Because of the need to increase the HR contribution performance and effectiveness, and due to the globalization and the competition in small village world, it was obvious that more flexibility, responsiveness and quality are required in the HR practices. This need raised the Strategic HRM (SHRM). Armstrong defined the SHRM as "an approach to making decisions on the intention and plans of the organization concerning the employment relationship and its recruitment, training, development, performance management, reward and employees relations policies and practices" (Beardwell and Claydon, 2010). Between its extremes, soft and hard, HRM has three identified frameworks:
1. AMO Theory
This theory suggests that the organizational performance is the accumulation of employee's abilities, motivation and opportunities to participate in the decision making which when utilized properly will encourage employees and improve their performance. In this theory, HRM policies are manipulated to increase employees' ability through learning and development, increase employees motivation by granting them more involvement and empowerment and participation in the decision making which supposed to result in improved employees performance and ultimately improved organizational performance. Moreover, this theory recognizes the role of the front line managers in influencing employees attitude to improve their performance and organization's benefit.
2. Contingency Theory
Proponents of this theory argue that there is no best way of doing things, rather, management actions should vary in different situations. Internal and external factors need to be considered in different situations and dealt with in flexible way that guarantees the best outcome. Flexibility here is through HR policies. Three models were developed to show the best fit theory concept, these models are:
a) Lifecycle Model: This model suggests that HR policies should be different based on the organization's stage of development of lifecycle. For example, in the startup stage flexibility in HR polices is important to enable the business to grow faster. While in the growth stage when the business reach a certain size, formal HR policies and procedures should be written. Also, in the maturity stage when the business reaches its plateau and margins become less, HR strategy may move to more cost control. Finally, in the declining stage of the business life, the HR strategy moves to downsizing and redundancy actions.
b) Competitive Advantage Model: This model suggests that the overall organization's performance will improve when HR policies mutually reinforce the organization's choice of competitive strategy. For example, the cost reduction led the HR strategy to emphasize the efficiency by some hard HR techniques and the quality enhancement and innovation pushed HR strategy toward the added value concept by soft HR policies. From the previous example, it is clear that HR policies are linked to the organizational goals and the external context and resulted in improved performance in different situations.
c) Configurational Model: Marchington and Wilkinson (2008) suggested that this model seeks to derive an internally consistent set of HR policies that maximize horizontal integration and then link these to alternative strategy configuration in order to maximize vertical integration. Thus put simply, SHRM according to configurational theorists requires an organization to develop a HR system that achieves both horizontal and vertical integration, and a form of "idealized fit' (Beardwell and Claydon, 2010). In other words, this model recognizes the need for organization to achieve both vertical and horizontal goals through appropriate HR policies and practices.
3. The resource-based view of SHRM
This theory pays more attention to the internal resources for an organization more than evaluating the performance in terms of the external context. It looks at the HR department as a key strategic player in developing the organization's competitive advantage and employees as the key asset in developing and maintaining the competitive advantage. Based on this theory a framework called VRIO was developed to explore the ways an organization can achieve the competitive advantage:
Ø Value which consider how to increase the value of the organization by increasing the value of employees by increasing their efficiency and eventually the customer satisfaction and retention. This could be achieved by reducing the number of employees and improving their performance by more flexible working practices.
Ø Rarity by making employees unique through training and improve their skills.
Ø Inimitability by developing the employee's characteristics in their social context which is the organization. These characteristics should not be imitable by competitors in order to achieve the competitive advantage.
Ø Organization which suggests that organization should be organized in a way that can capitalize on adding value, rarity and inimitability.
Having gone through the soft HRM and hard HRM and all the three theoretical frameworks for HRM, it can be concluded that there is no best approach but a combination of more than one model might get better results because of more consideration of organization, employees and external factors which can result in an improved organizational performance. Now, we will zoom in to focus on the Occidental Oman Inc (Oxy) to examine the key skills it needs as an oil and gas company, the key positions and people and how Oxy uses the strategic HRM to recruit, select, develop and retain those key employees in order to make sure to have the best available people in the market to use them to achieve the organizational goals. But, first of all we will look at the context that Oxy has to consider as an important factor that can affect its HRM strategy. Omani culture is the context in this situation.