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THEORETICAL PERSPECTIVES IN ORGANISATION STRATEGY AND STRATEGIC

MANAGEMENT THEORY

Universalistic theor

It is also referred to as the best practice model, which is based on the assumption that there is a

set of superior/best HRM practices, and that adopting them will inevitably lead to superior

organizational performance

The idea that the adoption of certain best human resource practices would result in enhanced

organizational performance, manifested in improved employee attitudes and behaviors, lower

levels of absenteeism and turnover, higher levels of s!ills and therefore higher productivity,

enhanced "uality and efficiency and of course increased profitability#

$niversalistic perspective maintains that firms will see performance gains by identifying and

implementing best practice irrespective of the product mar!et situation, industry or location of the

firm#

%irms that have very distinctive management practices, distinctive human resources practices

which shape the core competences that determine how firms compete# &hat wor!s well in one

organization will not necessary wor! well in another because it may not fit its strategy,

technology or wor!ing practices# 'rganizational high performance wor! systems are highly idiosyncratic and must be tailored

carefully to each firms individual situation and specific conte(t in order toprovide ma(imum

performance#

)enchmar!ing is a valuable way of identifying areas of innovation and development that are

practiced to good effect elsewhere by leading companies#

Contin!enc theor

%or the contingency theory, otherwise !nown as best fit HRM, there are no universal prescription

of HR policies and practices# It is all contingent on the organizations conte(t, culture and its

business strategy

The best fit theory emphasizes the importance of ensuring that HR strategies are appropriate to

the circumstances of the organization, including the culture, operational processes and e(ternalenvironment#

HR strategies have to ta!e account of the particular needs of both the organization and its people#

It e(plores the close lin! between strategic management and HRM by assessing the e(tent to

which there is vertical integration between an organizations business strategy and its HRM

policies and practices

The vertical integration between business strategies or the ob*ective of the business and

individual behaviour and ultimately individual, team and organizational performance is at the fore

of core models of +HRM#

In vertical integration or fit where leverage is gained through procedures, policies and

processes is widely ac!nowledged to be a crucial part of any strategic approach to the

management of people#

The best fit therefore ensures an e(plicit lin! or relationship between internal people processes

and policies and the e(ternal mar!et in business strategy, and thereby ensures that competences

are created which have a potential to be a !ey source of competitive advantage#

ccording to the contingency approach , a firms approach to competition depends on, or ma!es

use of the talents and capabilities of employees, then HR practices would be more li!ely to have

an impact on performance- otherwise the connection between HR and performance might be

minimal#


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Con"i!#rational theor

strategys success turns on combining e(ternal fit and internal fit# firm with bundles of HR

practices should have a high level of performance, provided it also achieves high levels of fit withits competitive strategy#

.mphasis is given to the importance of bundling +HRM practices and competitive strategy so

that they are interrelated and therefore complement and reinforce each other#

ractices within bundles are interrelated and internally consistent, and has an impact on

performance because of multiple practices# .mployee performance is a function of both ability

and motivation# There are several ways in which employees can ac"uire needed s!ills 0such as

careful selection and training1 and multiple incentives to enhance motivation 0different forms of

financial and non2financial rewards#1

!ey theme that emerges in relation to best2practice HRM is that individual practices cannot be

implemented effectively in isolation but rather combining them into integrated and

complementary bundles is crucial#

In the configuration school, cohesion is thought li!ely to create synergistic benefits which in turn

enable the organizations strategic goals to be met#

The approach of bundling is holistic as it is concerned with the organization as a total entity and

addresses what needs to be done as a whole in order to enable it to achieve its corporate strategicob*ectives#

The notion of a lin! between business strategy and the performance of every individual in the

organization is central to fit or vertical integration# Internal fit advocates bundles of practice, to

ensure that organizations gain benefits from implementing a number of complementary practices

rather than only a single practice

Co$%etitive Theor

$nder this model, organizations need to wor! out the re"uired employee behaviors to implement

a chosen competitive strategy and devise supporting HR practices to enable those behaviors to be

encouraged in the wor!force# 3ertical integration can be e(plicitly demonstrated through the

lin!ing of a business goal to individual ob*ective setting, to the measurement and rewarding ofattainment of that business goal#

