How strategy is formulated • The aims of strategic HRM
• The resource-based view and its • The three HRM ‘perspectives’ of
implications Delery and Doty
• The significance of the concepts • The significance of bundling
of ‘best practice’ and ‘best fit’
• The practical implications of
strategic HRM theory
,26 Human Resource Management
Introduction
As Baird and Meshoulam (1988) remarked: ‘Business objectives are accomplished when human
resource practices, procedures and systems are developed and implemented based on organi-
zational needs, that is, when a strategic perspective to human resource management is adopted.’
The aim of this chapter is to explore what this involves. It starts with an introduction to the
basis of strategic human resource management (strategic HRM) provided by the concepts of
human resource management and strategic management. It then covers a definition of strate-
gic human resource management (strategic HRM) and its aims; an analysis of its underpin-
ning concepts – the resource-based view and strategic fit; and a description of how strategic
HRM works, namely the universalistic, contingency and configurational perspectives defined
by Delery and Doty (1996) and the three approaches associated with those perspectives – best
practice, best fit and bundling. The chapter ends with discussions on the reality of strategic
HRM and the practical implications of the theories reviewed earlier.
The conceptual basis of strategic HRM
Boxall (1996) explained that strategic HRM ‘is the interface between HRM and strategic man-
agement’. It takes the notion of HRM as a strategic, integrated and coherent approach and
develops that in line with the concept of strategic management. This is an approach to man-
agement that involves taking a broad and long-term view of where the business or part of the
business is going and managing activities in ways that ensure this strategic thrust is
maintained.
As defined by Pearce and Robinson (1988): ‘Strategic management is the set of decisions and
actions resulting in the formulation and implementation of strategies designed to achieve the
objectives of an organization.’ According to Kanter (1984) its purpose is to: ‘elicit the present
actions for the future’ and become ‘an action vehicle – integrating and institutionalizing mech-
anisms for change’. The concept of strategic management is built on the concept of strategy, as
considered below.
The concept of strategy
Strategy is the approach selected to achieve defined goals in the future. According to Chandler
(1962) it is: ‘The determination of the long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of resources necessary for carrying out those
goals.’
Strategy has three fundamental characteristics. First, it is forward looking. It is about deciding
where you want to go and how you mean to get there. It is concerned with both ends and
, Strategic Human Resource Management 27
means. In this sense a strategy is a declaration of intent: ‘This is what we want to do and this is
how we intend to do it.’ Strategies define longer-term goals but they also cover how those goals
will be attained. They guide purposeful action to deliver the required result. A good strategy is
one that works, one that in Abell’s (1993) phrase enables organizations to adapt by ‘mastering
the present and pre-empting the future’. As Boxall (1996) explained: ‘Strategy should be under-
stood as a framework of critical ends and means.’
The second characteristic of strategy is that the organizational capability of a firm (its capacity
to function effectively) depends on its resource capability (the quality and quantity of its
resources and their potential to deliver results). This is the resource-based view, based on the
ideas of Penrose (1959) who wrote that: the firm is ‘an administrative organization and a col-
lection of productive resources’. It was expanded by Wernerfelt (1984) who explained that
strategy ‘is a balance between the exploitation of existing resources and the development of
new ones’. Resource-based strategy theorists such as Barney (1991, 1995) argued that sustained
competitive advantage stemmed from the acquisition and effective use of bundles of distinc-
tive resources that competitors cannot imitate. The resource-based view is a major element in
strategic HRM, as discussed later in this chapter.
The third characteristic of strategy is strategic fit – the need when developing HR strategies to
achieve congruence between them and the organization’s business strategies within the context
of its external and internal environment. The focus is upon the organization and the world
around it. To maximize competitive advantage a firm must match its capabilities and resources
to the opportunities available in its environment. The concept of fit or integration is also a
major feature of strategic HRM.
The formulation of strategy
The formulation of corporate strategy is best described as a process for developing a sense of
direction, making the best use of resources and ensuring strategic fit. It has often been described
as a logical, step-by-step affair, the outcome of which is a formal written statement that pro-
vides a definitive guide to the organization’s intentions. Many people still believe and act as if
this were the case, but it is a misrepresentation of reality. In practice the formulation of strat-
egy can never be as rational and linear a process as some writers describe it or as some manag-
ers attempt to make it.
The difficulty is that strategies are often based on the questionable assumption that the future
will resemble the past. Some years ago, Heller (1972) had a go at the cult of long-range plan-
ning: ‘What goes wrong’ he wrote, ‘is that sensible anticipation gets converted into foolish
numbers: and their validity always hinges on large loose assumptions.’
Strategy formulation is not necessarily a deterministic, rational and continuous process, as was
pointed out by Mintzberg (1987). He believe that, rather than being consciously and system-
atically developed, strategy reorientation happens in what he calls brief ‘quantum loops’. A
2
Strategic Human Resource
Management
Key concepts and terms
• Best fit • Resource-based view
• Best practice • Strategic configuration
• Bundling • Strategic fit
• Competitive advantage • Strategic HRM
• Configuration • Strategic management
• Human resource advantage • Strategy
• Lifecycle model
Learning outcomes
On completing this chapter you should be able to define these key concepts.
