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Strategic Human Resource Management: Aligning Workforce Capabilities with Business Strategy

What "strategic" adds to HRM, where the matching idea came from, how vertical and horizontal fit are supposed to work, what the universalistic, contingency and configurational perspectives claim, and why the evidence for alignment is weaker than HR writing usually admits.

Md. Mehedi Hasan, LLB, ACS

27 October 2026 · 32 min read · 119 views

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Strategic Human Resource Management: Aligning Workforce Capabilities with Business Strategy
In This Article
  1. 1. What the Word "Strategic" Adds
  2. 2. Where the Matching Idea Came From
  3. 3. Vertical Fit: How Alignment Is Supposed to Work
  4. 4. The Assumptions Behind Matching
  5. 5. Horizontal Fit: Why Practices Must Agree With Each Other
  6. 6. Three Ways of Theorizing the HR-Performance Link
  7. 7. What the Evidence Can and Cannot Show
  8. 8. Bangladesh: Five Banks, One Workforce, and a Strategy Still Forming
  9. 9. Diagnostic: How Well Do Your HR Practices Fit?
  10. 10. Decision Exercise: Nilachal Appliance Care Moves Upmarket
  11. 11. Alignment as a Working Hypothesis
  12. 12. MBA Assignment: An HR Fit Audit
  13. 13. Test Your Knowledge
  14. 14. References

If two banks run the same competent HR practices, can both be managing people strategically when one is trying to become the cheapest lender in its market and the other the most trusted?

Strategic human resource management (SHRM) starts from the view that the answer is probably no: an HR practice's value depends on what the organization is trying to do and on the practices around it. This article, which opens Module 04, sets out what that claim means, where it came from, and how well the evidence supports it. A five-bank merger in Bangladesh, still under way in 2026, shows how hard alignment becomes when the strategy itself is unsettled.

1. What the Word "Strategic" Adds

Article 11 traced how "human resource management" displaced personnel management and noted that David Guest made strategic integration one of its defining goals. Article 14 examined the HR business partner, a role for the HR function. Strategic HRM as a field of study asks something else. Its unit of analysis is the whole pattern of practices through which an organization acquires, develops, deploys and rewards people.

The definition most often cited is Patrick Wright and Gary McMahan's (1992, p. 298): SHRM is "the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals." Pattern means that practices are judged as a set, not one at a time; intended means the set is chosen for a purpose beyond administration. Wright and Ulrich (2017, p. 46) note that the definition separated SHRM from conventional HRM by calling for vertical alignment with the organization's strategy and horizontal coordination among HR practices. Those two kinds of fit organize most of what follows. A distinction they attribute to Lee Dyer (1985) helps too: organizational HR strategies concern how the firm deploys and develops people for business needs, functional HR strategies how the HR department supports them.

2. Where the Matching Idea Came From

Calls to link workforce planning with strategic planning predate the field (Armstrong and Brown, 2019, trace them to James Walker in 1978), but SHRM became a research programme through the work of Mary Anne Devanna, Charles Fombrun and Noel Tichy. Their 1981 article in Organizational Dynamics observed that few organizations took a strategic approach to HRM and proposed an audit of the HR function (Jackson, Jiang and Schuler, 2017). A 1982 article in Sloan Management Review framed the core managerial problem as keeping strategy, structure and human resource systems in direct alignment (Tichy, Fombrun and Devanna, 1982, as quoted in Armstrong and Brown, 2019). Writing as editor of Human Resource Management, Tichy (1983, p. 3) summed up the shift: "no longer were we asking the question: Are human resources important? Rather, the question for the 1980s is: How will we integrate human resource issues into the strategic management of the firm?" (quoted in Jackson, Jiang and Schuler, 2017).

Their 1984 edited volume, Strategic Human Resource Management, gave the approach its usual names, the Michigan model or the matching model. Its human resource cycle, and its contrast with the Harvard model, are the subject of Article 17. What matters here is the direction of reasoning: strategy comes first, and structure and HR systems are designed to drive it, an extension into HR of the older idea that structure should follow strategy.

Raymond Miles and Charles Snow (1984) then connected HR systems to strategic types: in the usual summary, efficiency-minded Defenders build talent internally, while Prospectors, always seeking new markets, buy it. Randall Schuler and Susan Jackson (1987) supplied a mechanism. Different competitive strategies require different role behaviours from employees, they argued, and the HR system is one of the main means by which an employer communicates, elicits and sustains those behaviours (Jackson, Jiang and Schuler, 2017). The table condenses their three "ideal" linkages as the authors restated them in 2014.

