business factors that influence hr strategy week 5

8/3/2019 Business Factors That Influence HR Strategy Week 5

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Business Factors that influence

HR Strategy


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Strategic Integration

HRM strategies should be integrated with

corporate or business strategies. Miller (1989)

believes that for this to happen, initiatives in

HRM must be consistent with those in other

functions and consistent with an analysis of

the product-market situation. There must be

a fit between HR strategy and the rest of theorganisation. Therefore, the HR strategy is

influenced by many organisational factors.


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The following factors

influence HR strategy

Business growth

Business decline

Business change

Labour cost control

Capital for labour

substitution

Location of operations

Changing nature of

work

Impact of technology

Increase in productivity

Increase in efficiency

Business competition

Labour market

competition

Employee development


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Business Growth and Decline

Direct impact on workforce planning

Involves recruitment, decisions on skills

required, where workers are needed

Has implications for career development for

current employees

Decline may involve long-term planning forreducing staffing levels of immediate

redundancies


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Business Change

Changes may involve takeovers and mergers,

which may bring in a new management

philosophy, corporate culture and style

Old values need to be replaced by new ones

Staffing policies can be different in many ways,

eg job descriptions, working practices, shift

patterns, skills needed, welfare benefits


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Labour Cost Control

Companies compare their costs with others in

their industry: if too high, their profits could

be eroded

The long-term must be considered: companies

who have ignored long-term cost control have

often gone out of business eventually

Two approaches: pay cuts or greater efficiency


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Capital for Labour Substitution

Can be very effective at reducing labour costs

Less of an issue where labour is cheap

(developing countries)

Very relevant where technology

improvements are available

Affects skills and working environment ofworkers


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Location of Operations

Moving operations means moving theworkforce or making them redundant andrecruiting new staff

It could involve opening new branches (eg,shops)

Choice of location may be influenced by

availability of potential skilled workforce,government grants, local labour force costs,market opportunities in the area


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Changing Nature of Work

Move towards home-, tele- and flexi-working

Use of flexible work-stations rather than fixed

desks

Reduction of paperwork

Levelling of hierarchies means workers are

empowered

Self-managed teams

These strategies are largely cost-cutting


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Impact of Technology

Usually more efficient and cheaper than

labour

In some industries has involved wide scale

redundancies (eg News International)

Trade unions often resist requires

consultation

Involves retraining staff


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Increase in Productivity and Efficiency

Measures regularly taken of labour costs

Low productivity and efficiency mean lower

profits

Measures to improve involve performance

management measures and staff development

May also involve replacing staff with machines

or teleworking, etc


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Business Competition

Often means bringing down prices but alsoconsistently innovating products and services

May involve introducing excellence strategies in

service industries, with implications forrecruitment and selection, development andperformance management (see BGS case)

In manufacturing, will involve employing the best

skilled staff and establishing R&D department

Can involve moving to cheaper labour areas (eg,call centres of bank)


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Labour market Competition

Has huge impact where the market is growing

and there are insufficient skilled workers

May need to set up long-term training

strategies (eg, BGS)

Can force up labour rates

Can force a business to relocate to an area

where the competition does not exist


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Employee Development

Government has an influence standards in

schools, support for apprenticeship training, etc

Employee development strategies of competitors

may have to be copied to attract staff

Sound employee development plan is an integral

part of the workforce plan


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Developing Integrated HR Strategies

HR strategies should be integrated vertically

with the business strategy and horizontally

with each other. Coherence through

integration is a fundamental concept of HRM

they must complement each other.

M d l f i t ti HR t t i


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Model of integrating HR strategies

with examples of approaches to

business strategy

Please see separate document.

business factors that influence hr strategy week 5

Documents