Chapter-02

Human Resource Management Strategy and Performance

 Learning Objectives
1. Explain why strategic planning is important to all managers.
2. Explain with examples each of the seven steps in the strategic planning process.
3. Discuss main generic types of corporate strategies and competitive strategies.
4. Define strategic human resource management and give an example of strategic human
resource management in practice.
5. Explain how you would design a program to improve employee engagement.
6. Explain with examples why metrics are essential for managing human resources.  
 The Management Planning Process

The basic management planning process consists of five steps:

 Setting objectives,
 Making basic planning forecasts,
 Reviewing alternative courses of action,
 Evaluating which options are best, and then choosing and implementing your plan.
 A plan shows the course of action for getting from where you are to the goal.
 Planning is always “goal-directed” (such as, “double sales revenue to $16 million in fiscal
year 2022”).
 The Strategic Management Process
 A strategic plan is the company’s overall plan for how it will match its internal
strengths and weaknesses with its external opportunities and threats in order to maintain
a competitive position.
 The strategic planner asks, “Where are we now as a business, and where do we want to
be?”
 Strategy: A course of action the company can pursue to achieve its strategic aims.
 Strategic management is the process of identifying and executing the
organization’s strategic plan by matching the company’s capabilities (strengths and
weaknesses) with the demands of its environment (its competitors, customers, and
suppliers, for instance).
Why Strategic Planning is
Important to all Managers
 Strategic planning is important because in a well-run organization the goals
come from the top of the organization downward.

 It provides a sense of direction and outlines measurable goals.

 Strategic planning is a tool that is useful for guiding day-to-day decisions and
also for evaluating progress and changing approaches when moving forward
 Management Roles in Strategic Planning

• Top Managers’ Role in Strategic Planning

• Departmental Managers’ Strategic Planning Roles
• Devise
• Support
• Execution
 Devising a strategic plan is top management’s responsibility. Why?
 Because the consequences of a poor choice can be dire, few top managers delegate total
responsibility for strategic planning.

The departmental managers’ strategic planning roles involve:

• Helping devise the strategic plan
• Formulating supporting, functional/departmental strategies
• Executing the plans
 Few people know as much about the firm’s competitive pressures, vendor capabilities,
and concerns than do the company’s department managers.
 Step 1-The strategic management process begins by asking, “What business are we in?”
Here the manager defines the company’s current business.

 Specifically, “What products do we sell, where do we sell them, and how do our products or
services differ from our competitors’?”

 For example, the Coca-Cola Company sells mostly sweetened beverages such as Coke and
Sprite, while PepsiCo sells drinks but also foods such as Quaker Oats and Frito chips

 The Second step is to ask, “Are we in the right business given our strengths and
weaknesses and the challenges that we face?”

 To answer this, managers “audit” or study both the firm’s environment and the firm’s internal
strengths and weaknesses.
 Next, based on environmental analysis (i.e. on the environmental scan, SWOT, and
PEST analyses), the task in step 3 will be to decide what should our new business be,
in terms of what we sell, where we will sell it, and how our products or services differ
from competitors’ products and services?
 Vision statement
A general statement of the firm’s intended direction; i.e. “what we want to
become.”
Example: PepsiCo’s vision is “Performance with Purpose.”
 Mission statement
Summarizes the answer to the question, “What business are we in?”
Example: Ford mission statement—making “Quality Job One.”
 The manager’s next step (step 4) is to translate the desired new direction into strategic
goals.
 At Ford “Quality Job One” mean for each department in terms of how they would boost
quality?
 The answer was laid out in goals such as “no more than 1 initial defect per 10,000 cars.”

 Next, (step 5) the manager chooses strategies—courses of action—that will enable the
company to achieve its strategic goals.
 For example, how should Ford pursue its goal of no more than 1 initial defect per 10,000
cars? Perhaps open two new high-tech plants, and put in place new, rigorous employee
selection, training, and performance-appraisal procedures.
 Step 6, strategy execution, means translating the strategies into action. This means hiring
(or firing) people, building (or closing) plants, and adding (or eliminating) products and
product lines.