Competitive strategyRole behaviours the strategy needsHR practices that support them
InnovationA high degree of creative behaviour; a longer-term focus; relatively high cooperation; moderate concern for quality and quantity; greater risk taking; high tolerance of ambiguity, uncertainty and failureJobs requiring close interaction and coordination; appraisals reflecting longer-term team achievements; assignments that build skills for other positions; broad career paths; pay that emphasizes internal equity and offers choice
Quality enhancementRelatively repetitive and predictable behaviour; an intermediate- to longer-term perspective; modest cooperation; high concern for quality and process; modest concern for quantity; low risk taking; greater commitment to the firmFixed and stable job descriptions; high participation in decisions about immediate work; a mix of individual and team criteria in selection and appraisal; relatively egalitarian treatment; some employment security; extensive and continuous training
Cost reductionRather repetitive and predictable behaviour; a short-term focus; individual-based jobs; modest concern for quality; high concern for quantity and results; low risk taking; comfort with stabilityFixed and stable job descriptions; narrowly designed jobs and career paths; short-term, results-oriented appraisal; minimal training and development; market-based pay

Source: Schuler and Jackson (2014, pp. 37-39), restating Schuler and Jackson (1987). Wording condensed.

The behavioural framework's strength is that it names the intermediate step. "Align HR with strategy" is an instruction no one can follow; "identify the behaviours the strategy needs, then check whether each practice encourages them" can be applied and argued about. Its weakness is that the profiles are ideal types adapted from Michael Porter's generic strategies, few organizations pursue only one, and the authors illustrated them with three cases (a small manufacturer, a Honda plant and UPS), not a test across many firms.

3. Vertical Fit: How Alignment Is Supposed to Work

Vertical fit is the alignment of the HR system with the organization's strategy or other features of its situation. It works through two links, each a hypothesis. The first runs from strategy to required behaviours and capabilities: a bank competing on fast lending to small businesses needs credit officers who can judge risk on incomplete information, which a bank competing on low-cost deposits needs far less. The second runs from behaviours to practices: selection that screens for that judgement, training that builds it, appraisal that recognizes it, and pay that does not punish the occasional reasonable loss. Typical failures are a strategy too vague to imply anything about people, and practices adopted because they are fashionable.

Lloyd Baird and Ilan Meshoulam (1988) made the two fits explicit: external fit means HRM fits the organization's developmental stage, and internal fit means HRM's components complement and support each other. Their external fit is broader than fit with strategy, since a young and a mature firm might sensibly run different systems; later research mostly narrowed it to strategy.

The empirical record on vertical fit is weak. Wright and Ulrich (2017, p. 54) observe that "the concept of fit has been assumed without question since the inception of the field," yet Mark Huselid (1995), testing many ways of modelling fit between practices and strategy, found little evidence of it, and Delery and Doty's (1996) fit effects for a few practices "could by no means be considered robust or consistent support." Either vertical fit matters less than assumed, or, as Wright and Sherman (1999, summarized in Wright and Ulrich, 2017) proposed, researchers measured the wrong thing. Surveys record whether a firm has a practice such as pay for performance, which helps almost anywhere. Fit may lie in what the practice is aimed at: pay for performance defined as customer service should help a service-focused firm, while the same practice defined as cost cutting may not. If alignment lives in the content of practices more than their presence, a survey that asks only whether a practice exists cannot detect it.

4. The Assumptions Behind Matching

The matching model treats strategy as given and HR as the variable to adjust, which involves three challengeable assumptions.

That strategy is known, stable and single. If realized strategy is often emergent, as Mintzberg argued (Article 06), a system tightly fitted to the announced strategy may fit the wrong thing, and a diversified group has several strategies at once.

That influence runs one way. The resource-based view in Article 08 reverses the order: capabilities that reside in people help determine which strategies a firm can pursue. Jaap Paauwe and Paul Boselie (2005) argued for treating HR systems as "an enabling device for a whole range of strategic options," which "implies a reversal of the strategy-HRM linkage." Wright and Snell (1998) added time. In Wright and Ulrich's (2017, p. 54) summary, fit is a state that does not guarantee fit later, whereas flexibility is a capability to reconfigure skills, behaviours and practices when strategy changes. Hiring narrowly for today's process buys present fit at the cost of future flexibility, and the matching model offers no way to weigh that trade.

That one HR system covers the workforce. Schuler and Jackson noted that practices for lower-level staff and line managers often differ, and David Lepak and Scott Snell (1999) developed the idea of an HR architecture that manages employee groups under different systems (Jackson, Jiang and Schuler, 2017). Segmenting eases the multiple-strategy problem but creates horizontal tensions where groups work side by side.

John Purcell (1999, p. 37, as quoted in Armstrong and Brown, 2019) stated the general objection: the search for a matching model is limited "by the impossibility of modelling all the contingent variables, the difficulty of showing their interconnection, and the way in which changes in one variable have an impact on others." That does not make vertical fit meaningless. It makes it a judgement about a particular organization that no typology can supply in advance.

