What is Strategic Human Resource Management (SHRM)?

Imagine this: You walk into a new store, excited to browse its products, but you’re met with disinterested employees, unhelpful customer service, and outdated products.  

It all feels like the store lacks any real energy or emotion. 

This scenario is often a symptom of something much bigger – weak strategic human resource management. 

Find it hard to believe? 

Take the instance of “Toys R Us”, once a retail giant that crumbled due to high employee turnover, limited training opportunities, and disengaged employees. 

Not just it, the fate of Nokia, Blackberry, Kmart, Electronic Arts, and many were similar! 

In today’s world, a strong HR strategy is not a luxury but an absolute necessity. 

In this blog let’s explore how strategic HR management can be the secret weapon for building a strong, engaged, and thriving company. 

What is Strategic Human Resource Management? 

Strategic human resource management (SHRM) is the practice of attracting, developing, rewarding, and retaining employees for organizational benefits.

Accordingly, HR departments collaborate with other departments to understand and align their goals with the overall business objectives. Strategic HR practices are seen as partners in business profitability and long-term sustainability.

Strategic Human Resource Management Definitions 

While this definition sums up SHRM’s entire function and role, here are a few author’s definitions and their views on strategic HRM. 

In the words of Gary Desler, “Strategic human resource management means formulating and executing human resource policies and practices that produce the employee competencies and behaviors that the company needs to achieve its strategic aims.”

Armstrong defines strategic human resource management as, “an approach to making decisions on the intentions and plans of the organization concerning the employment relationship and the organization’s recruitment, training, development, performance management, and the organization’s strategies, policies, and practices.” 

Thus, with these definitions, it’s clear that strategic human resource management is the process of linking the human resource functions of an organization to its strategic objectives to improve its overall performance.

Now, let’s see how this term evolved through time and came into its true meaning today. 

Evolution of Strategic Human Resource Management 

Let’s understand the evolution of this term below. 

Personnel management to HRM 

Initially, HR functions were limited to personnel management, focusing solely on staffing and managing the labor relations in an organization. They operated bureaucratically, using traditional approaches and with no involvement in strategic planning. 

After 1970, the scenario started gradually transforming personnel management into HR management. 

HRM to SHRM 

From the early 1980s, HR management shifted its focus to achieving organizational goals through workforce commitment. This modern approach transformed HR function into a more strategic function emphasizing HR cognition, learning, networking, leadership, and development. 

With rapid globalization and integration of strategic planning and HR function, there was a dynamic shift from the concept of HRM to SHRM. 

The new generation practices 

In the 21st century, SHRM practices are based on the philosophy that a company can gain a competitive advantage in the market through its people’s skills and competencies. 

These practices rest on the following principles: 

• Proactive management of people to meet their personal needs and promote employees’ interests. 
• Recognition of the crucial role of human resource management in sustaining business success and growth. 
• Designing an organization’s culture, work style, and structure enhances employees’ quality, commitment, and motivation to achieve business objectives. 

Thus, the role, definition, and meaning of strategic HR Management have undergone significant changes, resulting in a philosophy in which HR strategies combine all employee efforts under one organized structured program to meet an organization’s strategic needs. 

Now, let’s understand the difference between HRM and SHRM. 

If you want to know more about HR Planning, refer this blog. 

What is the difference between HRM and SHRM? 

While related, HRM and SHRM have distinctive approaches to workforce management. 

HRM or Human Resource Management, is a traditional approach to managing an organization’s workforce. It focuses on day-to-day administrative activities and effectively handles compliance-related issues.

SHRM or Strategic Human Resource Management is a more proactive approach to managing an organization’s workforce. Its focus is on aligning HR practices with overall strategic goals and objectives. 

Let’s understand some more distinctions between the terms through the table below: 

HRM vs SHRM: Differences Explained! 

Thus, strategic HR management is a holistic approach to an organization’s human resources, helping build a competitive advantage and long-term sustainability.

