Strategic HRM

Overview of Strategic Management

3–2
Levels of Strategic Management
 SHRM
– The linking of HRM with strategic goals & objectives in
order to improve business performance & develop
organizational cultures that foster innovation & flexibility.
– Formulating & executing HR systems—HR policies &
activities—that produce the employee competencies &
behaviors the company needs to achieve its strategic aims.
 Strategic Human Resource Management

Clarify the business

strategy

SHRM is the linking of

the human resource Evaluate &
refine Realign the HR
function with the functions & key
company’s strategies to people practices
accomplish that
strategy. Realization of
business
strategies &
results Create needed
competencies
and behaviors
 Step One: Mission, Vision, and Values

 Mission

 Strategic Vision

 Core Values
Example
 Step Two: Environmental Analysis

 Environmental Analysis
– The systematic monitoring of the major external forces influencing the
organization.
– External issues like economic factors, industry & competitive trends,
technological changes, govt. and legislative issues, social concerns,
demographic trends
 Five Forces Framework

New Entrants

Suppliers Rival Customers

Firms

Substitutes
Five Forces Framework
 Step Three: Internal Analysis
Competitive advantage through
people if they are Valuable,
Rare, Inimitable, Organized
(VRIO)

Cultural Audits to examine

values, attitudes, beliefs, and
expectations (VABEs)

- Internal Analysis of 3 C’s

The Human Capital Architecture - Forecasting Demand
- Strategic knowledge workers, - Forecasting supply
Core employees, supporting - Gap Analysis
workers
 Step Four: Formulating Strategy

• Corporate Strategy
– Growth & Diversification, M&A, Strategic Alliances & Joint
Ventures
• Business Strategy
– Cost leadership, Differentiation
• Functional Strategy
– Ensuring Alignment (Vertical Fit & Horizontal Fit)
 HR’S Strategic Roles
• HR professionals should be part of the firm’s strategic
planning executive team.
– Identify the human issues that are vital to business
strategy.
– Help establish & execute strategy.
– Provide alternative insights.
– Are centrally involved in creating responsive & market-
driven organizations.
– Conceptualize and execute organizational change.
 HR Involvement in Mergers

Source: Jeffrey Schmidt, “The Correct Spelling of M & A Begins with HR,” HR Magazine, June 2001, p. 105.
 Translating
Strategy into
HR Policy
and Practice

Basic Model of How

to Align
HR Strategy
and Actions
with Business
Strategy

Source: Adapted from Garrett Walker and J. Randal MacDonald,

“Designing and Implementing an HR Scorecard,” Human
Resources Management 40, no. 4 (2001), p. 370.
 HR Strategy: Strategic Fit

Corporate Strategy

Business Strategy

HR Strategy

HR System Training Rewards

(Performance Mgmt.)
Step 5: Strategy Implementation

Human resources mgmt. is

critical to every aspect of
strategy implementation.

For an org. to perform well, these

7 elements need to be aligned &
mutually reinforcing
 Step 6: Evaluation & Assessment
• Benchmarking
• HR metrics
• Balanced Scorecard
(Financial, Customer, Internal process, learning and growth)
Example: Balanced Scorecard