5. Horizontal Fit: Why Practices Must Agree With Each Other

Horizontal fit is the consistency of HR practices with one another. Employees read practices together as signals of what the organization values; when the signals conflict, they follow the one backed by money or promotion.

Brian Becker, Mark Huselid, Peter Pickus and Michael Spratt (1997, p. 43) supplied the vocabulary. "Deadly Combinations," they wrote, "develop when firms adopt HRM policies and practices that might well make sense in isolation but when evaluated within the context of other HRM practices deployed throughout the firm are a recipe for disaster." Their examples are ordinary: sophisticated performance management alongside pay that barely distinguishes high from low performers, or encouragement of teamwork alongside raises for individual contributions. "Powerful Connections" are the reverse, complementarities in which the system returns more than the sum of its parts. Promotion from within can fall on either side: with training, incentive pay and real pay differences it builds capability; without them, the authors warn, it can degenerate into a low-performance "civil service" culture.

Two manufacturing studies provide the strongest early evidence that practices matter as systems. Casey Ichniowski, Kathryn Shaw and Giovanna Prennushi (1997) analysed up to 2,190 monthly observations from 36 US steel finishing lines, a process uniform enough to allow precise technical controls, and found "consistent support for the conclusion that groups or clusters of complementary human resource management (HRM) practices have large effects on productivity, while changes in individual work practices have little or no effect on productivity" (p. 291). Some lines changed systems during the period, allowing before-and-after comparison of the same line, though not of lines chosen at random. John Paul MacDuffie (1995) found a similar pattern in 62 volume car assembly plants worldwide: plants combining team-based work, high-commitment HR policies and low inventory buffers outperformed mass-production plants, and interactions among these bundles predicted performance better than the bundles separately. His data were cross-sectional, "so causality cannot be definitively determined" (p. 218).

These results carry an awkward implication for the matching model. In MacDuffie's plants, one internally consistent system outperformed another, which is closer to a best-practice conclusion than a best-fit one. Strong evidence for horizontal fit, in other words, does not by itself support vertical fit, and may cut against it. Article 19 examines MacDuffie's study and the high-performance work systems literature in detail.

6. Three Ways of Theorizing the HR-Performance Link

By the mid-1990s these strands had hardened into competing positions, and John Delery and Harold Doty (1996) gave them the names still in use: universalistic, contingency and configurational. The typology is useful because each position implies a different claim, a different statistical test and a different instruction to managers.

PerspectiveCore claimHow it is testedInstruction to managers
Universalistic ("best practice")Some HR practices are better than others for almost all organizationsMain effects: firms using more of the practices perform better, whatever their strategyAdopt the practices with the best evidence
Contingency ("best fit")A practice's effect depends on its consistency with other features of the organization, above all strategyInteraction effects: the link between a practice and performance changes with strategyChoose the practices that suit your strategy
ConfigurationalInternally consistent patterns of practices, close to ideal types, outperform inconsistent mixtures, and more than one pattern can succeedCloseness to an ideal-type configuration, or the performance of clusters of practicesBuild a coherent system that matches your strategic type

This table is the article's summary of the three perspectives as Delery and Doty (1996) distinguished them.

Delery and Doty tested all three on US commercial banks, using survey data gathered from HR directors in the early 1990s on the practices used for specific jobs such as teller and loan officer (Wright et al., 2001). The seven practices are usually listed as internal career opportunities, formal training, results-oriented appraisal, profit sharing, employment security, participation and job descriptions. In Wright and Ulrich's (2017, p. 47) summary, the universalistic approach "explained the most amount of variation in financial performance," while the contingency and configurational approaches "also explained variation." The original article could not be obtained in full for this series, so its sample and findings are reported through the authors' later description of the data and Wright and Ulrich's review, and no coefficients are given.

Jeffrey Arthur's (1994) study of 30 US steel minimills is usually cited as configurational evidence: "the mills with commitment systems had higher productivity, lower scrap rates, and lower employee turnover than those with control systems." Jeffrey Pfeffer (2007, p. 125) put the gap at 34 percent fewer labour hours per ton and a 63 percent better scrap rate. Arthur also found the HR system moderated the turnover-performance link.

The perspectives are less incompatible than their labels suggest: a principle, such as rewarding the contributions the organization most needs, can hold almost everywhere while its form depends on strategy. Becker and colleagues (1997, p. 41) called best practices "only a point of departure" for building a system that is "internally coherent and externally aligned." The meta-analytic evidence cuts across the categories too. Combs and colleagues (2006) aggregated 92 studies and estimated a correlation of .20 between high-performance work practices and organizational performance, stronger for systems than for single practices and stronger among manufacturers, which supports system effects alongside a contingency, industry, that none of the original theories placed at the centre.

