Link Between Strategic Management and Leadership

The human resource of an organization offered the potential synergy for sustained competitive advantage, when properly deployed, maintained and utilized. From the onset, the traditional HRM, the formal system for managing people in organization, concerned itself essentially with transactional and administrative support services. The emergence of SHRM, concerned with the relationship between HRM and strategic management of the organization, was a paradigm shift.The strategic business partner model emphasized the proper integration or fit of HR practices with the business strategies of the organization, to generate a competitive advantage. Vertical link between business strategy and HR strategies and horizontal links among HR strategies Strategic Human Resource Management is the practice of aligning business strategy with that of HR practices to achieve the strategic goals of the organization. The aim of SHRM (Strategic Human Resource Management) is to ensure that HR strategy is not a means but an end in itself as far as business objectives are concerned.

The idea behind SHRM is that companies must “fit” their HR strategy within the framework of overall Business objectives and hence ensure that there is alignment between the HR practices and the strategic objectives of the organization. The new business context, which is characterized by increasing globalization, greater organizational complexity, market competitiveness and cutting-edge information communication technology, is prompting organization executives to take more interest in the deployment and utilization of their human esources.The HR function is therefore playing a far more strategic role in the business or corporate strategic planning process in the organization. The emergence of SHRM is increasingly adding more value to the organization. Thus, SHRM is based on HRM principles, which integrate the concept of business strategy.

Strategy here refers to “the pattern of organizational moves and managerial techniques or approaches used to attain organization objectives and to pursue the organization’s mission” (Inyang, 2004:20).Strategy is also considered as “the process by which the basic mission and objectives of the organization are set and the process by which the organization uses its resources to achieve these objectives” (Tichy, Fombrun, & Devanna, 1982:47). Organizations must choose and follow the diverse approaches in order to achieve success or gain competitive advantage. Scholarly advocacy as already noted has consistently emphasized the need for HRM to become a strategic business partner.

That means that SHRM has to be integrated with business strategy. This is also the issue of fit. Integration or fit refers to the involvement of SHRM in the formulation and implementation of organizational strategies and the alignment of SHRM with the strategic needs of an organization (e. g.

Buyens & De Vos 1999; Schuler & Jackson, 1999). To become strategic business partner means that the HR managers should participate in strategic decision-making alongside other senior managers in the organization.This, according to Ulrich (1997), would provide greater opportunity to align HR goals, strategies, philosophies and practices with corporate objectives and the implementation of business strategies. The involvement of HR managers would be to become members of senior or top management in the organization (Budhwar, 2000; Teo, 2000). Membership at this level in the organizational hierarchy offers opportunity for SHRM to represent its concerns and influence the direction of business strategy from the onset of the decision making process.

This involvement from the crafting stage of strategy decision-making will enhance commitment on the part of the HR managers during implementation stage of such business strategy. Inyang (2008b) argues for the co-optation of the HR manager to business policy formulation as a business partner, to help drive policy implementation to success and attain competitive advantage. There is research evidence that integration tends to result in enhanced competence, congruence and cost effectiveness (Black & Boal, 1994; Teece, Pisano & Shuen, 1997).There is increasing attention being focused on SHRM discourse about congruence or fit” or integration between HR practice and business strategy (Baird & Meshoulam, 1988; Wright & McMahan, 1992; and Wei, 2006).

The underlying assertion in the fit analyses is that the employment of effective HR practices and the design of an HR system compatible with the firm strategy are sine qua non for the successful implementation of the organization’s business strategies (Lengnick-Hall & Lengnick-Hall, 1988).Fit is therefore a fundamental feature of SHRM, which connotes the utilization of human resources to enhance the attainment of organizational goals. According to Wright & McMahan(1992:298), fit means “… the pattern of planned human resource deployment and activities to enable a firm to achieve its goal”. Scholars of SHRM identify two kinds of fit: horizontal fit and vertical fit. Horizontal fit refers to the congruence among various HRM practices (Baird & Meshoulam, 1998), and vertical fit refers to the alignment of HRM practice with strategic management process of the firm (Schuler & Jackson, 1987).

Generally, vertical fit or integration is necessary to provide congruence between business and human resource strategy so that the latter supports the accomplishment of the former, and helps to define it. Horizontal fit or integration with other aspects of the HR strategy is required so that its different elements fit together. The aim is to achieve a coherent approach to managing human resources, in a manner in which the various practices are mutually supportive.Both types of fit contribute significantly to the competitiveness of an organization and it is important for organization to arrange a variety of HR practices in a systematic way. According to Pfeffer (1994), a set of properly arranged HR practices can have a positive impact on a firm performance when they are properly implemented.

Creating a proper fit or integration is the key issue in SHRM and it is this congruence in organization’s HR practices that impact on the bottom line. Figure 1 below illustrates these concepts and their impact on the organization.