The society in which we all live thrives for ‘knowledge and intellectual capital’ rather than

‘physical capital.’ As the business world is evolving, the function of human resource has
developed remarkably. Therefore, it is imperative to understand its historical background as it
helped define what HR is today.

Traditionally, the HR department dealt with risk mitigation and administration work related
to recruitment and training. There were limited opportunities for HR to influence the
direction of the organization.

At the end of the 1990s, Dave Ulrich, heralded as the father of Human Resource by HR
magazine, pitched down the HR challenges and stated that “HR had often become ineffective,
incompetent, and costly; in a phrase, it is value sapping.” [1]

During the 2000s, the role of HR has been significantly increased, which can be witnessed in
many organizations. From here, the concept of Strategic Human Resource Management
(SHRM) became prevalent. HR should not be defined by its actions but by its outcomes –
outcomes that enhance organization value for its stakeholders.

The ultimate goal of an organization is to gain competitive advantage and establish a

monopoly in the market. Strategic HRM means developing and articulating human resource
policies to help the organization achieve its long-term goals.

There are two practical ideas which can help this relatively new profession in showing up as a
more strategic HR leader:

 Know the business inside and out: It is crucial to understand the nature of the
business and think about how people can be tied up to its goals and outcomes. They
should be capable of answering questions such as – What is going on in the industry,
who are the competitors, what are the core competencies? Ask what, not how.
 Envision the future: HR professionals are generally known as the ‘no, we have to
follow the policy’ team. They need to figure out the solutions which can aid in the
development of the business.

As the number of global HR professionals increased by nearly one million, it is the need of
the hour to define what is meant to be an effective HR professional.

In 2012, Dave Ulrich and his colleagues also proposed six competencies that helped these
professionals to create sustainable value for the organization. These competencies are –
Change champion, Capability builder, Strategic positioner, Innovator and integrator,
Technology proponent, and Credible activist.

The organizational goals can be attained through strategic HRM practices when the
employees feel committed. Therefore, the value of strategic HRM as a system framework for
human resources development that contributes to a sustainable competitive advantage cannot
be overlooked.
It is encouraging to see that organizations that have been around for decades are creating a
difference in the HR sector. Companies like Nissan, Alliance Boots, BT, Mayo Clinic, etc.,
are working to gain a competitive advantage through their HR strategies.

For instance, Nissan has developed an HR concept known as Kaizen. It emphasizes that

every person in the organization works towards one goal: continually improving how a task is
done. Managers are provided the autonomy to build their teams, and employees are
encouraged to brainstorm new ideas. This results in – higher employee satisfaction and higher
output with superior quality. 

From its beginning with the massive industrialization programs in the nineteenth century to
its evolution and expansion throughout the twentieth century, HR remains the vital arm in
business operations in this century. 

Strategic Fit

The extent to which the activities of a single organization or of organizations working in partnership
complement each other in such a way as to contribute to competitive advantage. The benefits of good
strategic fit include cost reduction, due to economies of scale, and the transfer of knowledge and
skills.

The success of a merger, joint venture, or strategic alliance may be affected by the degree of strategic
fit between the organizations involved. Similarly, the strategic fit of one organization with another is
often a factor in decisions about acquisitions, mergers, diversification, or divestment.

Strategic Fit exists when value chain of different business are related. When these different value
chains allow transferring skills and expertise from one business to other , and their combined
performances work to reduce cost.

Strategic fit could be classified into

1. Market related Fits.

2. Operating Fit
3. Management Fit.

Market related fit arises when value chains of different businesses overlap so that the products can be
used by same customers, marketed and promoted in a similar way and have a common distribution
channel (common dealers and retailers)

Market related fit could be of following types:

1. Common sales force to call on customers

2. Advertising related products together

3. Use of same brand names

4. Joint delivery & shipping

5. Joint after-sale service & repair work

6. Joint order processing & billing

7. Joint promotional tie-ins

8. Cents-off couponing, trial offers, specials

9. Joint dealer networks

Operational Fit:

Operational Fit arises when different businesses work along in order to explore opportunities for cost-
sharing or skill transfer.

Types of Operational Fits are:

1.Procurement of purchased inputs

2.R&D/technology

3.Manufacture & assembly

4.Administrative support functions

5.5.Marketing & distribution

Benefits of Operating Fits.

