Strategic Human Resource Management-A Framework

Chapter 2
Copyright © 2016 Pearson India Education Services Pvt. Ltd

Strategic Human Resource
Management—A Framework
Human Resource Management, 2e Author: Pravin Durai

After reading this chapter,
you should be able to

1. Understand the concept of strategic human
resource management
2. Understand the models of strategic human
resource management
3. Enumerate the benefits of strategic human
resource management

Strategic Human Resource
Management- Meaning

Strategic human resource management is a process of
aligning HR strategies with the business strategy to
accomplish the performance goals through the
employees’ competency and commitment

Steps in Strategic Management
Process

Human Resource Management, 2e
Author: Pravin Durai

Determination of Vision and Mission
The first step in strategic management requires a clear

vision and mission statements for an organization.

The three components of business vision include core
values, core purpose, and visionary goals.
The vision statement of the organization conveys the future

it predicts goal it wants to accomplish in the near and
distant future.
The mission statement declares the purpose of the

organization.

Determination of Vision and Mission
In strategic management, the mission and vision provide the

framework for strategic planning within the organization.
 it provides the direction to the whole organization
 helps the decision-makers prioritize their activities.
At the first stage of the strategic management process, the

managers assess their positions and responsibilities related to
the vision, mission and goals of the organization.
While the vision and mission of an organization remain

unaltered, its strategies can be changed in accordance with
the changes in the environment.

Mission Statements

Shipping corporation of India
M: We transport goods and transform life
IDBI
M: We plan ahead and get ahead
Featherlite
: We help you to work better

Goals

Goals of the company is derived from objective. Goal is
precise and is expressed in clear and specific terms.
The goal for the objective of Hero Honda of enhancing

market share is toe increase the sales of Hero Honda
Cycles by 200,000 in 2022

Bindra
https://www.youtube.com/watch?v=EJ7cErowVbo

2. Analyzing the environment

Business Environment
Factors, activities those surround encircle business

And influence business

Environmental analysis: The process by which strategists
monitoring of the economic, governmental/legal
competitive, supplier technological geographical and social
setting to determine opportunities and threats to their
firm.
Divided in to internal factor and external factor

External Environmental influences

Social and Cultural
Technological
Economic
Political, Legal and Government
International
Natural

Internal Environmental Influences

Human Resource management
Trade union
Organizational structure
Financial management
Marketing management
Production management
Leadership style
Management styles

External environmental analysis

Opportunities and threats arising from external factor
Example: Low per capita income contry’s provides

demand for low price products this can be threat for high
price product in such market

Internal environment analysis

Functional area
Organizational resources
Organizational structure
Stakeholders
Analysis of these factors reveals the company strenths
and weakness (SW analysis).
Example: skills, committees, smart employees are

strength and poor financial position is the weakness of
the company

Strategy Formulation
This step involves determining the courses of action suitable

for achieving organizational objectives. After understanding

the likely changes in the environment, the managers should
develop a range of strategic alternatives to deal with the
critical issues of the market.
While choosing the best strategy, the organization should
assess its internal strengths and weaknesses in the
background of the opportunities and threats which it has
identified in the market.

Each organization can develop its own alternatives

depending on its situation but there are three general
strategies called “generic strategies”, which can be useful
for a wide range of organizations.
These generic strategies are formulated at the corporate,

business and functional levels of an organization,
respectively.

Strategy Implementation
At this stage;
1. organization first establishes the way in which the

activities are carried out at present
2. it decides the changes required in the system for the
effective implementation
3. Concentrate on the techniques required for effective
execution of strategies
4. Can activities like enhancing organizational capabilities,
mobilizing resources, training and motivating HR
resources, establishing an information and control
system, restoring the work ethics and culture, and
ensuring the appropriate leadership.

Strategy Implementation
Normally, the implementation stage involves:

(i) developing the capabilities of the organization steadily to
accomplish the strategy efficiently
(ii) distributing the resources among the strategically
significant activities
(iii) establishing the necessary policies and practices that
support strategy execution
(iv) developing the positive organizational culture and
responsive leadership.

Performance Evaluation
The final stage in the strategic management process is

performance evaluation.

Since strategic management is a continuous process, it is
essential for the managers to continuously assess the
performance of each strategy after its execution.
Based on the performance, the organization can bring about

necessary changes in its future strategies. The performance
evaluation process usually consists of the following steps:

Performance Evaluation
Organizations may have to constantly improve their strategies

because :
(i) the market conditions continuously change
(ii) better ways of performing existing activities may emerge
(iii) the existing managers may be replaced with those with
new ideologies and orientation.

Setting performance standards in the form of tolerance limits
for every stage of the strategic management process.

Assessing the actual performance of the implemented
strategies after a reasonable timeframe.
Comparing the actual performance of the strategies against

the set standards to identify the performance gaps.
Initiating necessary adjustments, if the gap exceeds tolerance

limits; like modifying the strategies, revamping performance
objectives, bettering strategy execution and redefining
business vision and mission, if necessary.

Models of Strategic Human
Resource Management

Models Of
SHRM
Business-oriented Strategic fit Strategic labour

model model allocation model

Models of Strategic Human Resource
Management

Business-oriented Model

This model aims at value creation by developing a
HR system that creates and sustains the competitive
advantage through human resources

Strategic Fit Model
This model focuses on matching the HR capabilities and

resources with the external opportunities.

