Chapter 3
Strategic Human Resource Management
Chapter 3: HR’s Strategic Challenges
 Strategic plan
• A company's plan for how it will match its internal
strengths and weaknesses with external
opportunities and threats in order to maintain a
competitive advantage.
 Three basic challenges:
1. The need to support corporate productivity and
performance improvement efforts.
2. Employees play an expanded role in employers'
performance improvement efforts.
3. HR must be more involved in designing —not just
executing—the company's strategic plan.
The Strategic Management Process
 Strategic management
– The process of identifying and executing the
organization’s mission by matching its
capabilities with the demands of its
environment.
 Strategy
– A strategy is a course of action.
– The company’s long-term plan for how it will
balance its internal strengths and weaknesses with
its external opportunities and threats to maintain a
competitive advantage.
Strategic Management Process (cont’d)
 Strategic management tasks
– Step 1: Define the Business and Its Mission
– Step 2: Perform External and Internal Audits
– Step 3: Translate the Mission into Strategic Goals
– Step 4: Formulate a Strategy to Achieve the
Strategic Goals
– Step 5: Implement the Strategy
– Step 6: Evaluate Performance
Steps in Strategic Management…
Step 1: Define the Business and Its Mission
Management experts use the terms Vision & Mission to help
define a company’s current & future business.
What business do we want to be in or expand, even lessen?
We choose our strategies to take us there.
Vision:
A statement of where the company intends to go, evokes
emotional feelings in organization members.
A mental image of a future desirable state.
What the business should be.
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Step 1: Define the Business and Its Mission
Why a shared Vision is necessary?
 A Strategic vision widely shared among all
employees functions similar to how a magnet
aligns iron filings.
 When all employees are to committed firm’s
long-term direction, optimum choices on
business decisions are more likely Individuals
and teams know intent of firm’s strategic
vision.
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Step 1: Define the Business and Its
Mission
 Mission
Spells out who the company is, what it does,
and where it’s headed.
Tells us who the company is supposed to be
now.
Mission is more specific & shorter term.
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Step 1: Define the Business and Its Mission
 Begins with thinking strategically about firm’s future
makeup and forming vision of firm’s future for 5-10
years.
 Task is to
– Inject sense of purpose into firm’s activities
– Provide long-term direction
– Give strong firm identity
– Decide WHO we are, WHAT we do, & WHERE we
are headed.
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Step 1: Define the Business and Its Mission
 An organization’s MISSION
– reflects management’s vision of what firm seeks to
do & become
– Provide clear view of what firm is trying to
accomplish for its customers
– Indicate intent to stake out a particular business
position.
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Steps in Strategic Management…
Step
2: Perform External and Internal Audits
Managers base their strategic
plans on methodical analysis of
their external & internal
situations. The basic point of a
strategic plan should be a
direction for the firm that makes
sense, in terms of external
opportunities & threats it faces
& internal strengths &
weaknesses it possesses.
SWOT Analysis
The use of a SWOT chart to
compile and organize the
process of identifying company
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Steps in Strategic Management…
Step 3: Translate the Mission Into Strategic Goals
Managers need long-term strategic goals.
What does the mission mean for the next 5 years?
What kinds of partnerships do we form? Short-term goals as well!
Step 4: Formulate a Strategy to Achieve the Strategic Goals
How are we going to get there?
Get the employees involved!!
People will not implement strategies they don’t buy into.
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Steps in Strategic Management…
Step 5: Implement The Strategy
Translate the strategy into action and results!
Involves all of the management functionsPlanning
Organizing
Staffing
Leading
Controlling
Step 6: Evaluate Performance
Strategic Control! – Keeps our strategies up to date.
Take constant corrective action as needed.
“Are all the resources we have contributing as planned to achieve our
goals?”
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Types of Strategic Planning
 Corporate – Level Strategy
 Business – Level Strategy
 Functional Strategy
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Types of Strategic Planning
 Corporate-level strategy
– Identifies the portfolio of businesses that, in total, comprise
the company and the ways in which these businesses relate
to each other.
– 4 strategies used here:
• Diversification strategy implies that the firm will expand by
adding new product lines.
• Vertical integration strategy means the firm expands by
producing its own raw materials, or selling its products
direct.
• Consolidation strategy reduces the company’s size.
• Geographic expansion strategy takes the company
abroad.
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Types of Strategic Planning . . .
 Business-level/competitive strategy
– Identifies how to build and strengthen the business’s long-term
competitive position in the marketplace.
– Breaks down each of the businesses
– At this stage we focus on strategies to affect a competitive
advantage:
• Cost leadership: the enterprise aims to become the low-cost
leader in an industry.
• Differentiation: a firm seeks to be unique in its industry along
dimensions that are widely valued by buyers.
• Focus: a firm seeks to carve out a market niche, and compete
by providing a product or service customers can get in no other
way.
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What is Competitive
Advantage?
 Competitive advantage
– Any factors that allow an organization to
differentiate its product or service from those of
its competitors to increase market share.
– Superior human resources are an important
source of competitive advantage
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Strategies in Brief
Company
Strategic Principle
Dell
Be direct
eBay
Focus on trading communities
General Electric
Be number one or number two in every
industry in which we compete, or get out
Southwest Airlines
Meet customers’ short-haul travel needs
at fares competitive with the cost of
automobile travel
Vanguard
Unmatchable value for the investor-owner
Wal-Mart
Low prices, every day
Examples of Achieving Strategic Fit…
 Michael Porter
– Emphasizes the “fit” point of view that all of the
firm’s activities must be tailored to or fit its
strategy, by ensuring that the firm’s functional
strategies support its corporate and competitive
strategies.
 Gary Hamel and C. K. Prahalad
– Argue for “stretch” in leveraging resources—
supplementing what you have and doing more
with what you have—can be more important than
just fitting the strategic plan to current resources.
HR and Competitive Advantage
 Competitive advantage
– Any factors that allow an organization to
differentiate its product or service from those of
its competitors to increase market share.
– *Superior human resources are an
important source of competitive
advantage*
HR and Competitive Advantage
To be continued…..
Thanks