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BUSINESS STRATEGY & HR
STRATEGY
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APPROACHESTOTHEDEVELOPMENT
OF HR STRATEGIES
Best- fit approach
Best practice approach
Bundling approach
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BEST- FIT
Linking HR strategy with business strategy.
Analysis of business needs of the firm.
Development of HR strategies supportive of businessinitiative.
Limitations:
Fails to align employee interest with the organization.
Considers HR as reactive rather than proactive.
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BEST- PRACTICE
Organizations should adopt the best practice irrespective ofthe context Superior management practices can be easily identified and
transferred across organizations. 7 best practices are
Employment security Selective hiring Self-managed teams High- compensation contingent on performance Training
Reduction of status differential Sharing information
Limitation- less consensus on best practices, it is not clear what goals
are being served by best practices
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BUNDLING/ HR BUNDLES APPROACH
Development and implementation of several HR
practices together so that they are interrelated
and internally consistent
Internal fit or horizontal integration Integration can take place when HR personnel &
Line managers share their view on what & how
HR policies can be implemented
Examplehigh performance
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APPROACHESFORACHIEVINGSTRATEGICFIT
ApproachesCompetitive
strategy
Organizationaltypology
Life cycleapproach
Focus Differentiation
Defender Prospector Analyzer
Start-up Growth Maturity Decline
Costleadership
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LINKING BUSINESS STRATEGY (PORTER) AND HRSTRATEGY( SCHULER & JACKSON)
Result oriented
Short-term focus andquantities (Volumes)
Suitable for repetitive &predictable business
FMCG, Retailers(Reliance fresh, Bigbazaar, Pantaloon) HUL,P&G
1. Short-term performancemeasures( result/
outcomes)2. Efficiency (explicit job
description, specialized jobassignments)
3. Hierarchical pay, fewincentives
4. Narrow career path,limited training5. Limited employment
security6. Limited participation
Cost leadership Utilization HR Strategy
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Long term focus
Firm distinguishes itsproduct from itscompetitors (unique,extraordinary)
Creative job behaviour
Moderate/high concernfor quality and quantity
Apple, Nike, Sony etc.
External recruitment & hiringof people who bring in new
ideasBroad career paths
Extensive training
Equal and fair pay, manyincentives for creativity
Long term performancemeasures
High employee participation
Some employment security
Differentiation Facilitation HR Strategy
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Different segment ofmarket have different
needs
High concern forquality
Moderate concern for
quantity
Long/medium termfocus
Hiring employeesbelonging to the target
market Equal and fair pay with
many incentives
Broad career paths with
extensive training High employee
participation
Some employee security
Focus Accumulation HR strategy
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ORGANIZATION TYPOLOGY( MILES & SNOW)
& HR STRATEGY
Find changethreatening
Favour strategies thatencourage continuityand security
Bureaucratic approach
Planned and regularly
maintained policies toprovide for lean HR
Build human resources
Likely to emphasize
training programmes andinternal promotion
Defenders HR Strategy
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Thrive on change
Favour strategies ofproduct and marketdevelopment
Creative and flexible managementstyle
Have high quality human resourcesEmphasize redeployment andflexibility of HR
Little opportunity for long term HRPlanning
Acquire human resources
Likely to emphasize recruitment,selection and performance basedcompensation
Prospectors HR Strategy
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Seek to match newventures with the
present business setup
Followers venturesare not new to the
market, only new to thefirm
Low level of monitoringand coordination
Buy as well as makekey human resources
Emphasize HRplanning
Analyzers HR Strategy
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STAGESOFORGANIZATIONALLIFE & HR
PRACTICES
Start-up Flexible pattern of workRecruitment of highly motivated and committedemployees
Competitive pay
Little formality
No unions
Growth More sophisticated recruitment & selectionTraining and development
Performance management processesReward system
Focus on high commitment
Developing stable employee relations
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Maturity Attention to the control of labour costs
Focus on increasing productivity
Control compensation
Strained employee relations
Decline Emphasis on rationalization ofworkforce & downsizing
Abandoning some longstanding
practices to cut costsTrade unions have a marginalized role
Retraining and career consultingservices
Redeployment
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TYPEAND NUMBEROF PRODUCTS
Single product strategy-Functional structure
Subjective selection criteria
Less systematic appraisal
Rewards are distributed in
paternalistic way
Growth strategy Acquisition of unrelatedbusinesses
Different selection criteria fordifferent businesses
Performance appraisal &
rewards are impersonal
Development is cross functional& cross business
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ITC
It is not a pure-play FMCG company, sincecigarettes is its primary business. Other productsare foods, personal care, paper products, lifestyle,hotels & Agri business .