As both businesses tend to work together they often save lot on cost. The companies are able to tap
into more economy of scale and/or economies of scope. Both the businesses often tend to increase
operation efficiency through sharing of related activities.

Management Fit:

This fit revolves around a comfort that is built among both the businesses in terms of some
comparable units like Entreasures, Administration and various administrative activities , operating
problems. It allows accumulated managerial know-how in one business to be used in managing
another business.

It is necessary that business management should take actions to capture benefits as they don’t just
happen! Benefits with sharing potential must be recognized so that activities to be shared are merged
and coordinated. When skill transfer takes place a means must be found to make it effective.

 
The business of HR is an increasingly interesting and often complex
environment. The level of time and resources allocated to the HR function
within an organisation varies dramatically. This article explores a few
different aspects around the connection between a company’s Human
Resource Management policies and the organisations business strategy.

An increasing number of studies demonstrate the importance of linking

business strategy with deployment of human resources within an
organisation. A company’s pool of human resources and talent are
arguably some of its most valuable assets. A company which links it HRM
with its strategic business plan stands to gain a strong competitive
advantage in the marketplace.

Strategic decision making is about considering both the internal and

external factors and the context around them. The internal factors could be
the company’s mission statement, the organisational structure and whether
it is a large multi divisional organisation or a smaller single product
company. This would usually impact on how the selection, appraisal and
development of employees is structured. The external factors could be the
political, cultural and economic force which may impact the business.

The human dimension of the Company’s strategy refers to the key subject
of employees and employment relations. This resource represents the
potential value of workers for achieving goals and gaining organisational
success. Management of this includes decision making, implementation
and taking actions aimed at employee attitudes and behaviours to achieve
the organisational goals.

Strategic HRM can be very effective in organisations when implemented

correctly. It benefits the organisation in several ways. It can be a very
useful tool to help identify and analyse both internal and external threats as
well as opportunities. It also helps to provide a clear business vision and
strategy. It is an important influence in the approach to the recruitment and
selection process to get the right people with the right skillset into the most
effective positions to maximise their potential within the organisation.

A key component of linking business strategy to HRM is a culture of clear

communication and trust within an organisation. When employees are
encouraged to become involved in various aspects of the business strategy
it develops higher levels of trust and respectability between employees and
the management team. This trust is built on the knowledge sharing which
allows employees to also share in the vision and goals of the organisation.
The right strategy therefore helps to retain talent and develop highly
competent employees.
The Michigan model is often referred to in discussion around strategic
HRM. The model is based on strategic control, organisation structure and
people management processes. While it focuses on reward systems for
motivating employees it also concentrates on managing human resources
to achieve strategic goals. Therefore, having the right structure in place
ensures issues are addressed in a timely and effective manner. Most
importantly it gets ‘buy in’ from employees as they feel involved in
contributing to the overall strategic plan of the organisation. This can result
in higher levels of productivity from a high performing workforce.

It takes strong leadership and commitment to consistently maintain the link

between HR practices and the strategic plan of the business. There are
some barriers such as varying levels of financial support towards the
implementations and follow up of HR, development and training policies.
There may also be market pressures due to economic difficulties which
make it difficult to recruit the preferred talent for specific roles within the
organisation. The presence of Trade Unions and threats of industrial action
can also have an adverse effect on an organisation’s development and
performance in relation to the implementation of Strategic HR
Management.

A significant number of Multi-National Corporations base their operations in

low cost economies to increase their profit margins. Therefore, the effect of
globalisation is also a significant factor affecting business strategy and
HRM. As both social and business relationships in distant regions are now
instantly linked by advances in communication it is much more sustainable
to manage a global workforce.  However, while multinationals often locate
to economies which may have lower operating costs and an attractive
corporation tax rate, the strategy will only be successful if the pool of talent
with the relevant skillset is available.  In summary, this can result in an
even more competitive market around recruitment for organisations which
demonstrates the challenges around linking business strategy with HRM. It
is important that an organisation builds and maintains a strong capacity to
recruit and retain high performing employees. Through ongoing training
and development these employees would acquire a broad range of
knowledge, skills and attitudes throughout their careers.

The importance of strong teamwork and collaboration between various

stakeholders at the senior levels within an organisation is crucial to the
success of any strategy.  When leaders can demonstrate their willingness
to buy in to the combined business strategy and HRM processes of their
organisation and openly share this with their teams it can be a very
powerful and dynamic tool in gaining competitive advantage in the
marketplace.