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HUMAN RESOURCE

MANAGEMENT

STRATEGIC HUMAN
RESOURCE 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

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.
LEVELS OF STRATEGY
1. 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 OF
STRATEGY IN ORGANIZATIONS
1. Corporate-Level
CORPORATION Strategy
What business are we in?

2. Business-Level
Strategy
How do we compete?

Textiles Unit Chemicals Unit Auto Parts Unit

3. Functional-Level
Strategy
How do we support the
business-level strategy?

Finance R&D Manufacturing Marketing


LEVELS OF STRATEGY

1. CORPORATE
LEVEL
STRATEGY

a.
DIVERSIFICATION Implies that the firm will expand
STRATEGY by adding new product lines.

b.
VERTICAL Means the firm expands by, perhaps,
INTEGRATION producing its own raw materials, or
STRATEGY selling its products direct.

c.
CONSOLIDATION Reduces the company’s size
STRATEGY

d.
GEOGRAPHIC
EXPANSION Takes the company abroad.
STRATEGY
LEVELS OF STRATEGY Cont . . .
2. BUSINESS
LEVEL/
COMPETITIVE
STRATEGY a.
COST LEADERSHIP

The enterprise aims to become


the low-cost leader in an
industry.

b. c.
DIFFERENTIATION FOCUS

A firm seeks to carve out a


A firm seeks to be unique in its market niche, and compete by
industry along dimensions that providing a product or service
are widely valued by buyers. customers can get in no other
way.
LEVELS OF STRATEGY Cont . . .
3. FUNCTIONAL
LEVEL
STRATEGY

Identify the basic courses of action that each


department will pursue in order to help the
business attain its competitive goals.
INTEGRATION

INTEGRATION

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

Vertical Horizontal
Integration Integration
VERTICAL INTEGRATION

This is a general qualitative estimate of the VERTICAL


extent to which HR’s activities and objectives INTEGRATION
are aligned with the overall objectives &
strategy of the enterprise as a whole.

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.

Resourcing

T&D
HR
PRACTICES
Motivation

Maintenance
HR STRATEGY: STRATEGIC FIT

Corporate Strategy

Business Strategy

HR Strategy

HR System Training Rewards


(Performance Management)
THE ROLE OF HRM IN
STRATEGY FORMULATION
•Lowest level of integration; HRM
function's attention is focused on day-to-
ADMINISTRATIVE
LINKAGE
day activities. No input from the HRM
function to the company's strategic plan is
given.

•The strategic business planning function


ONE-WAY develops the plan and then informs the
LINKAGE HRM function of the plan. HRM then
helps in the implementation.

•Allows for consideration of human resource


issues during the strategy formulation
TWO-WAY
process. The HRM function is expected to
LINKAGE
provide input to potential strategic choices
and then help implement the chosen option.

•Is based on continuing, rather than


INTEGRATIVE sequential, interaction. The HR
LINKAGE executive is an integral member of the
strategic planning team.
THE ROLE OF HRM IN
STRATEGY FORMULATION Cont . . .

HR Strategic Administrative
Function Planning Linkage

HR Strategic One-way
Function Planning Linkage

HR Two-way
Strategic Linkage
Function Planning

HR Strategic Integrative
Function Planning 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 STRATEGIC
MANAGEMENT PROCESS

STRATEGY
FORMULATION

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
IMPLEMENTATION
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.
MODEL OF THE STRATEGIC
MANAGEMENT PROCESS
Strategy Strategy
Formulation Implementation
EXTERNAL
ANALYSIS HR PRACTICES
• Recruiting
(Opportunities & • Training
Threats) • Performance
Management
• Labor relations
HUMAN • Employee Firm
RESOURCE • Job analysis
Strategic NEEDS
• Job design Performance
Mission Goals • Selection Productivity,
Choice • Skills • Development Quality,
• Behavior • Pay structure
• Culture Profitability
• Incentives
• Benefits
INTERNAL
ANALYSIS
Human Human
(Strengths & Resource Resource
Weaknesses) Capability
Skills, Actions
Abilities, Behaviors,
Knowledge Results
STRATEGY
FORMULATION

EXTERNAL
ANALYSIS

(Opportunities
& Threats)

STRATEGIC
MISSION GOALS
CHOICE

INTERNAL
ANALYSIS

(Strengths &
Weaknesses
STRATEGY FORMULATION Cont . . .
Five Components of the Strategic Management Process:

A mission is a statement of the organization's reasons


1 for being.