+HRM according to configuration theorists re"uires an organization to develop a HR system that

achieves both horizontal and vertical integration# The configuration approach contributes to the+HRM debate in recognizing the need for organizations to achieve both vertical and horizontal fit

through their HR practices, so as to contribute to an organizations competitive advantage and

therefore be deemed strategic#

The use of performance management practices and competency framewor!s are typically adopted

to provide for coherence across a range of HR activities


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STRATEGIC PLANNING AND IMPLEMENTATION CONSIDERATIONS ASSOCIATED &ITH

'EY AREAS O( HRM STRATEGY)

*) n HR strategy will add value to the organisation if it4

articulates more clearly some of the common themes which lie behind the achievement of other

plans and strategies, which have not been fully identified before- and

identifies fundamental underlying issues which must be addressed by any organisation or

business if its people are to be motivated, committed and operate effectively#

The first of these areas will entail a careful consideration of e(isting or developing plans and strategies to

identify and draw attention to common themes and implications, which have not been made e(plicit

previously#

The second area should be about identifying which of these plans and strategies are so fundamental that

there must be clear plans to address them before the organisation can achieve on any of its goals# Theseare li!ely to include4

wor!force planning issues

succession planning

wor!force s!ills plans

employment e"uity plans

blac! economic empowerment initiatives motivation and fair treatment issues

pay levels designed to recruit, retain and motivate people

the co2ordination of approaches to pay and grading across the organisation to create alignment

and potential une"ual pay claims

a grading and remuneration system which is seen as fair and giving proper reward for

contributions made

wider employment issues which impact on staff recruitment, retention, motivation etc#

a consistent performance management framewor! which is designed to meet the needs of all

sectors of the organisation including its people

career development framewor!s which loo! at development within the organisation at e"uipping

employees with 5employability5 so that they can cope with increasingly fre"uent changes in

employer and employment patterns


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policies and framewor!s to ensure that people development issues are addressed systematically 4

competence framewor!s, self2managed learning etc#

The HR strategy will need to show that careful planning of the people issues will ma!e it substantially

easier for the organisation to achieve its wider strategic and operational goals#

In addition, the HR strategy can add value is by ensuring that, in all its other plans, the organisation ta!es

account of and plans for changes in the wider environment, which are li!ely to have a ma*or impact on

the organisation, such as4

changes in the overall employment mar!et 2 demographic or remuneration levels

cultural changes which will impact on future employment patterns

changes in the employee relations climate

changes in the legal framewor! surrounding employment

HR and employment practice being developed in other organisations, such as new fle(ible wor!

practices#

%inding the right opportunity to present a case for developing an HR +trategy is critical to ensuring that

there will be support for the initiative, and that its initial value will be recognised by the organisation#

6iving a strong practical slant to the proposed strategy may help gain acceptance for the idea, such as

focusing on good management practice# It is also important to build 5early or "uic! wins5 into any new

strategy#

'ther opportunities may present the ideal moment to encourage the development of an HR +trategy42

a ma*or new internal initiative could present the right opportunity to push for an accompanying

HR strategy, such as a restructuring e(ercise, a corporate ac"uisition, *oint venture or merger

e(ercise#

a new e(ternally generated initiative could similarly generate the right climate for a new HR

strategy 2 e#g# )lac! economic empowerment initiatives#

In some instances, even negative news may provide the 5right moment5, for e(ample, recent

industrial action or employee dissatisfaction e(pressed through a climate survey#

+) Ma,in! the HR Strate! inte!ral to the or!anisation

The human resources practitioner should ensure that the HR +trategy is integrated with broader

organisational ob*ectives# bove all, it should ensure that the rest of the organisation accepts the +trategy#

