Strategic HRM

Ref: SHRM – Charles Greer

 What is strategy?
 What is strategy?
– Is it a plan?
– Does it refer to how we will obtain the ends we
seek? Is it a position taken?
– Just as military forces might take the high ground
prior to engaging the enemy,
– might a business take the position of low-cost
provider?
– does strategy refer to perspective, to the view one
takes of matters, and to the purposes, directions,
decisions and actions stemming from this view?
– Does strategy refer to a pattern in our decisions and
actions?
– does repeatedly copying a competitor’s new product
offerings signal a "me too" strategy?
Ref: SHRM – Charles Greer
 Meaning
 Strategy is a term that comes from the
Greek strategia, meaning "generalship."
In the military, strategy often refers to
maneuvering troops into position before
the enemy is actually engaged

Ref: SHRM – Charles Greer

 Strategy
n
ti o
ni
efi

 Strategy is deciding where to go and

D

the means to get there.

 Strategy is a declaration of intent.

Prof. S. Pattnaik
 Levels of Strategy-Making in
a Diversified Company

Corporate-Level Corporate
Managers Strategy

Two-Way Influence
Business-Level
Managers Business Strategies

Two-Way Influence

Functional
Managers Functional Strategies

Two-Way Influence
Operational
managers Operating Strategies
 What is strategic
management?
 A continuous, iterative process aimed at
keeping an organization as a whole
appropriately matched to its environment
(Samuel C. Certo and J. Paul Peter, Strategic Management)
 Keeping the business in tune with
management and marketing forces both
outside and inside the firm

Ref: SHRM – Charles Greer

 Competitive strategy
 Competitive strategy leads to competitive
advantage
– Generates supernormal ROI
– Offers services of value
– Uses cost effective technology
– Avoids erosion of competitive advantage by
exploiting and developing a technological base
 Ex 1-6:
Strategic
Company mission
Management
and social
Process
responsibility

Possible?
External
Internal analysis
environment
Desired?
Feedback

Feedback
Strategic analysis and choice

Long-term
Generic and grand strategies
objectives

Short-term objectives; Policies that

Functional tactics
reward systems empower action

Restructuring, reengineering
and refocusing the organization
Legend Strategic control and
Major impact continuous improvement
Minor
impact
 Strategic analysis HRM
“To be competitive, organizations in many
industries must have highly skilled.
Knowledgeable workers. They must also have a
relatively stable labour force since employee
turnover works directly against obtaining the kind
of coordination and organizational learning that
leads to fast response and high-quality products
and services”
- Edward Lawler
Ref: SHRM – Charles Greer
 WHAT IS SHRM?
 Strategic human resource management
has been defined as ‘the linking of human
resources with strategic goals and
objectives in order to improve business
performance and develop innovative
organizational culture that foster
innovation and flexibility.
 Some Organisational
Strategies

Company Strategic Principle

General Be number one or number two in

Electric every industry in which we
compete, or get out

Wal-Mart Low prices, every day

3M Foster innovation

Prof. S. Pattnaik
 Aim of SHRM

 Long-term Objectives
 Profitability
 Return on investment
 Competitive position
 Technological leadership
 Productivity
 Employee relations
 Public responsibility
 Employee development
 Aim –Short term
•Detailed work planning
•Emphasis on technical
qualifications and skills
•Emphasis on job-specific
training
•Emphasis on job-based pay
•Use of performance appraisal as a control device
•Team-based training
 Types of HR Strategy
 1) general strategies such as
 high-performance working team
– Supplying competitive intelligence regarding the
external environment
– Supplying information regarding the company’s
internal human strengths and weaknesses.
– Showing how the firm’s HR activities can and do
contribute to creating value for the company
 2) specific strategies relating to the different
aspects of human resource management
such as learning and development and
reward(Human capital management, corporate
social esponsibility,
 organization development, engagement,
knowledge management,employee resourcing,
talent management, learning and development,
reward, employee relations, and employee
well-being
 Difference Between Strategic HRM &
HR strategies:-
STRATEGIC HRM HR Strategies [ HR StrategiesHRS ]

General Approach to Strategic Mgnt of HR Outcome [manifestation] of general HRM

approach

Aligned with organizational intention about future Focus on specific organizational intentions about
direction what needs to be done.

Focus on long term people issue Focuses on short term performance measures that
is result/outcome.

SHRM decisions are built into strategic business HRSs decisions are derived from SHRM.
plan

Deals with macro-concerns such as quality, HRSs are concerned with ensuring availability of
commitment, performance, culture & mgnt an efficient workforce, training, good employee
development relations

Defines areas in which specific HR strategies need HRSs facilitate the successful achievement of
to be developed. Ref: SHRM – Charles Greerobjectives + goals
corporate
 Approaches to SHRM
 The resource-based approach-A resource-based
approach will address methods of increasing the firm’s
strategic capability by the development of managers
 and other staff who can think and plan strategically and

who understand the key strategic issues.