You should also understand:
• The conceptual basis of strategic • The fundamental characteristics
HRM of strategy
• How strategy is formulated • The aims of strategic HRM
• The resource-based view and its • The three HRM ‘perspectives’ of
implications Delery and Doty
• The significance of the concepts • The significance of bundling
of ‘best practice’ and ‘best fit’
• The practical implications of
strategic HRM theory
,26 Human Resource Management
Introduction
As Baird and Meshoulam (1988) remarked: ‘Business objectives are accomplished when human
resource practices, procedures and systems are developed and implemented based on organi-
zational needs, that is, when a strategic perspective to human resource management is adopted.’
The aim of this chapter is to explore what this involves. It starts with an introduction to the
basis of strategic human resource management (strategic HRM) provided by the concepts of
human resource management and strategic management. It then covers a definition of strate-
gic human resource management (strategic HRM) and its aims; an analysis of its underpin-
ning concepts – the resource-based view and strategic fit; and a description of how strategic
HRM works, namely the universalistic, contingency and configurational perspectives defined
by Delery and Doty (1996) and the three approaches associated with those perspectives – best
practice, best fit and bundling. The chapter ends with discussions on the reality of strategic
HRM and the practical implications of the theories reviewed earlier.
The conceptual basis of strategic HRM
Boxall (1996) explained that strategic HRM ‘is the interface between HRM and strategic man-
agement’. It takes the notion of HRM as a strategic, integrated and coherent approach and
develops that in line with the concept of strategic management. This is an approach to man-
agement that involves taking a broad and long-term view of where the business or part of the
business is going and managing activities in ways that ensure this strategic thrust is
maintained.
As defined by Pearce and Robinson (1988): ‘Strategic management is the set of decisions and
actions resulting in the formulation and implementation of strategies designed to achieve the
objectives of an organization.’ According to Kanter (1984) its purpose is to: ‘elicit the present
actions for the future’ and become ‘an action vehicle – integrating and institutionalizing mech-
anisms for change’. The concept of strategic management is built on the concept of strategy, as
considered below.
The concept of strategy
Strategy is the approach selected to achieve defined goals in the future. According to Chandler
(1962) it is: ‘The determination of the long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of resources necessary for carrying out those
goals.’
Strategy has three fundamental characteristics. First, it is forward looking. It is about deciding
where you want to go and how you mean to get there. It is concerned with both ends and
, Strategic Human Resource Management 27
means. In this sense a strategy is a declaration of intent: ‘This is what we want to do and this is
how we intend to do it.’ Strategies define longer-term goals but they also cover how those goals
will be attained. They guide purposeful action to deliver the required result. A good strategy is
one that works, one that in Abell’s (1993) phrase enables organizations to adapt by ‘mastering
the present and pre-empting the future’. As Boxall (1996) explained: ‘Strategy should be under-
stood as a framework of critical ends and means.’
The second characteristic of strategy is that the organizational capability of a firm (its capacity
to function effectively) depends on its resource capability (the quality and quantity of its
resources and their potential to deliver results). This is the resource-based view, based on the
ideas of Penrose (1959) who wrote that: the firm is ‘an administrative organization and a col-
lection of productive resources’. It was expanded by Wernerfelt (1984) who explained that
strategy ‘is a balance between the exploitation of existing resources and the development of
new ones’. Resource-based strategy theorists such as Barney (1991, 1995) argued that sustained
competitive advantage stemmed from the acquisition and effective use of bundles of distinc-
tive resources that competitors cannot imitate. The resource-based view is a major element in
strategic HRM, as discussed later in this chapter.
The third characteristic of strategy is strategic fit – the need when developing HR strategies to
achieve congruence between them and the organization’s business strategies within the context
of its external and internal environment. The focus is upon the organization and the world
around it. To maximize competitive advantage a firm must match its capabilities and resources
to the opportunities available in its environment. The concept of fit or integration is also a
major feature of strategic HRM.
The formulation of strategy
The formulation of corporate strategy is best described as a process for developing a sense of
direction, making the best use of resources and ensuring strategic fit. It has often been described
as a logical, step-by-step affair, the outcome of which is a formal written statement that pro-
vides a definitive guide to the organization’s intentions. Many people still believe and act as if
this were the case, but it is a misrepresentation of reality. In practice the formulation of strat-
egy can never be as rational and linear a process as some writers describe it or as some manag-
ers attempt to make it.
The difficulty is that strategies are often based on the questionable assumption that the future
will resemble the past. Some years ago, Heller (1972) had a go at the cult of long-range plan-
ning: ‘What goes wrong’ he wrote, ‘is that sensible anticipation gets converted into foolish
numbers: and their validity always hinges on large loose assumptions.’
Strategy formulation is not necessarily a deterministic, rational and continuous process, as was
pointed out by Mintzberg (1987). He believe that, rather than being consciously and system-
atically developed, strategy reorientation happens in what he calls brief ‘quantum loops’. A