7. What the Evidence Can and Cannot Show

Article 15 set out the most direct challenge to this literature: Wright, Gardner, Moynihan and Allen (2005) found HR practices correlated as strongly with past performance as with future performance, so reverse causation cannot be ruled out. Three further problems bear on SHRM's claims.

Measurement. Most studies ask one person, usually a senior HR manager, to describe practices across a whole organization. Gerhart, Wright, McMahan and Snell (2000) collected ratings from several respondents in 14 large organizations and found interrater reliabilities averaging .16 for individual practices in managerial jobs, .20 in hourly jobs and .21 for a 16-item scale (as summarized in Wright et al., 2001, pp. 875-876): informed people in the same firm often disagree about which practices it uses. Such error bears hardest on fit tests, which multiply a measure of practice by a measure of strategy; the product of two unreliable measures is less reliable than either. That last point is standard measurement reasoning, offered as one reason fit effects may be hard to detect, not a finding of the studies cited. Averaging the ratings of many respondents produced reasonably reliable measures, yet "single respondent studies continue to predominate" (Wright et al., 2001, p. 895). Wall and Wood (2005) concluded that the field's methodological limitations made the claim that HRM improves performance "premature."

Design. Guest, Michie, Conway and Sheehan (2003) studied 366 UK companies. With objective measures, greater use of HRM was associated with lower labour turnover and higher profit per employee, but "after controlling for previous years' performance, the association ceases to be significant"; the study "confirms the association between HRM and performance but fails to show that HRM causes higher performance." When Saridakis, Lai and Cooper (2017) set out to meta-analyse longitudinal studies, they found only eight, which gave a corrected correlation of .287, again stronger for systems than for single practices. That is a thin base for a field that routinely speaks of HR's "impact."

Direction. Using Canadian longitudinal workplace data with three time points, Dongwon Shin and Alison Konrad (2017) found that past high-performance work systems contributed to later productivity "as well as the reverse," with performance supplying the information and slack resources for further HR investment. The better question may be when deliberate HR choices, rather than prior success, can start that cycle.

None of this shows SHRM's central claims are false. It shows they are less secure than much HR writing implies, and that vertical fit, the idea most associated with the word "strategic," has the weakest support of all.

8. Bangladesh: Five Banks, One Workforce, and a Strategy Still Forming

A bank resolution in Bangladesh shows what alignment involves when strategy, structure and workforce must be rebuilt at once, under objectives set partly outside the firm. The facts below come from dated press reports; the analysis is this article's. The bank's internal HR decisions have not been published, and nothing here describes them.

On 16 September 2025 Bangladesh Bank's board approved a plan to merge five troubled Shariah-based banks, First Security Islami, Social Islami, Union, Global Islami and Exim, a process "expected to take at least two years to complete" (The Daily Star, 16 September 2025). When the government approved the merger in October, its press secretary said no employees would lose their jobs; the bank would be state-owned at first and privatised gradually over five years (bdnews24.com, 10 October 2025). Sammilito Islami Bank began operations on 2 December 2025, and its chairman stated the priority: "Our main goal will be regaining the trust of the depositors" (The Business Standard, 2 December 2025). It began operating as a single entity in August 2026.

The inherited workforce was large and divided. Bangladesh Bank put it at roughly 16,000 (The Financial Express, 7 October 2026); Bonik Barta counted 18,081 in October 2025, with annual salary costs of about Tk 1,977 crore, and the reports do not explain the difference. A November 2025 report noted that "each bank follows its own pay structure, with salaries for identical positions varying across institutions" and that a standardised salary plan was being prepared, and a Bangladesh Bank spokesperson said: "How much the salaries are cut is secondary; ensuring employees retain their jobs is more important" (The Financial Express/bdnews24.com, 27 November 2025). Cuts of up to 20 percent were reported (The Business Standard, 29 November 2025). Ranks and responsibilities were adjusted by August 2026, while 780 branches were still being rationalised (The Business Standard, 27 August 2026), but in October the challenge remained: "Each of the predecessor banks had its own organisational hierarchy, job structure, salary structure, working practices and management culture" (The Financial Express, 7 October 2026).