Goals are what the organization hopes to achieve in the


2 medium-to long-term future.

External analysis consists of examining the organization's


3 operating environment to identify strategic opportunities
and threats.

Internal analysis attempts to identify the


4 organization's strengths and weaknesses.

Strategic choice is the organization's strategy, which


5 describes the ways the organization will attempt to fulfill its
mission and achieve its long term goals.
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

Organizational
Structure

Types of Task Design


Information

Product
Market Performance
Strategy Selection,
Reward Training, and
systems Development
of people
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.

 Have input into the strategic plan.


 Have specific knowledge of the
Human organization’s strategic goals.
Resource  Know what types of employee skills,
Managers behaviors, and attitudes are needed to
Should: support the strategic plan, and
 Develop programs to ensure that employees have
those skills, behaviors, and attitudes.
SEQUENCE OF HR STRATEGIC FORMULATION

Analyze:
What are the Issues/problem/business needs

Diagnose:
Why issues occur/Causes
What factors are influencing the situation

Conclusion & Recommendations:


What alternative strategies are available

Action Planning:
What problems may occur and how we will
overcome

Resource Planning:
What resource will we need
How will we obtain these resource

Benefits:
How do they satisfy the business needs
How do they benefit individual employees
STRATEGIC IMPLEMENTATION OF HRM

Strategic
Staffing

Strategic Strategic Human


Compensation Resource
Management Development

Strategic
Performance
Management
TRADITIONAL Vs. STRATEGIC HRM
DIMENSION TRADITIONAL HR STRATEGIC HR
Line Managers & HR
Accountability HR Specialists.
Specialists.
HR strategy
Managing people to facilitate formulation &
Importance the activities. implementation in
alignment with
organizational strategy.
Custodian of HR policy
Strategic Business
Role of HR implementation &
Partners.
compliance.
Approach Ritualistic, Reactive Proactive, Business-
Orientation Activities. oriented Results.
People and
Organization’s
Major Function People Development. Development in line
with the Business
Objectives.
THE HR SCORECARD APPROACH

Measures the HR function’s effectiveness


HR and efficiency in producing employee
SCORECARD behaviors needed to achieve the company’s
strategic goals.

 Must know what the company’s strategy is.


CREATING  Must understand the causal links between HR
activities, employee behaviors, organizational
AN HR
outcomes, and the organization’s performance.
SCORECARD  Must have metrics to measure all the activities
and results involved.
STRATEGIC HR RELATIONSHIPS

HR
Activities

Emergent
Employee
Behaviors

Strategically
Relevant
Organizational
Outcomes

Organizational
Performance

Achieve Strategic
Goals
THE HR SCORECARD APPROACH TO
FORMULATING HR POLICIES,
ACTIVITIES, AND STRATEGIES
USING THE HR SCORECARD APPROACH

1 Define the Business Strategy.

2 Outline the Company’s Value Chain.

Identify the Strategically Required Organizational


3 Outcomes.

Identify the Required Workforce Competencies


4 and Behaviors.

Identify the Strategically Relevant HR System


5 Policies and Activities.

6 Design the HR Scorecard Measurement System.

7 Periodically Evaluate the Measurement System.


Levels Of Corporate Level Business/Competitive Operational Level
Strategy Strategy Level Strategy Strategy

Diversification Cost Leadership


Strategy Strategy
Vertical Integration Differentiation
Strategy Strategy
Consolidation Focus CHAPTER : 10
Strategy Strategy
Geographic
Expansion Strategy
Management
Quality Circle
Vertical Horizontal
Integration Integration Integration

Role of HRM in Administrative One-Way Two-Way Integrative


Strategy Formulation Linkage Linkage Linkage Linkage
STRATEGIC HUMAN
RESOURCE Components of the
Strategy Strategy
Strategic
MANAGEMENT Management Process
Formulation Implementation

3. Conclusion &
1. Analyze 2. Diagnose
Sequence Of HR Recommendation
Strategic Formulation 4. Action 5. Resource
6. Benefits
Planning Planning
Strategic
Strategic Strategic Human Strategic Performance Strategic Compensation
Implementation Of Staffing Resource Development Management Management
HRM

Traditional Vs. Approach


Accountability Importance Role of HR Major Function
Strategic HRM Orientation

 HR Activities
Strategic HR  Emergent Employee Behaviors
Relationships  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.