HUMAN RESOURCE
MANAGEMENT
STRATEGIC HUMAN
RESOURCE MANAGEMENT
CHAPTER NO. 8
AFTER STUDYING THIS CHAPTER YOU SHOULD BE ABLE TO:
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Describe the level of strategy and types of integration.
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Illustrate and explain each of the seven steps in the HR Scorecard
approach to creating HR systems.
Explain the role of HRM in strategy formulation.
The process and components of strategic management
Describe HR strategic formulation and implementation
Differentiate between traditional and strategic HRM
Link of HR Plan and Strategy with Organizational objectives and
goals.
STRATEGY
STRATEGY
The direction and scope of an organization over the long
term, which achieves competitive advantage for the
organization through its configuration of resources within a
changing environment and to fulfill stakeholder
expectations.
LEVELS OF STRATEGY
1. CORPORATE LEVEL
STRATEGY
Relates to the overall scope of the organization, its structures and
financing, and the distribution of resources between its different
constituent parts.
2. BUSINESS/COMPETITIVE
LEVEL STRATEGY
Refers how the organization competes in a given market, its
approaches to product development and to customers .
3. OPERATIONAL LEVEL
STRATEGY
It is concerned with how the various subunits-marketing, finance,
manufacturing and so on – contribute to the higher level strategies.
THREE LEVELS OF
STRATEGY IN ORGANIZATIONS
1. Corporate-Level
Strategy
What business are we in?
CORPORATION
2. Business-Level
Strategy
How do we compete?
Textiles Unit
Chemicals Unit
Auto Parts Unit
3. Functional-Level
Strategy
How do we support the
business-level strategy?
Finance
R&D
Manufacturing
Marketing
LEVELS OF STRATEGY
1. CORPORATE
LEVEL
STRATEGY
a.
DIVERSIFICATION
STRATEGY
Implies that the firm will expand
by adding new product lines.
b.
VERTICAL
INTEGRATION
STRATEGY
Means the firm expands by, perhaps,
producing its own raw materials, or
selling its products direct.
c.
CONSOLIDATION
STRATEGY
Reduces the company’s size
d.
GEOGRAPHIC
EXPANSION
STRATEGY
Takes the company abroad.
LEVELS OF STRATEGY Cont . . .
2. BUSINESS
LEVEL/
COMPETITIVE
STRATEGY
a.
COST LEADERSHIP
The enterprise aims to become
the low-cost leader in an
industry.
b.
c.
DIFFERENTIATION
FOCUS
A firm seeks to be unique in its
industry along dimensions that
are widely valued by buyers.
A firm seeks to carve out a
market niche, and compete by
providing a product or service
customers can get in no other
way.
LEVELS OF STRATEGY Cont . . .
3. FUNCTIONAL
LEVEL
STRATEGY
Identify the basic courses of action that each
department will pursue in order to help the
business attain its competitive goals.
INTEGRATION
INTEGRATION
It is the heart of HRM. It takes two forms:
Vertical
Integration
Horizontal
Integration
VERTICAL INTEGRATION
This is a general qualitative estimate of the
extent to which HR’s activities and objectives
are aligned with the overall objectives &
strategy of the enterprise as a whole.
Overall Objectives
& Strategy of
Business
HR Practices
VERTICAL
INTEGRATION
HORIZONTAL INTEGRATION
The extent to which the component
activities of an HR function are
integrated and relate to each other.
Resourcing
T&D
HR
PRACTICES
Motivation
Maintenance
HR STRATEGY: STRATEGIC FIT
Corporate Strategy
Business Strategy
HR Strategy
HR System
Training
(Performance Management)
Rewards
THE ROLE OF HRM IN
STRATEGY FORMULATION
ADMINISTRATIVE
LINKAGE
•Lowest level of integration; HRM
function's attention is focused on day-today activities. No input from the HRM
function to the company's strategic plan is
given.
ONE-WAY
LINKAGE
•The strategic business planning function
develops the plan and then informs the
HRM function of the plan. HRM then
helps in the implementation.
