Chapter 1

An Introduction to Strategic Human Resource Management

Pawan Budhwar and Samuel Aryee

The objectives of this chapter are to:
Summarise the developments in the field of human resource management (HRM)
Examine what strategy is
Highlight the growth and nature of strategic human resource management (SHRM)
Examine the linkages between organisational strategy and HRM strategy
Match HRM to organisational strategy
Discuss the main perspectives on SHRM and organisational performance.

What is HRM?
Developments in the field of HRM are now well documented in the management literature (see e.g. Boxall, 1992; Legge, 1995; Schuler and Jackson, 2007; Sisson and Storey, 2000; Torrington et al., 2005). The roots of HRM go back as far as the 1950s, when writers like Drucker and McGregor stressed the need for visionary goal-directed leadership and management of business integration (Armstrong, 1987). This was succeeded by the ‘behavioural science movement’ in the 1960s, headed by Maslow, Argyris and Herzberg. These scholars emphasised the ‘value’ aspect of human resources (HR) in organisations and argued for a better quality of working life for workers. This formed the basis of the ‘organisational development movement’ initiated by Bennis in the 1970s. The ‘human resource accounting’ (HRA) theory developed by Flamholtz (1974) was an outcome of these sequential developments in the field of HRM and is considered to be the origin of HRM as a defined school of thought. HRA emphasised human resources as assets for any organisation. This ‘asset’ view began to gain support in the 1980s (Hendry and Pettigrew, 1990). The last twenty-five years or so have then witnessed rapid developments in the field of HRM, which are an outcome of a number of factors such as growing competition (mainly to US/UK firms by Japanese firms), slow economic growth in the Western developed nations, realisation about the prospects of HRM’s contribution towards firms’ performance, creation of HRM chairs in universities and HRM-specific positions in the industry, introduction of HRM into MBA curricula in the early 1980s, and a continuous emphasis on the involvement of HRM strategy in the business strategy.
The debate relating to the nature of HRM continues today although the focus of the debate has changed over time. It started by attempting to delineate the differences between ‘Personnel Management’ and ‘HRM’ (see e.g. Legge, 1989; Guest, 1991), and moved on to attempts to incorporate Industrial Relations into HRM (Torrington et al., 2005), examining the relationship of HRM strategies, integration of HRM into business strategies and devolvement of HRM to line managers (Lengnick-Hall and Lengnick-Hall, 1989; Brewster and Larson, 1992; Budhwar and Sparrow, 1997) and then the extent to which HRM can act as a key means to achieve competitive advantage in organisations (Barney, 1991). Most of these developments have taken place over the last couple of decades or so, and have precipitated changes in the nature of the HR function from being reactive, prescriptive and administrative to being proactive, descriptive and executive (Boxall, 1994; Legge, 1995). At present then, the contribution of HRM in improving a firm’s performance and in the overall success of any organisation (alongside other factors) is being highlighted in the literature (see e.g. Guest, 1997; Schuler and Jackson, 2005; 2007). In relation to the last debate, three perspectives emerge from the existing literature: universalistic, contingency, and configurational (Katou and Budhwar, 2006; 2007).
The ‘universalistic’ perspective posits the ‘best’ of HR practices, implying that business strategies and HRM policies are mutually independent in determining business performance. The ‘contingency’ perspective emphasises the fit between business strategy and HRM policies and strategies, implying that business strategies are followed by HRM policies in determining business performance. The ‘configurational’