HR strategies and business strategies

SHRM
• Approach to strategic management of human
resources
• Aligned with organizational intentions
• Focus on people long term issue
• Focus on macro concerns such as structures,
culture, quality, commitment, performance,
• Strategic HRM decisions are built into the strategic
business plan
• SHRM and strategic management describe an
approach adopted by management & focus on the
long term issues and provide direction to the
organization

• Human resources strategies and business strategies

are the outcomes of this approach which focus on the
organizational view concerning key issues and
specific functions or activities
 HR Strategies

• Outcome of the general SHRM approach,

ensuring availability of workforce, training,
rewards, good IR etc.
• Focus on specific organizational intentions about
what needs to be done
• Focus on specific issues that facilitate the
achievement of corporate strategy, goals,
objectives
• HR strategy decisions are derived from SHRM
 Link between HR strategy and business strategy
• Key factor that influences the linkage between business and HR strategy is the organization's
quest to attain competitive advantage

• Classification of business strategy was developed Porter (1985)

• Any one strategy can be adopted to compete successfully in market & sustain superior
performance and advantage over its competitors

• Porters classification of Business strategy:

Three types of strategies may be adopted by the origination are:
a) Cost leadership (Retailers, Mega marts)
1. Firm increases its efficiency, cuts costs, price is lower than competitor
2. Change in price affect customer demand
3. Customer is more sensitive than brand
b) differentiation, (Nike, Sony)
4. Distinguishes its products,
5. charges a premium for its products for uniqueness, innovativeness, extraordinary
6. Firm seek to develop brand loyalty
c) Focus (cloths , restaurants for families)
7. Different segments have different needs to satisfy
 Strategic fit

Dilemma organization often confronted:

Adopt business strategy that fit available competencies & capabilities
OR
First decide business strategy & stretch and modify their competencies

• Strategic fit proposes that for organization seeks to

maximize competitive advantage it must match its
internal resources and skills (organizational
competencies) with the opportunities available in the
external environment
 Types of fit between HR and Business strategy

a) Best fit approach

b) HR bundles or configuration approach
c) Best practice approach

a) Best fit approach

1. Linkage of HR strategies with business strategy also referred as
external fit or vertical integration
2. HR strategies should match the stages of development of the
firm (start up, growth, maturity, decline)
3. Drawback - Organization performance will improve when HR
practices reinforce
b) HR bundles or configuration approach
1. Bundling refers development & implementation of
HR practices together so that they are interrelated and
internally consistent. Each HR practice complements
and reinforces the other
2. This approach also referred as internal fit or
horizontal fit
3. Integration between HR practices is more likely to
take place if HR personnel & line managers share their
values on how HR policies should be implemented
c) Best practice approach
1. Contrary to internal and external contingency
perspectives, is the view that organization should
adopt the best practice irrespective of the context
2. Best practices are identifiable and are transferable
across the organization
3. Employment security, selective hiring, team working,
high pay for performance, extensive training,
reduction of status differences, information sharing