Business Strategy & HR Strategy

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    BUSINESS STRATEGY & HR

    STRATEGY

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    APPROACHESTOTHEDEVELOPMENT

    OF HR STRATEGIES

    Best- fit approach

    Best practice approach

    Bundling approach

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    BEST- FIT

    Linking HR strategy with business strategy.

    Analysis of business needs of the firm.

    Development of HR strategies supportive of businessinitiative.

    Limitations:

    Fails to align employee interest with the organization.

    Considers HR as reactive rather than proactive.

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    BEST- PRACTICE

    Organizations should adopt the best practice irrespective ofthe context Superior management practices can be easily identified and

    transferred across organizations. 7 best practices are

    Employment security Selective hiring Self-managed teams High- compensation contingent on performance Training

    Reduction of status differential Sharing information

    Limitation- less consensus on best practices, it is not clear what goals

    are being served by best practices

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    BUNDLING/ HR BUNDLES APPROACH

    Development and implementation of several HR

    practices together so that they are interrelated

    and internally consistent

    Internal fit or horizontal integration Integration can take place when HR personnel &

    Line managers share their view on what & how

    HR policies can be implemented

    Examplehigh performance

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    APPROACHESFORACHIEVINGSTRATEGICFIT

    ApproachesCompetitive

    strategy

    Organizationaltypology

    Life cycleapproach

    Focus Differentiation

    Defender Prospector Analyzer

    Start-up Growth Maturity Decline

    Costleadership

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    LINKING BUSINESS STRATEGY (PORTER) AND HRSTRATEGY( SCHULER & JACKSON)

    Result oriented

    Short-term focus andquantities (Volumes)

    Suitable for repetitive &predictable business

    FMCG, Retailers(Reliance fresh, Bigbazaar, Pantaloon) HUL,P&G

    1. Short-term performancemeasures( result/

    outcomes)2. Efficiency (explicit job

    description, specialized jobassignments)

    3. Hierarchical pay, fewincentives

    4. Narrow career path,limited training5. Limited employment

    security6. Limited participation

    Cost leadership Utilization HR Strategy

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    Long term focus

    Firm distinguishes itsproduct from itscompetitors (unique,extraordinary)

    Creative job behaviour

    Moderate/high concernfor quality and quantity

    Apple, Nike, Sony etc.

    External recruitment & hiringof people who bring in new

    ideasBroad career paths

    Extensive training

    Equal and fair pay, manyincentives for creativity

    Long term performancemeasures

    High employee participation

    Some employment security

    Differentiation Facilitation HR Strategy

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    Different segment ofmarket have different

    needs

    High concern forquality

    Moderate concern for

    quantity

    Long/medium termfocus

    Hiring employeesbelonging to the target

    market Equal and fair pay with

    many incentives

    Broad career paths with

    extensive training High employee

    participation

    Some employee security

    Focus Accumulation HR strategy

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    ORGANIZATION TYPOLOGY( MILES & SNOW)

    & HR STRATEGY

    Find changethreatening

    Favour strategies thatencourage continuityand security

    Bureaucratic approach

    Planned and regularly

    maintained policies toprovide for lean HR

    Build human resources

    Likely to emphasize

    training programmes andinternal promotion

    Defenders HR Strategy

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    Thrive on change

    Favour strategies ofproduct and marketdevelopment

    Creative and flexible managementstyle

    Have high quality human resourcesEmphasize redeployment andflexibility of HR

    Little opportunity for long term HRPlanning

    Acquire human resources

    Likely to emphasize recruitment,selection and performance basedcompensation

    Prospectors HR Strategy

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    Seek to match newventures with the

    present business setup

    Followers venturesare not new to the

    market, only new to thefirm

    Low level of monitoringand coordination

    Buy as well as makekey human resources

    Emphasize HRplanning

    Analyzers HR Strategy

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    STAGESOFORGANIZATIONALLIFE & HR