Three points follow from this article's concepts. First, horizontal fit has to come before vertical fit. Two officers doing the same job under one manager, paid on scales inherited from different banks, receive contradictory signals whatever the strategy says. Second, the stated objectives pull toward different HR profiles. Regaining depositors' trust is closest to Schuler and Jackson's quality-enhancement profile, which pairs some employment security with extensive training; pay cuts and branch rationalisation follow the cost-reduction profile. A job guarantee from one profile and pay cuts from the other, combined with demands for better service and stricter compliance, risk the mixture Becker and colleagues warned about: each policy is defensible, and together they tell staff they will be kept, paid less and asked for more. Third, the strategy is not the firm's alone. Job protection is a public-policy commitment, and planned privatisation means the eventual strategy may differ from today's. The matching model, which starts from a strategy the firm has chosen, says little where constraints on HR are part of the strategy and flexibility for a later owner may matter as much as fit now.

9. Diagnostic: How Well Do Your HR Practices Fit?

Choose one business unit you know well and rate each statement for it. Statements 1 to 5 concern vertical fit and statements 6 to 10 horizontal fit; totals range from 10 to 50. The statements and score bands are this article's teaching tool, based on the distinctions discussed above. They are not a validated instrument.

Vertical and horizontal fit in one business unit

Think of one business unit and rate how far each statement describes it today, not how it is meant to work.

Strongly Disagree Disagree Neutral Agree Strongly Agree
Senior managers can say, in a sentence or two, which employee behaviours our strategy depends on most.
Selection criteria for our critical roles were revised the last time our strategy changed.
What our appraisal system defines as good performance reflects what the strategy needs, not only general competencies.
Our training spending is concentrated on the capabilities the strategy depends on, not spread evenly across courses.
When a major strategic decision is being made, someone asks early whether the workforce can deliver it.
The behaviours our appraisal system rewards are the same ones that pay and promotion decisions reward.
Where we ask for teamwork, at least part of pay or recognition depends on team results.
People doing the same job under the same manager are managed under the same rules and pay structure.
Before introducing a new HR practice, we check whether it conflicts with practices already in place.
Employees in different teams would describe what the organization rewards in much the same terms.

Reading the result. Add statements 1 to 5 and 6 to 10 separately. A high horizontal and low vertical subtotal describes a coherent system that may be aimed at the wrong target. The reverse describes good intentions undermined by conflicting signals, often because new practices were added without retiring old ones. Statement 8 is the quickest test after a merger, and statement 10 is worth checking with employees themselves.

10. Decision Exercise: Nilachal Appliance Care Moves Upmarket

A quick story

Fictional case, constructed for teaching. The company, people and figures are invented.

Nilachal Appliance Care repairs air conditioners and refrigerators in Dhaka households and has competed on price for twelve years. Its 600 field technicians are paid mainly per completed job, induction lasts two weeks, supervisors are judged on jobs per technician per day, and annual turnover of about 50 percent is treated as a cost of business. The board has approved a new line: annual maintenance contracts for hospitals, bank branches and data rooms, with four-hour response guarantees, scheduled preventive visits, written service reports and safety compliance. Household repair still brings in about 70 percent of revenue.

Six months in, two corporate clients have complained of skipped preventive visits and missing reports, and a hospital cold room failed twice in one month. The operations director proposes adding a client-rating bonus to the per-job pay.

You lead HR at Nilachal Appliance Care. What do you recommend to the executive committee?

What the exercise is designed to show. The new strategy changed the behaviours needed from some technicians, not all. A good response starts from those behaviours, makes every practice that shapes them consistent, confines the change to that segment, and builds in a comparison.

11. Alignment as a Working Hypothesis

Four decades of research have made SHRM's founding instruction more precise and its evidence less certain. Horizontal fit has the better support: in steel lines, car plants and two meta-analyses, systems of mutually reinforcing practices are more strongly associated with performance than single practices. Vertical fit, the idea that named the field, remains plausible and weakly tested, perhaps because it lives in the content of practices that surveys do not capture, perhaps because single-respondent, cross-sectional designs detect interactions poorly. Beneath both lies the causality problem.

For a manager this suggests an order of work. Check horizontal consistency first, because contradictory signals can be found by inspection. State vertical fit as an explicit chain from strategy to behaviours to practices, so each link can be questioned. Keep flexibility to refit, and test changes so they could be shown to fail. The open question is the one the Sammilito case raises: whose strategy should HR fit when owners, regulators and the public all set objectives? The matching model assumes it away. Article 17 turns to the Harvard and Michigan models, and the Harvard model's attention to stakeholders offers one way to take it seriously.

12. MBA Assignment: An HR Fit Audit

Select one business unit of an organization you can examine: your employer (which you may disguise), or a company that publishes enough about its strategy and people practices in annual, sustainability or integrated reports.