To achieve this ob*ective, practitioners should42


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consult all sta!eholders on the nature of the strategy-

cultivate and develop allies and supporters of the strategy through the consultation process-

focus on the benefits which are being derived from the strategy through tal!ing to and persuading

others, and by mar!eting the benefits of the strategy with concrete e(amples of how it has helped-

chec! that there is real commitment to the strategy at all levels of the organisation-

give regular feedbac! on the implementation of the plan through employee newsletters,

e(hibitions etc-

where possible, build into the strategy "uantifiable outcomes which can be easily monitored and

evaluated, so that it is possible to show the effect-

ma!e the strategy part of the induction process 2 especially for senior managers#

-) A strate!ic h#$an reso#rce %lannin! $o.el

There is no single approach to developing a Human Resources +trategy# The specific approach will vary

from one organisation to another# .ven so, an e(cellent approach towards an HR +trategic Management

+ystem is evident in the model presented below# This approach identifies si( specific steps in developing

an HR +trategy42

*) Settin! the strate!ic .irection

+) Desi!nin! the H#$an Reso#rce Mana!e$ent Sste$

-) Plannin! the total /or,"orce

0) Generatin! the re1#ire. h#$an reso#rces

2) Investin! in h#$an reso#rce .evelo%$ent an. %er"or$ance

3) Assessin! an. s#stainin! or!anisational co$%etence an. %er"or$ance


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+ource4 +trategic Human Resource Management +ystem for the 78st 9entury# :aval ersonnel Tas!

%orce, +eptember 7;;;

The si( broad interconnected components of this system consist of three planning steps and three

e(ecution steps#

The top three components represent the need for planning# 'rganizations must determine their strategic

direction and the outcomes they see!# This is usually accomplished with some form of strategic planning#

9lassic strategic planning is a formal, top2down, staff2driven process# &hen done well, it is wor!able at atime when e(ternal change occurs at a more measured pace#

However as the pace and magnitude of change increases, the approach to strategic planning changes

substantially4

%irst, the planning process is more agile- changes in plans are much more fre"uent and are often

driven by events rather than made on a predetermined time schedule#


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+econd, the planning process is more proactive# +uccessful organizations no longer simply

respond to changes in their environment, they proactively shape their environment to ma(imize

their own effectiveness#

Third, the planning process is no longer e(clusively top2down- input into the process comes from

many different organizational levels and segments# This creates more employee ownership of the

plan and capitalises on the fact that often the most valuable business intelligence can come from

employees who are at the bottom of the organizational hierarchy#


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and in order to align business and HR you need to answer one !ey "uestion, 59an your organisation=s

internal capability deliver the organisations business goals>5

Many organisations cite their people as their primary source of competitive advantage# +uccessful

companies continuously identify and adopt innovative human resource management policies and practices

to sustain that advantage# More importantly, they structure wor! and design training, performance

management, pay, and reward policies to help members of the organization succeed in achieving desiredorganizational outcomes# In other words, they integrate and align HRM policies and practices to reinforce

employee behaviors that can best realize the leaders= strategic intent# In the most successful companies,

the set of policies and practices that collectively ma!e up a company=s HRM system is the criticalmanagement tool for communicating and reinforcing the leaders= strategic intent#

Recommended actions:-

9onduct an e(ternal environmental scan and evaluate its impact on the organisation

Identify the organisation=s vision, mission and guiding principles

Identify the mission=s outcomes and strategic goals

9onsult all relevant sta!eholders

.valuate the impact of legislation on the organisation

0)+ Desi!nin! the H#$an Reso#rce Mana!e$ent Sste$

This stage focuses on the selection, design and alignment of HRM plans, policies and practices# 3arious

options may be open to the organisation such as drawing on industry best practices#

.merging HRM policies and practices range from outsourcing certain non2core functions, adopting

fle(ible wor! practices 0telewor!, wor! from home1 and the increased use of information technology# :ot

every industry trend may be appropriate for a specific organisation# In addition, it is essential that a cost2

benefit analysis of implementing new HRM policies and practices be underta!en# %or e(ample, the costs


