HUMAN RESOURCEMANAGEMENT

STRATEGIC HUMANRESOURCE MANAGEMENT

CHAPTER NO. 8

AFTER STUDYING THIS CHAPTER YOU SHOULD BE ABLE TO:

Describe the level of strategy and types of integration.

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.

Illustrate and explain each of the seven steps in the HR Scorecard approach to creating HR systems.

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.

STRATEGY

LEVELS OF STRATEGY1. 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 OFSTRATEGY IN ORGANIZATIONS

CORPORATION

Textiles UnitChemicals

UnitAuto Parts

Unit

Finance R&DManufacturin

gMarketing

1. Corporate-Level Strategy

What business are we in?

2. Business-Level Strategy

How do we compete?

3. Functional-Level Strategy

How do we support the business-level

strategy?

LEVELS OF 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

STRATEGYReduces the company’s size

d.GEOGRAPHIC EXPANSION STRATEGY

Takes the company abroad.

1. CORPORATELEVEL

STRATEGY

LEVELS OF STRATEGY Cont . . .

A firm seeks to be unique in its industry along

dimensions that are widely valued by buyers.

b.DIFFERENTIATION

A firm seeks to carve out a market niche, and compete by providing a product or

service customers can get in no other way.

c.FOCUS

The enterprise aims to become the low-cost leader

in an industry.

a.COST

LEADERSHIP

2. BUSINESS LEVEL/

COMPETITIVE STRATEGY

LEVELS OF STRATEGY Cont . . .

3. FUNCTIONALLEVEL

STRATEGY

Identify the basic courses of action that each department will pursue in order to help the business attain its competitive

goals.

INTEGRATION

It is the heart of HRM. It takes two forms:

INTEGRATION

Vertical Integratio

n

Horizontal Integratio

n

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.

VERTICAL INTEGRATION

Overall Objectives & Strategy of

Business

HR Practices

HORIZONTAL INTEGRATION

The extent to which the component activities of an HR

function are integrated and relate to each other.HORIZONTAL

INTEGRATION

HRPRACTICES

Resourcing

T & D

Motivation

Maintenance

HR STRATEGY: STRATEGIC FIT

Training Rewards

Corporate Strategy

Business Strategy

HR Strategy

HR System

(Performance Management)

THE ROLE OF HRM INSTRATEGY FORMULATION

• 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.

ADMINISTRATIVE LINKAGE

• The strategic business planning function develops the plan and then

informs the HRM function of the plan. HRM then helps in the implementation.

ONE-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.

TWO-WAY LINKAGE

• Is based on continuing, rather than sequential, interaction. The HR

executive is an integral member of the strategic planning team.

INTEGRATIVE LINKAGE

THE ROLE OF HRM INSTRATEGY FORMULATION Cont . . .

HR Function

HR Function

HR Function

HR Function

StrategicPlanning

StrategicPlanning

StrategicPlanning

StrategicPlanning

Administrative

Linkage

One-way Linkage

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 STRATEGICMANAGEMENT PROCESS

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 FORMULATION

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 STRATEGICMANAGEMENT PROCESS

HR PRACTICES• Recruiting • Training• Performance Management • Labor relations • Employee • Job analysis• Job design • Selection• Development • Pay structure • Incentives• Benefits

FirmPerformanceProductivity,

Quality,Profitability

HumanResourceActions

Behaviors,Results

HumanResourceCapability

Skills,Abilities,

Knowledge

HUMANRESOURCE

NEEDS

• Skills• Behavior• Culture

Mission Goals StrategicChoice

INTERNALANALYSIS

(Strengths &Weaknesses)

EXTERNALANALYSIS

(Opportunities &Threats)

Strategy Formulation

StrategyImplementation

STRATEGYFORMULATION

GOALSMISSIONSTRATEGIC

CHOICE

INTERNALANALYSIS

(Strengths &Weaknesses

EXTERNALANALYSIS

(Opportunities& Threats)

STRATEGY FORMULATION Cont . . .

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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2

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4

5

Five Components of the Strategic Management Process:

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

OrganizationalStructure

Types ofInformation

Task Design

Selection,Training, andDevelopment

of people

Rewardsystems

ProductMarketStrategy

Performance

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

Conclusion & Recommendations:What alternative strategies are available

Analyze:What are the Issues/problem/business needs

Resource Planning:What resource will we need

How will we obtain these resource

Action Planning:What problems may occur and how we will

overcome

Benefits:How do they satisfy the business needs

How do they benefit individual employees

Diagnose:Why issues occur/Causes

What factors are influencing the situation

STRATEGIC IMPLEMENTATION OF HRM

StrategicStaffing

Strategic Human

Resource Development

Strategic Performance Management

Strategic Compensatio

n Management

TRADITIONAL Vs. STRATEGIC HRM

DIMENSION TRADITIONAL HR STRATEGIC HR

Accountability HR Specialists. Line Managers & HR Specialists.

Importance

Managing people to facilitate

the activities.

HR strategy formulation &

implementation in alignment with organizational

strategy.

Role of HRCustodian of HR policy

implementation & compliance.

Strategic Business Partners.

Approach Orientation

Ritualistic, Reactive Activities.

Proactive, Business-oriented Results.

Major Function People Development.

People and Organization’s

Development in line with the Business

Objectives.

THE HR SCORECARD APPROACH

HR SCORECAR

D

Measures the HR function’s effectiveness and efficiency in producing employee behaviors

needed to achieve the company’s strategic goals.

CREATING AN HR

SCORECARD

Must know what the company’s strategy is. 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

Achieve Strategic Goals

HR Activities

Emergent Employee Behaviors

Strategically Relevant

Organizational Outcomes

Organizational

Performance

THE HR SCORECARD APPROACH TOFORMULATING HR POLICIES,ACTIVITIES, AND STRATEGIES

USING THE HR SCORECARD APPROACH

Define the Business Strategy.

Outline the Company’s Value Chain.

Identify the Strategically Required Organizational Outcomes.

Identify the Required Workforce Competencies and Behaviors.

Identify the Strategically Relevant HR System Policies and Activities.

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5

Design the HR Scorecard Measurement System.

Periodically Evaluate the Measurement System.

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Levels OfStrategy

Corporate Level Strategy

STRATEGIC HUMANRESOURCE

MANAGEMENT

Components of the StrategicManagement

Process

Sequence Of HR Strategic

Formulation

Strategic Implementation

Of HRM

StrategicStaffing

Strategic Human Resource

Development

Traditional Vs. Strategic HRM

Strategic HR Relationships

CHAPTER : 10

Management Quality Circle

Business/Competitive Level

Strategy

Operational Level Strategy

Diversification StrategyVertical

Integration Strategy

Consolidation Strategy

Geographic Expansion Strategy

Cost Leadership Strategy

Differentiation Strategy

FocusStrategy

Integration VerticalIntegration

Horizontal Integration

Role of HRM inStrategy

Formulation

Administrative Linkage

One-WayLinkage

Two-WayLinkage

IntegrativeLinkage

StrategyFormulation

Strategy Implementation

1. Analyze

4. ActionPlanning

2. Diagnose 3. Conclusion & Recommendation

5. ResourcePlanning 6. Benefits

Strategic Performance Management

Strategic Compensation Management

Accountability Importance Role of HR Approach Orientation Major Function

HR Activities Emergent Employee Behaviors Strategically Relevant Organizational Outcomes Organizational Performance Achieve Strategic Goals

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.