 Finally, in step 7, the manager evaluates the results of his or her planning and execution.
Things don’t always turn out as planned. All managers should periodically assess the
progress of their strategic decisions.
 Managers’ Roles in Strategic Planning
 Strategic plan is top management’s responsibility.
 Few top executives formulate strategic plans without lower-level managers’ input.
 No one knows more about the firm’s competitive pressures, product and industry trends,
and employee capabilities than do the company’s department managers.
 For example, the HR manager is in a good position to supply “competitive intelligence”—
information on competitors.
 Details regarding competitors’ incentive plans, employee opinion surveys about customer
complaints, and information about pending legislation such as labor laws are examples.
 Human resource managers should also be the masters of information about their own firms’
employees’ strengths and weaknesses.
 To devise a strategic plan-frequent discussions among top and lower-level managers.
 Types of Strategies
In practice, managers engage in three types or levels of strategic planning,
 Corporate level strategic planning,
 Business unit (or competitive) strategic planning, and
 Functional (or departmental) strategic planning
 Types of Strategies

Corporate-Level
Strategies

Vertical Geographic
Concentration Diversification Consolidation
Integration Expansion
Strategy Strategy Strategy
Strategy Strategy

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 Corporate Strategy
 The corporate strategy answers the question, “What businesses will we be in?”
 Corporate-level strategy identifies the portfolio of businesses that, in total, comprise the
company and how these businesses relate to each other.
 For example, with a concentration (single-business) corporate strategy, the company offers
one product or product line, usually in one market.
 A diversification corporate strategy means the firm will expand by adding new product
lines. PepsiCo is diversified.
 Example: PepsiCo added Frito-Lay chips and Quaker Oats to its drinks businesses.
 Google (with itsWaymo division) and Apple are moving into the self-driving car business.
 A vertical integration strategy means the firm expands by, perhaps, producing its own raw
materials, or selling its products directly. Thus, Apple opened its own Apple stores.
 Netflix uses its distribution model to promote its original content alongside programming
licensed from studios.
 With a consolidation strategy, the company reduces its size.
 With geographic expansion, the company grows by entering new territorial markets, for
instance, by taking the business abroad.
 Types of Strategies

Business-Level/
Competitive Strategies

Cost Leadership Differentiation Focus/Niche

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Managers typically adopt one or more of three standard competitive strategies—
Cost leadership,
Differentiation, or
Focus—to achieve competitive advantage.
 leadership means becoming the low-cost leader in an industry. McDonald’s, Walmart,
IKEA are examples.
 With differentiation, the firm seeks to be unique in its industry along dimensions that
are widely valued by buyers. Continuous research and innovations. Starbucke’s unique
coffee experience. Volvo stresses the safety of its cars, and Papa John’s stresses fresh
ingredients.
 Focus carve out a market niche.
 Functional Strategy: Each department should operate within the framework of its
business’s competitive strategy.
 Functional strategies identify what each department must do to help the business accomplish
its strategic goals. Thus, for, say, P&G to make its Oil of Olay products a top-tier brand, its
product development, production, marketing, sales, and human resource departments must
engage in activities that are consistent with this unit’s high-quality mission.
FIGURE 3-5 Linking Company-Wide and HR Strategies

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Three Important Strategic Human
Resource Management Tools
 Strategy Map
• The strategy map shows the “big picture” of how each
department’s performance contributes to achieving the company’s
overall strategic goals.
• It helps the manager and each employee visualize and understand
the role his or her department plays in achieving the company’s
strategic plan.
• The HR Scorecard: Many employers quantify and
computerize the strategy map’s activities. The HR scorecard
helps them to do so.
• The HR scorecard refers to a process for assigning financial
and nonfinancial goals or metrics to the human resource
management–related strategy-map chain of activities required
for achieving the company’s strategic aims.
• (Metrics for Southwest might include airplane turnaround
time, percent of on-time flights, and ground crew
productivity.)
 Digital Dashboards
The saying “a picture is worth a thousand words” explains the purpose of the digital
dashboard.
A digital dashboard presents the manager with desktop graphs and charts, showing a
computerized picture of how the company is doing on all the metrics from the HR scorecard
process.
Southwest Airlines manager’s dashboard might display real-time trends for various strategy-
map activities, such as fast turnarounds and on-time flights. This enables the manager to take
corrective action.
For example, if ground crews are turning planes around slower today, financial results
tomorrow may decline unless the manager takes action.