Strategic Management

• Strategic Human Resource Management

– Involves aligning initiatives involving how people are
managed with organizational mission and objectives
• Strategic Management Process
– Determining what needs to be done to achieve
corporate objectives, often over 3 - 5 years
 Strategic Management
– Examining organization and competitive environment
– Establishing optimal fit between organization and its
environment
– Reviewing and revising strategic plan
 Models of Strategy
• Industrial Organization (I/O) Model
– External environment is primary determinant of
organizational strategy rather than internal
decisions of managers
– Environment presents threats and opportunities
– All competing organizations control or have equal
access to resources
 Models of Strategy
– Resources are highly mobile between firms
– Organizational success is achieved by:
• Offering goods and services at lower costs than
competitors
• Differentiating products to bring premium prices
 Models of Strategy
• Resource-Based View (RBV)
–An organization’s resources and capabilities, not
external environmental conditions, should be basis for
strategic decisions
–Competitive advantage is gained through acquisition
and value of organizational resources
 Models of Strategy
–Organizations can identify, locate and acquire key
valuable resources
–Resources are not highly mobile across organizations,
and once acquired are retained
–Valuable resources are costly to imitate and non-
substitutable
 Contrasting the Two Approaches
• Research provides support for both positions
• What drives strategy?
– I/O: External considerations
– RBV: Internal considerations
• I/O: Strategy drives resource acquisition
• RBV: Strategy determined by resources
 The Process of Strategic Management
• Mission statement
• Environmental analysis
• Organizational self-assessment
• Establishing goals and objectives
 Exhibit 3-1
Process of Strategic Management
 Mission Statement

• Explains purpose and reason for existence

• Usually very broad
• No more than a couple of sentences
• Serves as foundation for everything organization does
 Solectron Mission Statement
“Our mission is to provide worldwide responsiveness
to our customers by offering the highest quality,
lowest total cost, customized, integrated,
design, supply-chain and manufacturing solutions
through long-term partnerships based on
integrity and ethical business practices.”
 Analysis of Environment
• Critical components of external environment
– Competition
– Industry structure
– Government regulations
– Technology
– Market trends
– Economic tends
 Organization Self-Assessment
• Identify primary strengths and weaknesses
• Find ways to capitalize on strengths
• Find ways to improve or minimize weaknesses
• Examine resources
Physical Human
Technological Capital
 Organization Self-Assessment
• Examine internal management systems
– Culture
– Organization structure
– Power dynamics and policy
– Decision-making processes
– Past strategy and performance
– Work systems
 Establishing Goals & Objectives
• Goals should be:
– Specific
– Measurable
– Flexible
 Corporate Strategies: Growth
• Benefits • Internal Methods
–Gaining economies of –Penetration of existing
scale in operations and markets
functions –Developing new markets
–Enhancing competitive –Developing new products
position vis-à-vis or services for existing
industry competitors or new markets
 Corporate Strategies: Growth
–Providing opportunities • External Methods
for employee –Acquiring other
professional organizations
development and –Vertical integration
advancement
 Corporate Strategies: Growth
• HR Issues • HR Issues
–Planning for new hiring –Merging organizations
–Alerting current –Dismissing redundant
employees employees
–Ensuring quality &
performance standards
are maintained
 Corporate Strategies: Stability
• Maintaining status quo due to limited environmental
opportunities for gaining competitive advantage
• Few employees will have opportunities for advancement
• Critical that management identify key employees and
develop specific HR retention strategies to keep them
 Corporate Strategies:
Turnaround or Retrenchment
• Downsizing or streamlining organization in cost-cutting
attempt to adjust to competitive environment
• Few opportunities and many environmental threats
• Important to develop HR practices to manage “survivors”
 Business Unit Strategies: Cost Leadership
• Increases in efficiency and cutting of costs, then passing
savings to consumer
• Assumes price elasticity in demand for products or
services is high
• Assumes that customers are more price sensitive than
brand loyal
 Business Unit Strategies: Cost Leadership
• HR strategy focuses on short-term performance measures
of results and promoting efficiency through job
specialization and cross-training
 Business Unit Strategies: differenciation
• In order to demand a premium price from consumers
– Attempting to distinguish organizational products or
services from other competitors or
– Creating perception of difference
 Business Unit Strategies: differenciation