Prepare a report of 2,500 to 3,000 words that:

  1. states the unit's business strategy in your own words, citing evidence, and derives the behaviours and capabilities it requires from two critical roles;
  2. maps the current practices that shape those roles (selection, training, appraisal, pay, promotion, job design and employee voice) and assesses the vertical fit of each, with reasons;
  3. identifies horizontal inconsistencies among the practices, including at least one possible deadly combination, and explains the mechanism by which it would affect behaviour;
  4. argues whether universalistic, contingency or configurational reasoning best explains the changes you would make, and where the strategy is plural or unsettled, says how you resolved that; and
  5. recommends changes and designs a feasible way to test whether they work, stating the comparison, measures, timescale and the trade-off between present fit and future flexibility.

Use at least five academic sources, including at least three from this article's reference list. Do not present an association between HR practices and performance as evidence of effect without stating the comparison behind it. Where information is unavailable, say so and explain how the gap limits your conclusions.

Assessment rubric (100 marks)

CriterionWhat a strong answer doesMarks
Strategy and required behavioursStates the strategy accurately from evidence and derives specific, defensible behaviours and capabilities for the two roles15
Vertical fit assessmentJudges each practice by its content and aim, not only its presence, and links each judgement to the required behaviours20
Horizontal fit analysisIdentifies real inconsistencies, explains the behavioural mechanism, and distinguishes deadly combinations from complementarities20
Theoretical framingApplies the universalistic, contingency and configurational perspectives accurately and handles plural or emergent strategy honestly15
Recommendations and evaluation designProportionate changes, a feasible comparison to test them, and explicit treatment of the fit-flexibility trade-off15
Use of sources and accuracy of citationUses academic and primary sources accurately and only for claims they support, with limits of the evidence stated10
Clarity and professional presentationClear structure, precise language, appropriate length5
Total100

13. Test Your Knowledge

MBA Knowledge Check: Strategic Human Resource Management

1. Which statement best matches Wright and McMahan's (1992) definition of strategic HRM?

2. In Baird and Meshoulam's (1988) model, what do external fit and internal fit refer to?

3. A cement producer competes mainly on being the lowest-cost supplier. Following Schuler and Jackson's (1987) linkages, which set of HR practices is most consistent with that strategy?

4. A consulting firm introduces cross-functional project teams and peer feedback, but annual bonuses are still set by ranking individuals on personal billable hours. Which concept best describes the problem?

5. A researcher hypothesizes that profit sharing raises bank performance only among banks following a Prospector strategy. Which perspective and test does this represent?

6. Ichniowski, Shaw and Prennushi (1997) found that once whole HR systems were in their model, the effect of any individual practice was essentially zero. What does this imply for a study that measures a single practice, such as incentive pay, and finds it related to productivity?

7. A survey of 400 firms finds that the presence of pay for performance is related to profitability just as strongly in cost-focused firms as in service-focused firms. The authors conclude that vertical fit does not matter. Which criticism, following Wright and Sherman (1999), is strongest?

8. Gerhart and colleagues (2000) found interrater reliabilities of about .20 for single-respondent reports of HR practices. What follows for research on vertical fit?

9. A CEO points to the company's rise in profit per employee since it adopted a package of high-commitment practices and says, "Our HR strategy caused this growth." In light of Guest and colleagues (2003) and Shin and Konrad (2017), which response is best supported?

10. Which assessment of HR alignment at Sammilito Islami Bank, as reported up to October 2026, is best supported by this article's analysis?

14. References

  1. Becker, B. E., Huselid, M. A., Pickus, P. S., & Spratt, M. F. (1997). HR as a source of shareholder value: Research and recommendations. Human Resource Management, 36(1), 39–47. https://doi.org/10.1002/(SICI)1099-050X(199721)36:1<39::AID-HRM8>3.0.CO;2-X (author-hosted copy: markhuselid.com)
  2. Delery, J. E., & Doty, D. H. (1996). Modes of theorizing in strategic human resource management: Tests of universalistic, contingency, and configurational performance predictions. Academy of Management Journal, 39(4), 802–835. https://doi.org/10.5465/256713
  3. Guest, D. E., Michie, J., Conway, N., & Sheehan, M. (2003). Human resource management and corporate performance in the UK. British Journal of Industrial Relations, 41(2), 291–314. https://doi.org/10.1111/1467-8543.00273
  4. Ichniowski, C., Shaw, K., & Prennushi, G. (1997). The effects of human resource management practices on productivity: A study of steel finishing lines. American Economic Review, 87(3), 291–313. https://www.jstor.org/stable/2951347
  5. MacDuffie, J. P. (1995). Human resource bundles and manufacturing performance: Organizational logic and flexible production systems in the world auto industry. Industrial and Labor Relations Review, 48(2), 197–221. https://doi.org/10.1177/001979399504800201 (author-hosted copy: Wharton)
  6. Saridakis, G., Lai, Y., & Cooper, C. L. (2017). Exploring the relationship between HRM and firm performance: A meta-analysis of longitudinal studies. Human Resource Management Review, 27(1), 87–96. https://doi.org/10.1016/j.hrmr.2016.09.005 (accepted manuscript: Kent Academic Repository)
  7. Schuler, R. S., & Jackson, S. E. (1987). Linking competitive strategies with human resource management practices. Academy of Management Executive, 1(3), 207–219. https://doi.org/10.5465/ame.1987.4275740
  8. Schuler, R., & Jackson, S. E. (2014). Human resource management and organizational effectiveness: Yesterday and today. Journal of Organizational Effectiveness: People and Performance, 1(1), 35–55. https://doi.org/10.1108/JOEPP-01-2014-0003
  9. Wright, P. M., & McMahan, G. C. (1992). Theoretical perspectives for strategic human resource management. Journal of Management, 18(2), 295–320. https://doi.org/10.1177/014920639201800205
  10. Wright, P. M., & Ulrich, M. D. (2017). A road well traveled: The past, present, and future journey of strategic human resource management. Annual Review of Organizational Psychology and Organizational Behavior, 4, 45–65. https://doi.org/10.1146/annurev-orgpsych-032516-113052