 Strategic fit-
 The HR strategy should be aligned to the
business strategy (vertical fit).
 HR strategy should be an integral part of the
business strategy, contributing to the
business planning process as it happens.
 High-performance management –
 Aims to make an impact on the
performance of the firm through its people
in such areas as productivity, quality, levels
of customer service, growth, profits and,
ultimately, the delivery of increased
shareholder value.

 High-performance management practices
include rigorous recruitment and selection
procedures, extensive and relevant training
and management development activities,
incentive pay systems and performance
management processes.
 High-commitment management
 HRM is its emphasis on the importance
 of enhancing mutual commitment. ‘A form
of management which is aimed at eliciting a
commitment so that behaviour is
 primarily self-regulated rather than
controlled by sanctions and pressures
 external to the individual, and relations
within the organization are based
 on high levels of trust.’
 High-involvement management-
 The aim is to create a climate in which a
continuing dialogue between managers and
the members of their teams takes place in
order to define expectations and share
 information on the organization’s mission,
values and objectives.

Ref: SHRM – Charles Greer

 Types of Strategic Planning
 Corporate-level strategy
– Identifies the portfolio of businesses that, in
total, comprise the company and the ways in
which these businesses relate to each other.
 Diversification strategy
 Vertical integration strategy
 Consolidation strategy
 Geographic expansion strategy

Prof. S. Pattnaik
 Types of Strategic Planning
(cont’d)
 Business-level/competitive strategy
– Identifies how to build and strengthen the
business’s long-term competitive position in
the marketplace.
 Cost leadership
 Differentiation
 Focus

Prof. S. Pattnaik
 Types of Strategic Planning
(cont’d)
 Functional strategies
– Identify the basic courses of action that
each department will pursue in order to
help the business attain its competitive
goals.

Prof. S. Pattnaik
 Methodology for strategy
development
 Strategic analysis
– Environmental analysis
 human resource environment
 human resource legal environment
– Establish organizational direction
 Strategy formulation
– Human resource planning
 Strategy implementation
– Work force utilisation and employment practices
– Reward and development system
 Strategic control
– Performance impact of human resource practices
– Human resource evaluation
Ref: SHRM – Charles Greer
 Strategy formulation
 What are the purpose(s) and objective(s) of
the organization?
 Where is the organization presently going?
 What critical environmental factors does the
organization currently face?
 What can be done to achieve organizational
objectives more effectively in the future?

Ref: SHRM – Charles Greer

 Strategy formulation process
 Development of organizational philosophy and
mission statement
 Environmental scanning
 Analysis of SWOT
 Formulation of strategic objectives
 Generation of alterative strategy
 Evaluation and selection of strategies
 Informal / incremental strategic planning
– Managed/logical incremental planning

A strategy is the pattern or plan that integrates

Ref: SHRM an Greer
– Charles organisation’s major goals, policies,
and action sequences into a cohesive whole
 HR strategy ?
'a human resource system that is tailored to the
demands of the business strategy'
-Miles and Snow 1984
'the pattern of planned human resource activities
intended to enable an organization to achieve its
goals'
- Wright and McMahan 1992
“the pattern planned human resource deployments and
activities intended to enable an organisation to
achieve its goals”
Ref: SHRM – Charles Greer
 Types of HR Strategy
 1) general strategies such as high-performance
working
 2) specific strategies relating to the different aspects
of human resource management such as learning and
development and reward(Human capital management,
corporate social esponsibility,
 organization development, engagement, knowledge
management,employee resourcing, talent management,
learning and development, reward, employee relations,
and employee well-being
 SHRM concern
SHRM concern is to ensure
– HR management is fully integrated with the
strategy and strategic needs of the firm
– HR policies cohere across policy areas and
areas of hierarchy
– HR practices are adjusted and used by line
manages and employees as part of their
everyday work