TWO-WAY
LINKAGE
•Allows for consideration of human resource
issues during the strategy formulation
process. The HRM function is expected to
provide input to potential strategic choices
and then help implement the chosen option.
INTEGRATIVE
LINKAGE
•Is based on continuing, rather than
sequential, interaction. The HR
executive is an integral member of the
strategic planning team.
THE ROLE OF HRM IN
STRATEGY FORMULATION Cont . . .
HR
Function
Strategic
Planning
Administrative
Linkage
HR
Function
Strategic
Planning
One-way
Linkage
HR
Function
Strategic
Planning
HR
Function
Strategic
Planning
Two-way
Linkage
Integrative
Linkage
STRATEGIC MANAGEMENT
Strategic Management is a process for analyzing a
company's competitive situation, developing the
company's strategic goals, and devising a plan of
action and allocation of resources that will help a
company achieve its goals.
COMPONENTS OF THE STRATEGIC
MANAGEMENT PROCESS
STRATEGY
FORMULATION
Strategic planning groups decide on a strategic
direction by defining the company's mission and
goals, its external opportunities and threats, and its
internal strengths and weaknesses.
The organization follows through on the strategy
that has been chosen. This includes structuring the
organization, allocating resources, ensuring that
the firm has skilled employees in place, and
developing reward systems that align employee
behavior with the strategic goals.
STRATEGY
IMPLEMENTATION
MODEL OF THE STRATEGIC
MANAGEMENT PROCESS
Strategy
Formulation
Strategy
Implementation
EXTERNAL
ANALYSIS
HR PRACTICES
(Opportunities &
Threats)
Mission
Goals
Strategic
Choice
INTERNAL
ANALYSIS
(Strengths &
Weaknesses)
HUMAN
RESOURCE
NEEDS
• Skills
• Behavior
• Culture
• Recruiting
• Training
• Performance
Management
• Labor relations
• Employee
• Job analysis
• Job design
• Selection
• Development
• Pay structure
• Incentives
• Benefits
Human
Resource
Capability
Skills,
Abilities,
Knowledge
Human
Resource
Actions
Behaviors,
Results
Firm
Performance
Productivity,
Quality,
Profitability
STRATEGY
FORMULATION
EXTERNAL
ANALYSIS
(Opportunities
& Threats)
MISSION
STRATEGIC
CHOICE
GOALS
INTERNAL
ANALYSIS
(Strengths &
Weaknesses
STRATEGY FORMULATION Cont . . .
Five Components of the Strategic Management Process:
1
A mission is a statement of the organization's reasons
for being.
2
Goals are what the organization hopes to achieve in the
medium-to long-term future.
3
External analysis consists of examining the organization's
operating environment to identify strategic opportunities
and threats.
4
Internal analysis attempts to identify the
organization's strengths and weaknesses.
5
Strategic choice is the organization's strategy, which
describes the ways the organization will attempt to fulfill its
mission and achieve its long term goals.
HRM NEEDS IN STRATEGIC TYPES
Different strategies require different types of
employees.
Role behaviors are the behaviors required of an
individual in his or her role as a jobholder in a social
work environment.
Cost strategy firms seek efficiency and therefore carefully
define the skills they need in employees and use worker
participation to seek cost-saving ideas.
Differentiation firms need creative risk takers.
STRATEGY IMPLEMENTATION
Organizational
Structure
Types of
Information
Product
Market
Strategy
Task Design
Performance
Reward
systems
Selection,
Training, and
Development
of people
STRATEGIC HRM
Strategic human resource management is the pattern of planned
human resource deployments and activities intended to enable an
organization to achieve its goals.
Human
Resource
Managers
Should:
 Have input into the strategic plan.
 Have specific knowledge of the
organization’s strategic goals.
 Know what types of employee skills,
behaviors, and attitudes are needed to
support the strategic plan, and
 Develop programs to ensure that employees have
those skills, behaviors, and attitudes.