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0monetary and in allocation of resources1 of implementing a new *ob grading system may outweigh the

benefit of such an underta!ing# There may be more cost2effective alternatives available to the organisation

at this point in time#

articular HRM policies and practices may be necessary to support strategic organisational ob*ectives,

such as improving the retention of women in the organisation or promoting diversity, especially the

representation of designated groups amongst senior management#

good approach in selecting the appropriate HRM policies, procedures and practices is to identify the

appropriate HRM practices which support the organisation=s strategic intent as it relates to recruitment,

training, career planning and reward management#

Reco$$en.e. actions45

Identify appropriate human resource plans, policies and practices needed to support

organisational ob*ectives

Identify relevant human resource best practices

9onduct an employment systems review

0)- Plannin! the total /or,"orce

?etermining future business re"uirements, especially those relating to manpower re"uirements, represents

one of the most challenging tas!s facing human resource practitioners#

The development of a wor!force plan is a critical component of any human resource strategy and one of

the e(pected outcomes of human resource practitioners activities# ?espite this, manpower or wor!force

planning, as well as succession planning, has only recently en*oyed a resurgence in popularity# To some

e(tent this has been prompted by the need to develop employment e"uity and wor!place s!ills plans and

set numerical employment e"uity targets# The failure of many organisations to develop and implementwor!force planning is rather indicative of the lac! of strategic planning itself#


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&or!force planningis a systematic process of identifying the wor!force competencies re"uired to meet

the company=s strategic goals and for developing the strategies to meet these re"uirements# It is a

methodical process that provides managers with a framewor! for ma!ing human resource decisions based

on the organizations mission, strategic plan, budgetary resources, and a set of desired wor!force

competencies# &or!force planning is asystematic processthat is integrated, methodical, and ongoing# Itidentifies the human capital required to meet organisational goals , which consists of determining the

number and s!ills of the wor!ers re"uired and where and when they will be needed# %inally wor!forceplanning entails developing the strategies to meet these requirements , which involves identifying actions

that must be ta!en to attract 0and retain1 the number and types of wor!ers the organisation needs#

wor!force plan can be as simple or as comple( as the organisational re"uires# &or!force planning can

be conducted for a department, division or for the organisation as a whole# &hatever the level or approach

being adopted, it must nevertheless be integrated with broad2based management strategies#

In addition to wor!force planning, ensure that organisational structure and *obs ensure the efficient

delivery of services and effective management of the organisation as a whole#


?etermine the appropriate organisational structure to support the strategic ob*ectives

+tructure *obs 0competencies, tas!s and activities1 around !ey activities

?evelop a wor!force plan designed to support the organisations strategic ob*ectives

9ompile wor!force profiles, identifying designated groups, an inventory of current wor!force

competencies, competencies re"uired in the future and identified gaps in competencies

0)0 Generatin! the re1#ire. h#$an reso#rces


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This process focuses on recruiting, hiring, classifying, training and assigning employees based on the

strategic imperatives of the organisation=s wor!force plan#

comprehensive wor!place s!ills plan will identify appropriate training priorities based on the

organisations wor!force needs now and in the future# :ew recruitment practices may need to be adopted

to increase the representation of designated groups, or securing essential s!ills in the organisation#

comprehensive 5learnership strategy5 may assist in developing future wor!force needs, identified either in

terms of the organisations wor!force plan or re"uired in terms of industry blac! economic empowerment

charters#


.valuate recruitment and selection practices in light of the organisations strategic ob*ectives

?evelop and implement a comprehensive wor!place s!ills plan 0with a thorough training needs

analysis1

Implement a learnership strategy

dopt or clarify occupational levels and category classifications

0)2 Investin! in h#$an reso#rce .evelo%$ent an. %er"or$ance


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Traditional approaches to career planning, performance appraisals, reward management and employee

development must be re2appraised in light of the vision, characteristics and mission outcomes as reflected

in the HRM plans, policies, and practices#

?evelopment responses will aim to increase business s!ills, the application of business s!ills 0sometimes

called competencies1 and the behavioural elements 2 all of which contribute to an organisation=s effective

performance# In many ways, the +!ills ?evelopment legislation have re"uired organisations to re2

engineer their developmental methods and practices# :ew concepts such as lifelong learning and

recognising prior learning should form an integral component of the process of investing in employees#