It also focuses on developing HR practices in such a way
that they complement one another.
Two types of strategic fits are

• Vertical fit (deals with the extent of alignment
between the HR strategies & business strategy)
• Horizontal fit (deals with the extent of alignment
among the components of the HR strategy)

SLAP Model

This method focuses on the interdependences among
HR strategies, business strategies and organizational
changes.
This model acknowledges HRM as a continuous process

of balancing the demand for and the supply of labour.

Levels of Strategy
LEVELS

OF STRATEGY
Corporate Level Business Level Functional Level
Growth Portfolio Parenting

Strategy Strategy Strategy

Corporate Level strategy
Corporate Level strategy –top most level of strategy-making-

it focuses on the value creation for the entire organization.
Its three components are
i. growth strategy focuses on the development and
accomplishment of growth objectives
ii. portfolio strategy: This strategy aims at constantly
revising the portfolio of business units on the basis of the
risk and return.
iii. parenting strategy focuses on the allocation of
resources and development of organizational capabilities
across the business units

Business Level Strategy
Business level strategy focuses mostly on creating and
sustaining competitive advantage for products through one

or more of distinguishing factors like price/cost leadership
and product differentiation
For instance, factors like advanced technology, unique

product features, superior HR skills, efficient distribution
capabilities, and superior customer service and
convenience can give competitive advantage to the unit.
Example: The essence of a competitive strategy is about

being different from competitors. The strategy involves a
deliberate decision to perform differently in the market to
deliver a unique mix of values
Functional Level Strategy
 At the functional level, specific strategies are made
for the functional activities of the organization.

 This strategy may encompass production,
marketing, purchase, finance, HR, research and
development, and other similar activities of the
firm
 Each functional area covers several tasks. For
instance, the HR function may include tasks like
recruitment, selection and training.
 Here, the functional-level strategy will address
issues like whether to carry out the task, training
through in-house resources or to outsource etc.

Models of strategic formulation

High Involvement Management Model
This Model aims at creating an environment that

facilitates the continuous exchange of information

between the superiors and the subordinates
An organization can develop a high involvement

management model through HR practices like work
teams, problem-solving committees, job rotation,
suggestion schemes, and incentives for quality
initiatives.
The model would eventually lead to mutual

understanding, openness, mutual trust, and a sense of
oneness between the organization and its members.

High Commitment Management
Model

This Model aims at obtaining voluntary commitment
from employees by adopting mutually beneficial HR
practices

Procter and Gamble (P&G), a multinational company, builds
a high commitment among its employees by insisting on
developing virtues like leadership, ownership, integrity,
passion for winning, and trust among its employees as part

of the value formation exercise.
it declares its policy of building the organization mainly by

promoting and rewarding people on the basis of their
performance.
its core principles intensely explain its desire to align its

human resources with the overall corporate strategies by
emphasizing standardizing and streamlining the work,
aligning HR activities with objectives and strategies, and
adding value to the business through work sincerity.

High Performance Management
Model

The root of the high performance management model is the
alignment among the people, philosophy, policies,
programmes, practices and processes—the six Ps.

The HR policies and programmes play a major role in
producing a high-performance work organization
High performance management models can vastly improve

skill acquisition, knowledge sharing, commitment,
reliability, communication and motivation among
employees.
It also encourages innovation and shortens the response

time of the organization to the external developments.

The common features of the high performance management
model are:

 an improved alignment observed among people, policies
and processes, effectively supported by technology
 emphasis on fewer hierarchies and flatter organization

structure in order to be more flexible and responsive to
external changes
 continuous learning from the experience of the

developments in the market
 faster response

Benefits of a Strategic HRM

Benefits of a Strategic HRM

Barriers to an Effective SHRM

Job Analysis Job Design
Next Chapter

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Chapter 2

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Copyright © 2016 Pearson India Education Services Pvt. Ltd

The first step in strategic management requires a clear

Copyright © 2016 Pearson India Education Services Pvt. Ltd

The vision statement of the organization conveys the future

The mission statement declares the purpose of the

Human Resource Management, 2e Author: Pravin Durai

In strategic management, the mission and vision provide the

Copyright © 2016 Pearson India Education Services Pvt. Ltd

At the first stage of the strategic management process, the

While the vision and mission of an organization remain

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

The goal for the objective of Hero Honda of enhancing

Human Resource Management, 2e Author: Pravin Durai

Human Resource Management, 2e Author: Pravin Durai

Human Resource Management, 2e Author: Pravin Durai

Factors, activities those surround encircle business

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Divided in to internal factor and external factor

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Example: Low per capita income contry’s provides

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Example: skills, committees, smart employees are

Human Resource Management, 2e Author: Pravin Durai

This step involves determining the courses of action suitable

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

These generic strategies are formulated at the corporate,

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Normally, the implementation stage involves:

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

The final stage in the strategic management process is

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Based on the performance, the organization can bring about

Human Resource Management, 2e Author: Pravin Durai

Organizations may have to constantly improve their strategies

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd

Comparing the actual performance of the strategies against

Initiating necessary adjustments, if the gap exceeds tolerance

Human Resource Management, 2e Author: Pravin Durai

Copyright © 2016 Pearson India Education Services Pvt. Ltd