SEQUENCE OF HR STRATEGIC FORMULATION
Analyze:
What are the Issues/problem/business needs
Diagnose:
Why issues occur/Causes
What factors are influencing the situation
Conclusion & Recommendations:
What alternative strategies are available
Action Planning:
What problems may occur and how we will
overcome
Resource Planning:
What resource will we need
How will we obtain these resource
Benefits:
How do they satisfy the business needs
How do they benefit individual employees
STRATEGIC IMPLEMENTATION OF HRM
Strategic
Staffing
Strategic
Compensation
Management
Strategic Human
Resource
Development
Strategic
Performance
Management
TRADITIONAL Vs. STRATEGIC HRM
DIMENSION
Accountability
Importance
TRADITIONAL HR
STRATEGIC HR
HR Specialists.
Line Managers & HR
Specialists.
Managing people to facilitate
the activities.
HR strategy
formulation &
implementation in
alignment with
organizational strategy.
Role of HR
Custodian of HR policy
implementation &
compliance.
Strategic Business
Partners.
Approach
Orientation
Ritualistic, Reactive
Activities.
Proactive, Businessoriented Results.
People Development.
People and
Organization’s
Development in line
with the Business
Objectives.
Major Function
THE HR SCORECARD APPROACH
HR
SCORECARD
Measures the HR function’s effectiveness
and efficiency in producing employee
behaviors needed to achieve the company’s
strategic goals.
 Must know what the company’s strategy is.
CREATING
AN HR
SCORECARD
 Must understand the causal links between HR
activities, employee behaviors, organizational
outcomes, and the organization’s performance.
 Must have metrics to measure all the activities
and results involved.
STRATEGIC HR RELATIONSHIPS
HR
Activities
Emergent
Employee
Behaviors
Strategically
Relevant
Organizational
Outcomes
Organizational
Performance
Achieve Strategic
Goals
THE HR SCORECARD APPROACH TO
FORMULATING HR POLICIES,
ACTIVITIES, AND STRATEGIES
USING THE HR SCORECARD APPROACH
1
Define the Business Strategy.
2
Outline the Company’s Value Chain.
3
Identify the Strategically Required Organizational
Outcomes.
4
Identify the Required Workforce Competencies
and Behaviors.
5
Identify the Strategically Relevant HR System
Policies and Activities.
6
Design the HR Scorecard Measurement System.
7
Periodically Evaluate the Measurement System.
Levels Of
Strategy
STRATEGIC HUMAN
RESOURCE
MANAGEMENT
Corporate Level
Strategy
Business/Competitive
Level Strategy
Diversification
Strategy
Vertical Integration
Strategy
Consolidation
Strategy
Geographic
Expansion Strategy
Cost Leadership
Strategy
Differentiation
Strategy
Focus
Strategy
Vertical
Integration
Horizontal
Integration
Role of HRM in
Strategy Formulation
Administrative
Linkage
One-Way
Linkage
Components of the
Strategic
Management Process
Strategy
Formulation
Strategy
Implementation
Strategic
Implementation Of
HRM
Traditional Vs.
Strategic HRM
Strategic HR
Relationships
CHAPTER : 10
Management
Quality Circle
Integration
Sequence Of HR
Strategic Formulation
Operational Level
Strategy
Two-Way
Linkage
1. Analyze
2. Diagnose
3. Conclusion &
Recommendation
4. Action
Planning
5. Resource
Planning
6. Benefits
Strategic
Staffing
Accountability
Integrative
Linkage
Strategic Human
Strategic Performance Strategic Compensation
Resource Development
Management
Management
Importance
Role of HR
 HR Activities
 Emergent Employee Behaviors
 Strategically Relevant Organizational Outcomes
 Organizational Performance
 Achieve Strategic Goals
Approach
Orientation
Major Function
THOUGHT OF THE DAY
“If an HR person is trying to choose
people for an organization, knowing their
values is very important-if they are not
consistent with the organization’s values
they are not likely to stay very long.”
Professor, Roger Collins.