9learly, where a wor!force planning e(ercise reveals that there is little pro*ected growth in the wor!force

or that promotional or career development opportunities are limited, strategies aimed at employee

retention will be very different from organisations which are e(periencing considerable growth and

e(pansion#

Investment initiatives for the individual, team and organisation are all geared to achieve high levels of

organisational performance# It is important that at an individual level, particularly for senior staff, that

they feel their development needs are agreed and that they are provided with the s!ills to do their *obs# t

a team level, it defines the individuals= ability to wor! fle(ibly with others and align individual and team

s!ills and activities to business goals 2 all of which ensures that the organisation is e"uipped to achieve itsgoals#

Reward strategies aim to align the performance of the organisation with the way it rewards its people,providing the necessary incentives and motivation to staff# Its components can be a combination of base

pay, bonuses, profit sharing, share options, and a range of appropriate benefits, usually based on mar!et or

competitor norms and the organisation=s ability to pay#



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Identify appropriate policies, procedures and practices in respect of

9areer pathing

erformance appraisals

.mployee development and learning

Reward Management 0compensation and benefits1

romotions and *ob assignments

+eparation

0)3 Assessin! an. s#stainin! or!anisational co$%etence an. %er"or$ance

%inally, few organizations effectively measure how well their different inputs affect performance# Inparticular, no measures may be in place for "uantifying the contribution people ma!e to organizational

outcomes or, more important, for estimating how changes in policies and practices, systems, or processes

will affect that contribution# Implementing clear "uantifiable measures, identifying milestones in the

achievement of specific organisational goals, and using concepts such as a 5balanced scorecard5 will

articulate the results of the HR +trategic lan in measurable terms# Regular evaluation of the plan will

also assist in fine2tuning the HR strategic plan itself#


.valuate organisation culture and climate


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Implement succession planning

.valuate HR strategy using "uantifiable measures, e#g# balanced scorecard

Revise and adapt HR strategy

&hile HR strategies must be developed to support the achievement of the organisation=s ob*ectives, it is a

two2way process# HR strategies can themselves be critical inputs in determining the strategic initiatives

for the organisation# fatal error, however, is to develop and implement HR strategies without having

regard for the goals and ob*ectives which the organisation has e(plicitly or implicitly identified#

common mista!e is the development of wor!place s!ills plans which are not lin!ed to any strategic goals

or ob*ectives or which have no affirmative action components#

+imilarly, the isolated identification of affirmative action numerical targets without first conducting a

wor!force and succession planning e(ercise is in most instances, simply meaningless#


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RELATIONSHIP 6ET&EEN THEORIES O( Strate!ic an. Strate!ic Mana!e$ent an. Mo.els o"

Strate!ic HRM )

Strate!ic Strate!ic Mana!e$ent Mo.els o" Strate!ic HRM

+trategic decision ta!es its

meaning from the discourse and

social practice within which it is

located

%ocus on strategic decision2

ma!ing with in the organisation

)ody of language2based

communication that operates at

different levels in the

organization

?ecisions are =recommunicated=

until it becomes embodied in

action

contingency analysis relies

e(clusively on e(ternal

mar!eting strategies and

disregards the internal

operational strategies that

influence HR practices and

performance

+HRM approach loo!s only at

the realization of surplus value

within product mar!ets rather

than at comple( contingent

variables that constitute the full

transformation process

9onceptualizing management in

terms of functions, contingenciesand s!ills and the leadership

competence of managers

chieving the goal of =close fit=

of business and HR strateg

The basic premise of the

typologies of HR strategyapproach is that a dominant HR

strategy is strongly related to a

specific competitive strategy

=+trategic= is no longer

fashionable in management

thought and discourse, having

gone from =buzzword to boo2

word=

Translating +trategies in to

olicies and ractices+

Identifies how to close the= gap=

between an employee=s potential

and actual performance level

chieve competitive advantage

through innovation, "uality,

leadership

?efining 5&hat are the strategic

goals of the business>

Implementing added2value

programmes without cost2

constraints.nsure vertical

Integration,

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