1
Chapter
2
Strategic Human Resource
Management
After reading this chapter, you should be able to:
Describe the differences between strategy formulation and
strategy implementation.
List the components of the strategic management process.
Discuss the role of the HR function in strategy formulation.
Describe
the linkages between HR and strategy
formulation.
Chapter
2
Strategic Human Resource
Management
Discuss
the more popular typologies of generic strategies
and the various HR practices associated with each.
Describe the different HR issues and practices associated
with various directional strategies.
List the competencies the HR executive needs to become
a strategic partner in the company.
Introduction
 The
goal of strategic management in an organization is to
deploy and allocate resources in a way that gives it a
competitive advantage.
 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.
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What is 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.
 Strategic human resource management is
the pattern of planned human resource
deployments and activities intended to enable
an organization to achieve its goals.
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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.
 Strategy
Implementation: 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.
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Model of the Strategic Management
Process
Strategy Implementation
HR Practices
Strategy Formulation
External
Analysis
Opportunities
Threats
Mission
Goals
Strategic
Choice
Internal
Analysis
Strengths
Weaknesses
McGraw-Hill/Irwin
Human
Resource
Needs
Skills
Behavior
Culture
Recruiting,
Training,
Performance management,
Labor relations,
Employee relations,
Job analysis
Job design,
Selection,
Development,
Pay structure,
Incentives,
Benefits
Human
Resource
Capability
Skills,
Abilities,
Knowledge
Firm
Performance
Productivity,
Quality,
Profitability
Human
Resource
Actions
Behaviors,
Results
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
The Role of HRM in Strategy
Formulation
Administrative Linkage — Lowest level of integration; HRM
function's attention is focused on day-to-day 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.

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Strategy Formulation
External
analysis
Opportunities
Threats
Mission
Strategic
Choice
Goals
Internal
analysis
Strengths
Weaknesses
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Strategy Formulation
 Five
components of the strategic management process:
 A mission
is a statement of the organization's reasons for being.
 Goals are what the organization hopes to achieve in the medium-to
long-term future
 External analysis consists of examining the organization's
operating environment to identify strategic opportunities and threats.
 Internal analysis attempts to identify the organization's strengths
and weaknesses.
 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.
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Strategy Implementation
Organizational
structure
Types of
Information
Product
market
strategy
Performance
Reward
systems
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Task design
Selection,
training, and
development
of people
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HRM Practices




•


Job Analysis - the process of getting
detailed information about jobs.
Recruitment - the process through
which the organization seeks
applicants.
Training - a planned effort to
facilitate learning of job-related
knowledge, skills, and behavior.
Job design - making decisions about
what tasks should be grouped into a
particular job.
 Selection - identifying the
applicants with the appropriate
knowledge, skills, and ability.
 Development - the acquisition of
knowledge, skills, and behavior that
improves employees' ability to meet
the challenges of future jobs.
Performance management - helps ensure that employees’ activities and
outcomes are congruent with the organization’s objectives.
Pay structure, incentives, and benefits.
Labor and employee relations.
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
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Strategic Types
Generic Strategies —
Michael Porter has hypothesized
that competitive advantage comes
from creating value by:
Porter's
 reducing
costs (overall cost
leadership), or
 charging a premium price for a
differentiated product or service
(differentiation).
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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.
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Directional Strategies
External Growth
Strategy
Downsizing
Acquisitions
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Concentration
Strategy
Internal Growth
Strategy
Mergers
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The Role of HR in Providing a
Competitive Advantage
Emergent
Strategies - Those that evolve from the
grass roots of the organization.
 What
actually is done versus what is planned.
 HR plays an important role in facilitating the
communication of emergent strategies between levels in
the hierarchy.
Enhancing
Firm Competitiveness
 By
developing a rich pool of talent, HR can assure the
company's ability to adapt to a dynamic environment.
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Strategic Human Resource
Executives
Four
basic competencies:
 Business
Competencies - Understanding the company's
economic and financial capabilities.
 Professional/Technical Knowledge - In HR practices
such as selection techniques and compensation systems.
 Change Processes or Organizational Development
Techniques - The ability to diagnose the need for change
and develop and implement the appropriate intervention.
 Integration Competencies - A generalist perspective with
the skills of a specialist in the above three areas.
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Human Resource Competencies
Professional and
Technical
Knowledge
Business
Competence
HR Professional
Integration
Competence
McGraw-Hill/Irwin
Ability to
Manage Change
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