Chapter 1

The Strategic Role of Human Resource Management

Learning Outcomes
• Explain what Strategy, strategic planning and strategic management
are
• Describe various strategic planning process
• Explain different steps of strategic management process in detail
• Describe the role of HR in formulating and executing strategy
• Explain Basic Model of how to Align HR Strategy and Actions with
Business Strategy
• Define HR scorecard approach in detail

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Strategy and Strategic Management
• Strategy
• A course of action that a company can pursue to achieve its strategic aims.
• Adoption of tactics for long term courses of action
• Strategy is concerned with the overall goal of achieving sustainable
competitive advantage
• Strategy requires a holistic view, that is, a focus on the whole, not on partial
objectives, and not to specific components of business.
• Example, profit is not goal, rather it is the consequence of good strategy

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Strategies in Brief
Name of the Company Strategic Principle
• eBay • Focus on trading communities
• General Electronics • Be number one or number two in every
industry in which we compete, or get out
• Southwest Airlines • Meet customers’ short-haul travel needs at
fares competitive with the cost of
automobile travel
• Wal- Mart • Low prices, every day

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The nature of strategy

The Firm The Industry

• Goals & Environment
Values • Competitors
STRATE
• Resources & • Customers
Capabilities
GY
• Suppliers
• Structure &
Systems

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Strategic Plan
• The long term plan of a company about how it will balance its internal
strength and weakness with its external opportunities and threats to
maintain a competitive advantage.
• There are 3 types of strategic planning
• Corporate level strategy: where to compete
• Business level strategy: how to compete
• Functional strategy: how to implement

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1. Corporate level strategy
a) Diversification strategy: firms will expand by adding new product
lines. For example Fair & Lovely multivitamin
b) Vertical Integration strategy: firms will expand by producing its
own raw materials or direct selling.
c) Consolidation strategy: reduces the size of the company
d) Geographic expansion strategy: expanding business across national
border.

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 2. Business level strategy
a) Low cost leadership strategy: the company aims to become the
market leader. For example Ryan Air
b) Differentiation strategy: a firm seeks to be unique in its industry.
Example: Emirates
c) Focus strategy: a firm seeks to carve out a market niche, and compete by providing a product or services customers can get in no other
way.

Example: Ela’s kitchen

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3. Functional strategy
• Basic course of action that each department will look for to help
organization achieve its goals.
• Example: Square Pharmaceuticals should recruit more science
graduates.

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• Strategic Management:
• The process of identifying and executing the mission of an
organization by matching its capabilities with the demand of its
environment.
• For example, Good business strategic decisions (e.g., new
distribution channels) helped HONDA to become successful in US
market
• “capabilities” are potential for work performance. A distinctive capability becomes a
competitive advantage when it is applied in a firm and brought to a market.
• Any features that allow an organization to differentiate its product or services
from those of its competitors to increase its market share.
• Vision means the broad picture of idea about what an organization wishes to
achieve in future.
• Mission is about what an organization does to achieve its vision. It is the action
statement to achieve vision.

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• Honda
• Started exporting to US in late 1950’s
• Initially focused on selling their large motorcycles, thought to be attractive to
US consumers
• Their large bikes proved failure–prone in the US; retail outlets of bike
enthusiasts snubbed Honda
• Honda executives riding Honda 50cc bike attracted attention, including a call
from a Sears buyer
• Honda began to sell small bikes, through sporting goods stores, not
motorcycle dealers
• Within 5 years, one in three bikes sold in US was from Honda. Eventually,
large bikes sold too
Lessons:
1) Serendipitous success favours the ones who have strong capabilities for
something
2) Good business strategic decisions (e.g., new distribution channels) also critical
to unlock success

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 Strategic Management Process

Perform Formulate a
Define the Translate the
internal strategy to
business mission into Implement Evaluating
and strategic
achieve
the strategy performance
and its strategic
external goals
mission goals
audits

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Strategic Human Resource Management
• Strategic Human Resource Management means formulating and executing human resource policies and practices that increase employee competencies and

.
behaviours that required by the companies to achieve its strategic aims

• Linking of HRM with strategic goals and objectives in order to

improve business performance and develop organizational culture
that foster innovation and flexibility.

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Linkage of SHRM to Strategic Aim
• Management formulates a strategic plan that requires certain
workforce.
• Example: company X needs more computer- literature employees.
• According to this requirement, HRM formulates strategies such as
policies and practices to produce the desired workforce skills,
competencies and behaviours.
• Actions are taken by HR managers to evaluate if the newly
formulated strategy is producing the required behaviour.

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HRD’s Strategic Roles
• HR professionals should be part of the firms’ strategic planning
executive team.
• Identify the human issues that are vital to business strategy
• Help establish and execute strategy
• Provide alternative insights
• Are centrally involved in creating response and market driven organizations
• Conceptualize and execute organizational change

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HR’s Strategy Formulation Role
• HR help top management formulate strategy in variety of ways by
• Supplying competitive intelligence that may be useful in the strategic
planning process
• Supplying information regarding company’s internal human resource strength
and weakness
• Building a persuasive case that shows how- in specific and measurable terms-
the firm’s HR activities can contribute to create value for the company

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HR’s Strategy Execution Role

• The HR department’s strategies, policies and activities must make

sense in terms of the company’s corporate and competitive
strategies, and they must support those strategies

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Basic Model of how to Align HR Strategy and Actions with Business Strategy

Formulate Business Strategy

Identify Workforce
Requirements
Formulate HR strategic
policies and activities
Develop detailed HR
scorecard Measures

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1. Formulate Business Strategy
• What are the strategic goals of the business?

2. Identify Workforce Requirements

• What employee competencies and behaviours must HR deliver to enable the
business to reach its goals

3. Formulate HR strategic policies and activities

• Which HR strategies and practices will enable HR to produce these employee
competencies and behaviours?

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4. Develop detailed HR scorecard Measures
• HR Scorecard
• The way HR functions efficiency and effectiveness in producing employee competencies
and behaviours is measured which is required to achieve company’s strategic goals.
• Creating an HR scorecard
• Must know the strategy of the company
• Must understand the casual links between HR activities, employee behaviours and
organizational outcomes.

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• Shanghai Portman Ritz-Carlton Example
• Ritz-Carlton company took over Portman Hotel
• The new management decided to provide superior customer service
• They admitted that to achieve this strategic goal, employees would have to
exhibit new competencies and behaviours.
• To produce these behaviours, they interviewed each candidate and selected
only those who cared for and respected others.
• That means, they focus on talent and personal values because these are the
things that cannot be taught
• Thus they became the best employer as well as business hotel in Asia.

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• References
• Dessler, G., 2013. Fundamentals of human resource management. Pearson.
• Dutta, S., Narasimhan, O., & Rajiv, S. 2005. Conceptualizing and Measuring Capabilities:
Methodology and Empirical Application. Strategic Management Journal, 26(3): 277-285.
• Grant, R. M. (1991). The Resource-Based Theory of Competitive Advantage: Implications for
Strategy Formulation. California Management Review, 33(3): 114-135.
• Rumelt, R. (1991). “How much does industry matter?”, Strategic Management Journal, 12,
167-186
• Grant, Robert M. (2013). Contemporary Strategy Analysis, 8th ed. Wiley

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