Other sources cited

  • Armstrong, M., & Brown, D. (2019). Strategic human resource management: Back to the future? A literature review (IES Report 517). Institute for Employment Studies and CIPD. employment-studies.co.uk
  • Arthur, J. B. (1994). Effects of human resource systems on manufacturing performance and turnover. Academy of Management Journal, 37(3), 670–687. https://doi.org/10.5465/256705
  • Baird, L., & Meshoulam, I. (1988). Managing two fits of strategic human resource management. Academy of Management Review, 13(1), 116–128. https://doi.org/10.5465/amr.1988.4306802
  • Combs, J., Liu, Y., Hall, A., & Ketchen, D. (2006). How much do high-performance work practices matter? A meta-analysis of their effects on organizational performance. Personnel Psychology, 59(3), 501–528. https://doi.org/10.1111/j.1744-6570.2006.00045.x
  • Devanna, M. A., Fombrun, C., & Tichy, N. (1981). Human resources management: A strategic perspective. Organizational Dynamics, 9(3), 51–67. https://doi.org/10.1016/0090-2616(81)90038-3
  • Dyer, L. (1985). Strategic human resources management and planning. Research in Personnel and Human Resources Management, 3, 1–30.
  • Fombrun, C. J., Tichy, N. M., & Devanna, M. A. (Eds.). (1984). Strategic human resource management. John Wiley & Sons.
  • Gerhart, B., Wright, P. M., McMahan, G. C., & Snell, S. A. (2000). Measurement error in research on human resources and firm performance: How much error is there and how does it influence effect size estimates? Personnel Psychology, 53(4), 803–834. https://doi.org/10.1111/j.1744-6570.2000.tb02418.x
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Bangladesh news sources

  • "Merger plan for five Islamic banks gets clearance." The Daily Star, 16 September 2025. thedailystar.net
  • "Government approves merger of five Shariah-based private banks." bdnews24.com, 10 October 2025. bdnews24.com
  • "As 'Sammilito Islami Bank' launches, questions rise over staff sustainability." Bonik Barta (English), 29 October 2025. en.bonikbarta.com
  • "Merged Islamic banks to reduce salaries to standardise pay, preserving jobs." The Financial Express (bdnews24.com), 27 November 2025. thefinancialexpress.com.bd
  • "5-bank merger: New Sammilito Islami Bank staff may face up to 20% salary cut." The Business Standard, 29 November 2025. tbsnews.net
  • "Sammilito Islami Bank begins operations; depositors to get up to Tk2 lakh refunds from next week." The Business Standard, 2 December 2025. tbsnews.net
  • "Bangladesh Bank reviews loan recovery, restructuring progress of Sammilito Islami Bank." The Business Standard, 27 August 2026. tbsnews.net
  • Barman, B. "Sammilito Islami Bank yet to shed overlapping footprint of 5 predecessors." The Financial Express, 7 October 2026. thefinancialexpress.com.bd

Verification notes: Wright and McMahan's (1992, p. 298) definition is quoted as given in Wright and Ulrich (2017, p. 46). Delery and Doty (1996) could not be read in full; its sample is described from Wright et al. (2001), which used the same data set, and its findings from Wright and Ulrich (2017). Miles and Snow (1984) is described through the usual summary of its argument, not from the article itself. Tichy, Fombrun and Devanna (1982) and Purcell (1999) are cited as quoted in Armstrong and Brown (2019); Tichy (1983), Devanna, Fombrun and Tichy (1981) and Lepak and Snell (1999) through Jackson, Jiang and Schuler (2017); Dyer (1985), Wright and Sherman (1999) and Wright and Snell (1998) through Wright and Ulrich (2017); Gerhart et al. (2000) figures as summarized in Wright et al. (2001). Arthur's sample size is from Huselid (1995, p. 641). Guest et al. (2003), Combs et al. (2006), Shin and Konrad (2017), Paauwe and Boselie (2005), Baird and Meshoulam (1988), Arthur (1994) and Wall and Wood (2005) were checked at abstract level, and every quotation from them is taken from the abstract. The diagnostic, the summary table in Section 6, the Nilachal Appliance Care case and the analysis of the Bangladesh case are original teaching material for this series.