• Organization offers employees incentives and

compensation for creativity
• HR strategy focuses on external hiring of unique
individuals, and on retaining creative employees
 Business Unit Strategies: Focus
• Business attempts to satisfy needs of only a particular
group or narrow market segment (niche)
• Strategic intent is to gain consumer loyalty of neglected
groups of consumers
 Business Unit Strategies: Focus
• Strategic HR issue is ensuring employee awareness of
uniqueness of market segment
– Thorough employee training and focus on customer
satisfaction are critical factors
– Hiring members of target segment who are empathetic
to customers in target segment
Exhibit 3-3
(page 1)
Dyer &
Holder’s
Typology
of
Strategies
Exhibit 3-3
(page 2)
Dyer &
Holder’s
Typology of
Strategies
 Benefits of a Strategic Approach to HR
• Facilitates development of high-quality workforce
through focus on types of people and skills needed
• Facilitates cost-effective utilization of labor,
particularly in service industries where labor is
generally greatest cost
 Benefits of a Strategic Approach to HR
• Facilitates planning and assessment of environmental
uncertainty, and adaptation of organization to
external forces
 Reading 3.1 (Wright, Dunford, & Snell)
Human Resources & Resource Based View
• “People management systems” construct
– Not all competitive advantage begins with people
management systems
 Reading 3.1
Human Resources & Resource Based View
– These systems create value to the extent that
they impact stock, flow, and change of
intellectual capital/knowledge
– Basis of core competencies
 Reading 3.1
Human Resources & Resource Based View
• “Skill” concept expanded to consider stock of
intellectual capital in firm
• “Behavior” concept reconceptualized as flow of
knowledge within firm through its creation, transfer,
and integration
 Reading 3.1
Human Resources & Resource Based View
• Core competence arises from combination of firm’s
stock of knowledge and flow of knowledge through
creation, transfer, and integration in a way that is
valuable, rare, inimitable, and organized
 Reading 3.1
Human Resources & Resource Based View
• Dynamic capability construct illustrates the
interdependent interplay between workforce and core
competence as it changes over time
 Reading 3.2 (Capelli & Crocker-Hefter)
Distinctive Human Resources
• “Flexibility” dimension associated with “prospectors”
• “Established markets” category linked to
classifications like “defenders”
• Employment practices are difficult to change and
transfer
 Reading 3.2 (Capelli & Crocker-Hefter)
Distinctive Human Resources
• Claim: core competencies should drive business
strategy, and not vice versa
• Key question: If competencies are available to
everyone in an open market, how can they generate a
unique competency and competitive advantage for any
one firm?
 Reading 3.3 (Schuler)
The Five P’s Model of SHRM
• Philosophy
– Statements of how organization values and treats
employees; essentially culture of the organization
• Policies
– Expressions of shared values and guidelines for
action on employee-related business issues
 Reading 3.3 (Schuler)
The Five P’s Model of SHRM
• Programs
– Coordinated and strategized approaches to
initiate, disseminate, and sustain strategic
organizational change efforts necessitated by
strategic business needs
 Reading 3.3 (Schuler)
The Five P’s Model of SHRM
• Practices
– HR practices motivate behaviors that allow
individuals to assume roles consistent with
organization’s strategic objectives
– Three categories of roles:
Leadership Managerial Operational
 Reading 3.3 (Schuler)
The Five P’s Model of SHRM
• Processes
– Continuum of participation by all employees in
specific activities to facilitate formulation and
implementation of other activities
 Reading 3.3 (Schuler)
The Five P’s Model of SHRM
• Successful SHRM efforts begin with identification of
strategic needs
• Employee participation is critical to linking strategy
and HR practices
 Reading 3.3 (Schuler)
The Five P’s Model of SHRM
• Strategic HR depends on systematic and analytical
mindset
• Corporate HR departments can have impact on
organization’s efforts to launch strategic initiatives