C HA P TE R 2

ALIGNING HR WITH
STRATEGY
LEARNING OBJECTIVES

After reading this chapter, you should be able to:

• Understand the importance of strategic HR
planning
• Identify the risks associated with not planning
• Discuss approaches to linking strategy and HR,
including the barriers to becoming a strategic
partner

© 2010 by Nelson Education Ltd. 2

LEARNING OBJECTIVES

After reading this chapter, you should be able to:

• List the characteristics of an effective HR strategy
• Delineate the steps in the strategic HR planning model

© 2010 by Nelson Education Ltd. 3

WHAT GIVES THE FIRM COMPETITIVE
ADVANTAGE?

• Unique (differentiation, focus)

• Hard to copy
• Sustainable

4
 WHAT ARE HR STRATEGIES?
• HR strategies set out what the organization intends to do about its
human resource management policies and practices and how they
should be integrated with the business strategy. Key elements:

– Strategic objectives

– Plan of action

“There is no great strategy only great execution” (Gratton 2000)

A GOOD HR STRATEGY
• satisfy business needs
• is founded on detailed analysis
• can be turned into actionable programmes
• is coherent and integrated
• takes account of the needs of line managers,
employees and other stakeholders
CATEGORIES OF OVERALL
STRATEGIES

• Evolutionary approach to HRM.

• Broad-bush statements of aims and purpose that set the scene for more
specific strategies.
• Specific and articulated plans to create sets of HR practices and
develop a coherent HR system.
• Conscious introduction of overall approaches to HRM such as:
– High-performance management
– High-involvement management
– High-commitment management
HIGH-PERFORMANCE MANAGEMENT
• Aims to effect organizational performance through people.
• HRM areas involved
(HPWS – high performance work systems):
– Recruitment & selection
– Training and development
– Reward management
– Performance management
HIGH-INVOLVEMENT MANAGEMENT

• Commitment ad involvement opposed to bureaucratic control.

• Treating employees as partners. Providing opportunity for the
employee to control and understand their work.
• Communication for mutual understanding.
HIGH-COMMITMENT MANAGEMENT
• A form of management aimed at eliciting a commitment so that behavior is primarily
self-regulated rather than controlled. Organizational relations based on trust.
• Approaches to achieve commitment:
– Career ladders and emphasis on trainability
– Functional flexibility
– Reduction of hierarchy, ending of status differentials
– Reliance on teams: dissemination, structuring work, problem solving
– Intrinsic satisfaction via job design
– Permanent employment with temporary workers
– Merit pay and profit sharing
– Involvement in quality management
SPECIFIC HR STRATEGIES
• HC management
• High-performance management
• Corporate social responsibility
• Organization development
• Engagement
• Knowledge management
• Resourcing
• Talent management
• Learning and development
• Rewarding
• Employee relations
THE IMPORTANCE OF SHRM
• Human capital is the sum of employee’s (KSA) knowledge, skill,
abilities, experience and commitment invested in the
organization.
• HR should move from articulating perceived value to
demonstrate real value.
Two reasons:
• Employees help an organization to achieve success because
they are strategic resources.
• Planning process itself results in improved goal attainment.
 EMPLOYEES AS STRATEGIC
RESOURCES
• Resource-Based View: suggests that
the management of resources and • Typical capabilities might include:
capabilities will lead to competitive -Adaptability
advantage resulting in superior -Flexibility
performance and value creation. -Speed of bringing new products to
market
• Typical resources might include:
-Human resources
-Proprietary knowledge
-Reputation
IMPROVED GOAL ATTAINMENT
Organizations with clear strategies provide direction and meaning to
employees and mitigate the need for control by substituting a
consistency of purpose - in other words, a mission. This articulated
vision for the future may result in a more effective organization
through increased motivation and performance, lowered absenteeism
and turnover, and heightened stability, satisfaction, and involvement.
RISKS TO STRATEGIC HR
PLANNING

• Costs: Increased time and energy in making decisions, increased

potential for information overload, unrealistic commitments to
employees, over-concern with employee reactions that may be
incompatible with industry conditions
• False employee expectations: Future plans may raise employee
expectations that hey have a job for life and will be trained for that job
• Loss of Flexibility: Committing to one strategy may cause the
organization to become blind to changes in the environment
LINKING HR PROCESS TO STRATEGY

1. Corporate strategy leads to HR Strategy

2. HR competencies lead to Business strategy
3. HR strategy and Corporate strategy
4. HR becomes a business partner

16
 Corporate Strategies Leads to HR
Strategy
Internal Methods External Methods
Penetration of existing markets Acquiring other organizations
Developing new markets Vertical integration
Developing new products or services for HR Issues
existing or new market Merging organizations
Benefits Dismissing redundant employees
Gaining economies of scale in operations
and functions
Enhancing competitive position vis-à-vis
industry competitors
Providing opportunities for employee
professional development and advancement
HR Issues
Planning for new hiring
Alerting current employees
Ensuring quality and performance standards
are maintained

17
17
 Corporate Strategies Leads to HR
Strategy(Cont)
Stability
 Maintaining the 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.

Turnaround or Retrenchment
 Downsizing or streamlining the organization in a cost-cutting
attempt to adjust to the competitive environment.
 Few opportunities and many environmental threats.
 Important to develop HR practices to manage the “survivors.”

18
18
 HR BECOMES A BUSINESS PARTNER

• HR desires to be an active participant in the running of the business.HR

becomes a business partner by:

 Focusing on developing HR programs that enhance

organizational performance.
 Involving HR in strategic planning at the onset.
 Participating in decision making on mergers, acquisitions,
and downsizing.
 Redesigning organizations and work processes
 Accounting and documenting the financial results of HR
activities.
 Emergence of new models-Ulrich’s "three-legged" model.
 Cross-functional initiatives-
19
 CONTINUED …….
• HR’s success as true strategic business partner dependent on five
specific competencies:
– Strategic contribution - development of strategy
– Business knowledge - understanding nuts & bolts of organization
– Personal credibility - measurable value demonstrated in programs &
policies
– HR delivery - serving internal customers through effective & efficient
programs
– HR technology - using technology to improve organization’s management
of people

20
STRATEGIC FIT
• External fit:
HR programs must align with or fit the overall strategy of the organization. If
business strategy is to differentiate the organization from its competitors
based
on superior service then selection and training should be developed to hire and
train employees in the skill and attitudes necessary to deliver superior service.

• Internal fit:
a) fit with other functional areas of business such as marketing, production etc.
If customer service requires 24 hour service HR planning must ensure that.
(b) consistent with each other. “bundling HR services” – training , staffing,
compensation ,appraisal all consistent with each other.

• Focus on benefit measured and result oriented. 

Tracking of the results is an important to be able to measure results in order to
see if the goal has been achieved
LINKING ORGANIZATIONAL
STRATEGY TO HR PLANNING
STRATEGIC DIRECTION HR LINKAGE

mission determining organization’s

business

setting goals and

objectives and goals
objectives

strategy determining how to attain

goals and objectives

determining what jobs need to be

structure
done and by whom

matching skills, knowledge, and

people abilities to required jobs