Next in The Human Capital MBA series: Article 17 examines the Harvard and Michigan models of HRM.

FAQ

Is strategic HRM the same thing as having HR business partners or an HR director on the board?

No. Business partners and board membership describe the HR function's role and status, the subject of Article 14. Strategic HRM describes the pattern of practices across the organization and its relationship to strategy. An organization can have both partners and a board seat and still run practices that contradict its strategy, and a firm without an HR director can have a coherent pattern designed by its owners and line managers.

Can an organization have horizontal fit without vertical fit, or the reverse?

Yes, and the two cases fail differently. A tightly consistent system aimed at yesterday's strategy has horizontal fit and poor vertical fit: everything points the same way, in the wrong direction. A set of practices each chosen to support the strategy but never checked against each other can have vertical intent and poor horizontal fit, and the conflicting signals undo the intent. The diagnostic in Section 9 separates the two for this reason.

If some practices work almost everywhere, why worry about fit at all?

Because "works almost everywhere" usually describes a principle, such as rewarding the contributions that matter, while the content that makes it work differs between organizations. Delery and Doty found the universalistic approach explained the most variation in their bank sample, but contingency and configurational approaches explained some too, and the evidence that systems outperform individual practices means a good practice dropped into a conflicting system may achieve little.

Is the Michigan model the same as the matching model, and where does the Harvard model fit?

The approach of Fombrun, Tichy and Devanna (1984) is usually called both the Michigan model and the matching model, because it proposes matching HR systems and structure to strategy. The Harvard model of Beer and colleagues, published the same year, gives more weight to stakeholder interests and long-term consequences. Article 17 examines both in depth; this article uses the matching idea only as the starting point of the field.

Our strategy changes almost every year. Should HR change every year too?

Usually not in full. HR systems take time to affect behaviour, and constant redesign produces exactly the mixed signals horizontal fit warns against. Wright and Snell's distinction helps: aim for fit with the parts of strategy that are stable and build flexibility, such as broader skills and practices that can be reconfigured, for the parts that are not. If the strategy really changes every year, it may be worth asking whether it is a strategy or a sequence of plans.

Does strategic HRM apply to small firms without an HR department?

Yes. Every firm that hires, pays, trains and promotes people has a pattern of HR practices, whether or not anyone designed it. In a small firm the owner usually sets it, often informally, and the fit questions are the same. Baird and Meshoulam's link between HR and the organization's developmental stage is a reminder that a young firm's practices do not need to look like a large company's.

If research cannot prove that HR causes performance, why invest in aligning it?

Because the absence of proof is not proof of absence, and the costs of misalignment are often visible directly, for example in turnover or in behaviour that contradicts the strategy. The evidence supports caution in claims, not inaction. The practical response is to invest where the mechanism is clear and to test changes in ways that could reveal they did not work, such as staggered roll-outs or comparisons with similar units.

Is there a standard measure of HR fit we can use?

Not one that is validated for general use. Researchers have measured fit as interactions between practices and strategy, as distance from ideal types, or through clusters of practices, and each has weaknesses. Within an organization, the more useful approach is to trace each practice to the behaviour it rewards and to ask employees what they believe is rewarded; where their answers differ from management's, the gap is itself evidence of poor fit.

Key Points

  • ●Strategic HRM concerns the planned pattern of HR practices across an organization and its relationship to goals, which is different from the HR function's role or status.
  • ●The matching idea, traced to Devanna, Fombrun and Tichy in the early 1980s, holds that strategy, structure and HR systems should be aligned; Schuler and Jackson supplied a mechanism through the employee behaviours each strategy needs.
  • ●Vertical fit links HR to strategy and has weak empirical support, possibly because it lies in the content of practices that surveys do not measure; horizontal fit links practices to each other and has stronger support.
  • ●Delery and Doty's universalistic, contingency and configurational perspectives make different claims and require different tests; in their bank sample the universalistic approach explained the most variation.
  • ●Single-respondent, cross-sectional evidence, associations that vanish once prior performance is controlled, and reciprocal causation mean HR alignment should be treated as a hypothesis to test.

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