With the differences between both terms clear, let’s find the key objectives of strategic HR management. 

What are the objectives of strategic human resource management? 

The objectives of human resource management are derived from the philosophies which tie the emergence and development of human resource management together, both as a discipline and profession.

– Beer and Spector

Similarly, the following objectives of strategic human resource management underline the importance and benefits they offer an organization. 

10 key objectives of strategic human resource management

• Plan HR policies, shape practices, and execute programs that focus on attracting the best from the workforce for organizational success. 
• Integrate HR strategies with business strategies for boosting growth. 
• Manage and maintain human capital resources, intelligence, efficiencies, skills, and knowledge of the employees.
• Figure out further means to effectively and efficiently use human resources.
• Provide the right guidance for directing the collaborative efforts of the people and business practices toward accomplishing organizational and collective workforce goals and positively impacting how work gets done.
• Focus on the long-term effects of every HR strategy and policy rather than short-term benefits.
• Study the market conditions and identify the needs and personalized services of various segments while fulfilling them appropriately.
• Position employees as the primary source of competitive advantage.
• Enhance resource utilization, increase productivity, improve work culture and optimize remuneration to develop stable employee relations and reduce attrition rates. 
• Set strategies for future challenges, offer employee training programs, enhance mutual commitment, and integrate technology with HR practices. 

With these goals, SHRM gives organizations a direction to meet their business and individual employee needs. 

Now, let’s learn more about the importance of strategic human resource management in an organization. 

Before delving further, to know more about the objectives of HRM, give this a read. 

Key benefits offered by strategic human resource management 

Here are the few benefits offered by strategic human resource management in daily operations: 

• Attract, develop, and retain talent 
• Enhance the workplace environment 
• Improve job and work design 
• Manage knowledge and intellectual capital 
• Increase employee commitment, engagement, and motivation 

Let’s discuss them in depth below. 

Attract, develop, and retain talent

Matching the right talent with strategic and operational needs, developing necessary skills and competence for future requirements, and retaining employees consistently delivering superior quality work.

Create better work environment

Aligning the vision, mission, and purpose of the organization with the individual aspirations of the employees, engaging and motivating employees to enhance their work quality, and improving their employer brand.

Improve job and work design

Designing job roles that gives employees autonomy and flexibility enhances job satisfaction and encourages high performance and productivity.

Manage knowledge and intellectual capital

Providing learning and knowledge-sharing opportunities organization-wide, facilitating personalized learning programs, cross-functional job shadowing, mentoring, and creating succession plans to retain knowledge capital and improve learning and information flow.

Increase employee commitment, engagement, and motivation

Helping employees identify their core and ethical values, aligning them with organizational values, cultivating an environment of trust and cooperation, and enhancing psychological safety in the workplace.

Focusing on the long-term benefits offered by strategic HRM organizations can give organizations a competitive edge and achieve sustainable growth in today’s dynamic business environment. 

With all the benefits cleared, let’s understand how to create a successful HR strategic plan. 

How to create a strategic HR plan? 

Creating a strategic HR plan involves the following steps that help align the HR goals with the organizational objectives. 

Steps to create a successful strategic HR plan: 

• Understand business strategies: Begin by understanding your business’s core values, mission, purpose, and goals. This will help HR professionals align their HR goals with the broader business strategies.
• Define HR strategy: Define how HR will support achieving business goals through talent management, employee engagement, and motivation.
• Segment the key HR customers: Identify the core groups within the organization that the HR department mainly serves, such as employees, managers, executives, etc. Understand their basic needs and tailor the HR department’s offerings accordingly.
• Prioritize HR investments: Allocate the resources based on the business impact and the priorities of HR customers. Focus on initiatives that offer maximum value to the HR customers and the organization.
• Design HR services: Develop specific HR services that meet the needs of the HR customers, such as talent acquisition, learning and development plans, performance management, etc.
• Ensure the right HR service delivery model: Determine the most effective way to deliver HR services (whether centralized, decentralized, or a hybrid model). Choose the one that aligns with the organizational culture, internal communication style, and structure.
• Establish the right HR capabilities: Identify key skills, competencies, and knowledge required within the HR department to support this HR strategy. Make plans to acquire, retain, and develop these capabilities.
• Improve the overall HR efficiency: Continuously review and update your strategy to stay relevant to the dynamic business environment. Technology and automation (like efficient HRMS software) are the best ways to achieve this.
• Build HR brand: Develop and promote the HR brand within the organization, ensuring the HR function is considered a strategic business partner.

