The Impact of Environmental Volatility on Human Resource Planning and Strategic Human Resource Management

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Introduction

A substantial body of theoretical literature argues that human resources (HR) play an important role in the creation of competitive advantage within firms, and that the use of contemporary or progressive HR management practices is crucial for selecting, developing, motivating, and retaining requisite human capital (Butler, Ferris, & Napier, 1991; Jones & Wright, 1992; Kleiner, 1990; USDOL, 1993). And although prior work is limited, recent empirical research supports these contentions, finding that the adoption of systems of High Performance Work Practices can lead to substantially enhanced firm performance (Arthur, In Press; Delaney, in press; Huselid, 1994; Ichniowski, Shaw, & Prennushi, 1993; MacDuffie, 1993).

Most of the research in this area has focused on the firm-level impact of High Performance Work Practices in the domains of personnel selection (Boudreau, 1991) and compensation (Gerhart & Milkovich, 1992). But succession planning, replacement charts, HR inventories, and the Delphi technique. More quantitative procedures include regression analysis, operations research techniques, and Markov models.

Conceptually, SHRM refers to HR management practices that are intended first to influence and then to help execute the firm's strategic business plan. For example, Miller (1987) defines SHRM as "those decisions and actions which concern the management of employees at all levels in the business and which are related to the implementation of strategies directed towards creating and sustaining competitive advantage". Similarly, Begin (1991) suggests that SHRM includes all those actions that adapt the HR function "to the long-term strategies of the organization, ensuring that selection, appraisal, rewards, an development policies are appropriate for whatever those strategies might be".

A number of procedures for implementing SHRM have recently been developed. For example, Gupta (1986) advocates matching the attributes of a firm's managers to its business strategy. In this approach, a firm following a cost leadership business strategy would select managers with strong cost control and accounting skills, while a firm pursuing a differentiation or a focus strategy would selec managers with strong marketing or product development skills. Another SHRM procedure was developed by Schneider & Konz (1989), who advocate the use of strategic job analysis. This procedure requires subject matter experts to determine the knowledge, skills, and abilities (KSAs) that will be necessary in a job some time period in the future, after consideration of how the firm's corporate and business strategic plans may change the nature of the job in question. Personnel selection tests are then designed to help choose employees with the KSAs that will eventually be necessary.

The use of targeted staff assignments are another tool that can help to match business and HR strategies (Kerr & Jackofsky, 1989). In this form of management development, job assignments are used to provide employees with the experience and expertise necessary to help them implement the firm's strategic plan. Performance appraisal systems (Cleveland, Murphy, & Williams, 1989) and compensation policies (Balkin & Gomez-Mejia, 1987) can also be a form of SHRM, when they are used to focus managers on the firm's strategic goals.

Finally, by far the most common form of SHRM relies on HRP. Conceptually, this process begins with the firm's existing HR plan, which informs management about current and projected stocks of human capital throughout the firm. These estimates provide crucial input to the firm's strategic business planning process, as HR strengths, weaknesses, opportunities, and threats can have a profound effect on whether a certain strategy is feasible, and may also help to identify business opportunities in which the firm can excel. Finally, a HR plan is developed to help implement the firm's business strategy. …