Ref: SHRM – Charles Greer

 Strategic HRM is about improving business
performance through people.
 The major concerns of strategic HRM are to
meet the business needs of the organization
and the individual and collective needs of
the people employed in it.
 strategic HRM can make a contribution to
improving business performance.
 Strategic HRM (IMPORTANCE)
 Needs investment –ROI
 Cost of investment
 Reduction in total Labour cost
 Efficiency in operation
 Optimal use of human resources
 A source of competitive advantage
 Technical skills (pace of technological change)
 Knowledge and capabilities
 Management of critical and Difficult HR areas
 Management of change (Resistance to change)
 Lack of trust
 Antagonistic labour
 Motivational problems
 Management relations
 Economic turbulence
 Within the country (turbulence)
 Globalisation
 Dramatically changing demographics
 Differences in workforce values
Strategic human resource management and ∟ HRP are considered important
to manage uncertainties; HR is integrated with strategy; Integrating and
aligning HR function with strategy
Ref: SHRM – Charles Greer
 Benefits of SHRM
1. Identifying and analysing external opportunities and
threats that may be crucial to the company's success.
2. Provides a clear business strategy and vision for the
future.
3. To supply competitive intelligence that may be useful in
the strategic planning process.
4. To recruit, retain and motivate people.
5. To develop and retain of highly competent people.
6. To ensure that people development issues are
addressed systematically.
7. To supply information regarding the company's internal
strengths and weaknesses.
8. To meet the expectations of the customers effectively.
9. To ensure high productivity.
10. To ensure business surplus thorough competency

Ref: SHRM – Charles Greer

 Theoretical frame work of SHRM

Firm strategy Institutional /

Political forces

Resource dependence
Resource institutional
based view
of the firm HRM Practices

Cybernetics
Behavioral
approach
Agency/transaction costs
Firm level outcomes
HR Capital pool HR behaviors (performance,
satisfaction,
(Skills, abilities) absenteeism etc)
Ref: SHRM – Charles Greer
 Theoretical frame work of SHRM
 Strategy driven
– Resource based view
 Competitive advantage based on unique allocation of resources {selection
/Compensation package} (TCS)
– Behavioral view
 Control and influence the behaviors of individuals (Infosys)
– Cybernetics systems
 Adoption or abandonment of practices based on feedback on contributions to
strategy (Bosch – MICO)
– Agency/transactions cost view
 Use of control systems, performance evaluation and reward systems etc
– (In the absence of performance evaluation strategy may not be pursued)

 Non-Strategy driven
– Resource dependence and power theories
– Power and politics= legislation, unionization, control of resources, expectations of
social responsibility.
– Institutional theory
– In appropriate performance evaluation dimensions (inertia / rational decision
making.appraisal

Ref: SHRM – Charles Greer

 International strategy
 Multinational, global and transnational
strategies
 Strategic alliances
 Sustainable global competitive advantage
 Globally competent managers
 Location of production facilities

Ref: SHRM – Charles Greer

 Approaches to SHRM
 The resource-based approach-A resource-based
approach will address methods of increasing the firm’s
strategic capability by the development of managers
 and other staff who can think and plan strategically and who
understand the key strategic issues.
 Strategic fit-The HR strategy should be aligned to
the business strategy (vertical fit).
 HR strategy should be an integral part of the
business strategy, contributing to the business
planning process as it happens.
 High-performance management - aims to
make an impact on the performance of the firm
through its people in such areas as
productivity, quality, levels of customer
service, growth, profits and, ultimately, the
 delivery of increased shareholder value.
 High-performance management practices
include rigorous recruitment and selection
procedures, extensive and relevant training
and management development activities,
incentive pay systems and performance
management processes.
 High-commitment management
 HRM is its emphasis on the importance
 of enhancing mutual commitment. ‘A form
of management which is aimed at eliciting a
commitment so that behaviour is
 primarily self-regulated rather than
controlled by sanctions and pressures
 external to the individual, and relations
within the organization are based
 on high levels of trust.’

Ref: SHRM – Charles Greer

 High-involvement management-
 The aim is to create a climate in which a
continuing dialogue between managers and
the members of their teams takes place in
order to define expectations and share
 information on the organization’s mission,
values and objectives.

Ref: SHRM – Charles Greer

Human resource contributions
to strategy
 Environmental scanning and competitive
advantage
 Implementation of resource reallocation
decisions Slide >

 Lead time for dealing with labour shortages.

..

Ref: SHRM – Charles Greer

 HUMAN RESOURCE ACTIVITY TYPOLOGY

High Performance enhancement

Consulting
Staffing planning Employee relations
Benefits of planning Labour negotiations
Retirement planning Executive compensation
Employee development
Compliance
Management development
Recruitment interviewing
Strategic value of
activity < IMPORTANT TO EXECUTIVES >
Payroll
Benefitsadministration
Recruitmentinformation processing
Retirement administration
Employee records Employee assistance programs
Relocation administration
Recruitment information processing

Low
< IMPORTANT TO EMPLOYEES >

Back Transactional Type of HR activity Relationship

Benefits of integrating HRP with Strategic
planning
 Generates more solutions to complex
organizational problems
 Ensures consideration of human resources in
organizational goal setting process
 Ensures consideration of human resources in
assessment of organizational abilities to
accomplish goals and implement strategies
 Reciprocal integration prevents strategy
formulation based on personal
rigidities/preferences
 Facilitates concurrent consideration of strategic
plans and managerial succession.
Ref: SHRM – Charles Greer
Strategic components of HRM
relevant to internal fit
 Management awareness
 Management of the function
 Portfolio of programs
 Personnel skills
 Information technology
 Awareness of the environment