Business strategy
Cost leadership- FMCG sector
HR strategy- utilization strategy
Focus on short-term performance measures
Efficiency being a sought after virtue Narrow career paths & limited training
Compensation of employees at the junior /workmen level inthis sector is marginalized
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Diffentiation - Hotel & lifestyle
HR strategy Facilitation
Extensive training, external recruitment, high employeeparticipation, long term performance measures
Focus- Cigarettes business
maintainhighest standardsof quality owing to the growing business needs for export &catering to the luxury category after imposition of bans &heavy taxes.
HR strategy-
hiring is done from the target market( young engineers from thepremier institute of the market)
Broad career path with extensive training
Lot of employee empowerment & decision making power.
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HSBC
Strategic goal is to diversify into new marketsworld-wide.
HR at HSBC honour diversity within theorganization by building an inclusive workenvironment.
It recruits and maintains a unique blend of peoplewho come from different heritages andexperiences, with a wide range of cultures,
perspectives and talents.
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MC KINSEY
It offers premium management consulting servicesto clients internationally.
Business strategy- differentiator
People are the key differentiator Highly selective of their hires
Up or out policy
Emphasis on high performance level, feedback,
mentoring , credibility & integrity Many assignments come through its alumni
network.
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NOKIA
It caters to two segments of the market, one being theclasses and masses too.
Business strategy cost leadership, differentiator,prospector
A flat, networked organization with speed & flexibility indecision-making
HR practices-
Emphasis on innovation
Long term performance measures Extensive training
Professional & personal growth
Open & effective communication
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PANTALOON
The Cost leadership strategy-providing bestquality at the lowest price possible within themarket.
HR strategy-
Short-term performance measures- the salarystructure of the company is more based on theincentive oriented system.
High rigidity of the job description
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HOW JAPANESEMANUFACTURINGFIRMSALIGNTHEIRHUMANRESOURCEPOLICIESWITHBUSINESSSTRATEGIES: TESTINGACONTINGENCYPERFORMANCEPREDICTIONINA JAPANESECONTEXT.AUTHORS: TAKEUCHI, NORIHIKO1 SOURCE: INTERNATIONAL JOURNALOF HUMAN RESOURCEMANAGEMENT; JAN2009, VOL. 20 ISSUE 1, P34-56, 23P DOCUMENT TYPE: ARTICLE
This study examines the interaction effects of business-level strategyand HRM policies upon performance among Japanesemanufacturers, in response to the current debate around thecontingency fit proposition in the field of strategic human resourcemanagement (SHRM). Specifically, it was hypothesized that the three
generic strategic types -cost reduction, differentiation (innovation),and quality enhancement would moderate the relationship betweenparticular HRM policies and the performance of Japanesemanufacturing firms. The results, based on a sample of 312Japanese manufacturers operating in the domestic environment,reveal the existence of links between appropriate strategy and HRM
policies in predicting performance, providing strong support for theproposition of contingency fit from SHRM theory. The findings areused to discuss how Japanese manufacturers can align their HRMpolicies with business strategies to increase manufacturingperformance.
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BARRIERSTO STRATEGIC HR Short-term mentality/focus on current performance Inability of HR to think strategically
Lack of appreciation for what HR can contribute
Difficulty in quantifying many HR outcomes
Failure to understand line managers role as an HR
manager
Perception of human assets as higher-risk
investments
Incentives for changes that might arise
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SOMEOTHER ISSUES
HR practices are difficult to change andtransfer
It is easier for firms to find a new business
strategy to go with the existing HR practicesand competencies than to develop new HRpractices and competencies to match newbusiness strategies.