These steps, mentioned in the Deloitte paper, help organizations create an HR strategic plan that transforms the HR department into a business partner from an administrative cost center.  

Technology plays a crucial role in this transformation, so having an ideal HRMS partner is the key to the success of the new generation of businesses. 

Identify the real reason behind your employee turnover with Keka’s analytics

Practical examples of strategic human resource management 

Earlier discussed examples like Toys R Us, Nokia, and Blackberry showed how wrong HR strategy could lead to the downfall of even the market giants. 

Can the right strategy indeed transform something ordinary into something extraordinary? 

Well, yes, it’s true. 

Companies like Netflix, Google, Apple, and Southwest Airlines have done it! 

Let’s discuss a few real-life examples of organizations that turned the tide in their favor with the right HR strategy. 

Netflix: Reimagining HR practices for the future 

From its inception, Netflix focused on having a proper people strategy. Instead of the traditional performance reviews, they trusted their employees to be their bosses and aligned their core concept of creating innovative solutions. This approach attracted top talent with attractive salaries, unlimited vacation days, and a culture of transparency and honesty, making their employees take ownership of their work and driving bold decisions.

Zappos: Delivering happiness with service excellence 

Zappos, the online shoe retailer, flipped the script on delivering excellent customer service by focusing on their key HR strategy: ‘delivering happiness’. They redesigned their core strategies, focusing on company culture and excellent customer service. This approach, along with offering a hefty quitting bonus, has made Zappos an online retail leader with a loyal customer base.

USAA: Serving the right value inside and outside 

USAA, a company with a unique business model and an even more unique HR strategy model. They understand the unique skills, discipline, and leadership that military veterans bring and focus on transitioning them into business skills. Their people strategy includes extensive training programs to help recruits overcome initial difficulties, resulting in the USAA being a financial giant with deep trust and understanding of military family needs.

Patagonia: Bringing a positive change with sustainability 

Patagonia’s core HR strategies focus on environmental awareness among customers and employees. They promote additional paid time-offs to advocate for environmental causes and donate a percentage of sales to environmental groups. This approach has made Patagonia a market leader in outdoor apparel and a strong advocate for environmental sustainability.

These examples highlight the importance of strategic HR management and how organizations can leverage technology, human capital, and their unified efforts to create extraordinary organizations.

Wrapping It Up 

In conclusion, strategic human resource management is one of the key drivers of organizational success. It enables sustainable growth and profitability by aligning the aspirations of internal and external customers.

Every organization should invest their time and efforts in this arena. Leveraging technology and automation is the easiest way to do that. 

Keka’s HRMS solution might be a good answer to all this. 

With its features like automated leave management, compliance management, data-driven reporting tools, new-age performance management tools, and automated payroll processing, it transforms your HR department into a strategic business partner. 

Frequently Asked Questions  

What is strategic human resource management (SHRM)? 

Strategic human resource management (SHRM) aligns HR practices with organizational goals. It involves planning, implementing, and evaluating HR strategies to achieve competitive advantage. 

Why is SHRM important? 

 SHRM or Strategic human resource management is essential for improving employee performance and engagement and drive business profitability through effective talent management, succession planning, and culture development. 

What’s the difference between human resource management and strategic human resource management? 

The key difference between human resource management and strategic human resource management is while HRM focuses on daily administrative activities, SHRM focuses on long-term planning and maximizing employee performance.