Ref: SHRM – Charles Greer

 Requirements for SHR-Managers

 Information management skills

 Planning skills
 Management skills
 Integration skills
 Change management skills

Ref: SHRM – Charles Greer

 Strategy formulation process
 Development of organizational philosophy and
mission statement
 Environmental scanning
 Analysis of SWOT
 Formulation of strategic objectives
 Generation of alterative strategy
 Evaluation and selection of strategies
 Informal / incremental strategic planning
– Managed/logical incremental planning

A strategy is the pattern or plan that integrates

Ref: SHRM an Greer
– Charles organisation’s major goals, policies,
and action sequences into a cohesive whole
 Effective HR Strategy Formulation
and Implementation

Organizational
Organizational Consistency Environment
Environment
Strategies
Strategies
Fit Fit

Consistency
Consistency

Improved
Improved
HR Strategies Firm
Firm
Performance
Performance
Fit Fit
Organizational
Organizational Organizational
Organizational
Characteristics
Characteristics Consistency Capabilities
Capabilities
 Strategy implementation
work force utilization and employment practices

 Efficient utilization of human resources

 Dealing with employee shortages
 Selection of employees
 Dealing with employee surpluses

Ref: SHRM – Charles Greer

 Strategy implementation
work force utilization and employment practices

 Efficient utilization of  Cross training and flexibility in

assigning work
human resources  Using work teams
 Dealing with – Requirements for effective
teams
employee shortages  Forming
 Selection of  Storming
 Norming
employees  performing

 Dealing with  Operating on a non union basis

employee surpluses

Ref: SHRM – Charles Greer

 Strategy implementation
work force utilization and employment practices

 Efficient utilization of  Strategic recruiting

human resources
 Dealing with
employee shortages
 Selection of
employees
 Dealing with
employee surpluses
 Special recruiting for
minorities and women
workers
 Flexible retirement as
a source of labour
 Managing vendors of
outsourced functions

Ref: SHRM – Charles Greer

 Special implementation
challenges
 Career path for technical professionals
 Dual career couples
 Strategy implementation system – Reward
and development systems
 Strategically oriented performance management
system
 Strategically oriented compensation systems
 Employee development

Ref: SHRM – Charles Greer

 Strategy implementation system
– Reward and development systems
 Performance measurement
 Strategically oriented approaches
performance – MBO
management system – Graphic scale rating
– Narratives
 Strategically oriented – BARS
– Behavioral observation scales
compensation systems – 360 –degree feedback
 Employee  Performance evaluation of
executives
development  Effectiveness of performance
measurement.

YOU GET WHAT YOU MEASURE, YOU MEASURE WHAT YOU VALUE, YOU
Ref: SHRM – Charles Greer
CAN NOT CONTROL WHAT YOU CANNOT MEASURE.
 Strategy implementation system
– Reward and development systems

 Strategically oriented  Traditional

performance
management system
 Strategically oriented
compensation systems
compensation systems
– Job analysis > job evaluation >
salary/wage hierarchy
 Point system
Factor comparison system


 Hybrid system
 Employee – Internal equity
– > Wage surveys to establish
development external equity.

Ref: SHRM – Charles Greer

 Strategy implementation system
– Reward and development systems

 Strategically oriented  Skill based pay

performance  Broad banding
management system  Team based pay
 Strategically oriented  Variable
compensation systems
compensation
 Employee  Executive
development compensation

Ref: SHRM – Charles Greer

 Strategy implementation system
– Reward and development systems

 Strategically oriented  Training programs

 Training methods
performance
 Apprenticeships
management system  Management development
 Strategically oriented  Management development
compensation systems for international assignments
 Product life cycle and
 Employee managerial fit
development – PLC, Evolutionary stage >
Steady state
– Development Vs selection

Ref: SHRM – Charles Greer

Copyright © 2002 South-
Western. All rights reserved.
4–57
 Barriers to the implementation of
HR strategies
 • Failure to understand the strategic needs of the
business,

 • Lack of assessment of the environmental and

cultural factors that affect the content of the
strategies and the development

 • Taking of ill-conceived and irrelevant actions

 Criteria for an effective HR strategy
 Satisfies business needs;
 • Founded on detailed analysis and study;
 can be turned into actionable programs;
 is coherent and integrated;
 Takes account of the needs of line managers
and employees generally as well as those of
the organization and its other stakeholders

Ref: SHRM – Charles Greer

 • It is coherent and integrated, being
composed of components that fit
 with and support each other.
 • It takes account of the needs of line
managers and employees
 generally as well as those of the
organization and its other stakeholders.
To sum-up