    PRACTICES

    Start-up Flexible pattern of workRecruitment of highly motivated and committedemployees

    Competitive pay

    Little formality

    No unions

    Growth More sophisticated recruitment & selectionTraining and development

    Performance management processesReward system

    Focus on high commitment

    Developing stable employee relations

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    Maturity Attention to the control of labour costs

    Focus on increasing productivity

    Control compensation

    Strained employee relations

    Decline Emphasis on rationalization ofworkforce & downsizing

    Abandoning some longstanding

    practices to cut costsTrade unions have a marginalized role

    Retraining and career consultingservices

    Redeployment

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    TYPEAND NUMBEROF PRODUCTS

    Single product strategy-Functional structure

    Subjective selection criteria

    Less systematic appraisal

    Rewards are distributed in

    paternalistic way

    Growth strategy Acquisition of unrelatedbusinesses

    Different selection criteria fordifferent businesses

    Performance appraisal &

    rewards are impersonal

    Development is cross functional& cross business

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    ITC

    It is not a pure-play FMCG company, sincecigarettes is its primary business. Other productsare foods, personal care, paper products, lifestyle,hotels & Agri business .

    Business strategy

    Cost leadership- FMCG sector

    HR strategy- utilization strategy

    Focus on short-term performance measures

    Efficiency being a sought after virtue Narrow career paths & limited training

    Compensation of employees at the junior /workmen level inthis sector is marginalized

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    Diffentiation - Hotel & lifestyle

    HR strategy Facilitation

    Extensive training, external recruitment, high employeeparticipation, long term performance measures

    Focus- Cigarettes business

    maintainhighest standardsof quality owing to the growing business needs for export &catering to the luxury category after imposition of bans &heavy taxes.

    HR strategy-

    hiring is done from the target market( young engineers from thepremier institute of the market)

    Broad career path with extensive training

    Lot of employee empowerment & decision making power.

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    HSBC

    Strategic goal is to diversify into new marketsworld-wide.

    HR at HSBC honour diversity within theorganization by building an inclusive workenvironment.

    It recruits and maintains a unique blend of peoplewho come from different heritages andexperiences, with a wide range of cultures,

    perspectives and talents.

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    MC KINSEY

    It offers premium management consulting servicesto clients internationally.

    Business strategy- differentiator

    People are the key differentiator Highly selective of their hires

    Up or out policy

    Emphasis on high performance level, feedback,

    mentoring , credibility & integrity Many assignments come through its alumni

    network.

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    NOKIA

    It caters to two segments of the market, one being theclasses and masses too.

    Business strategy cost leadership, differentiator,prospector

    A flat, networked organization with speed & flexibility indecision-making

    HR practices-

    Emphasis on innovation

    Long term performance measures Extensive training

    Professional & personal growth

    Open & effective communication

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    PANTALOON

    The Cost leadership strategy-providing bestquality at the lowest price possible within themarket.

    HR strategy-

    Short-term performance measures- the salarystructure of the company is more based on theincentive oriented system.

    High rigidity of the job description

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    HOW JAPANESEMANUFACTURINGFIRMSALIGNTHEIRHUMANRESOURCEPOLICIESWITHBUSINESSSTRATEGIES: TESTINGACONTINGENCYPERFORMANCEPREDICTIONINA JAPANESECONTEXT.AUTHORS: TAKEUCHI, NORIHIKO1 SOURCE: INTERNATIONAL JOURNALOF HUMAN RESOURCEMANAGEMENT; JAN2009, VOL. 20 ISSUE 1, P34-56, 23P DOCUMENT TYPE: ARTICLE

    This study examines the interaction effects of business-level strategyand HRM policies upon performance among Japanesemanufacturers, in response to the current debate around thecontingency fit proposition in the field of strategic human resourcemanagement (SHRM). Specifically, it was hypothesized that the three

    generic strategic types -cost reduction, differentiation (innovation),and quality enhancement would moderate the relationship betweenparticular HRM policies and the performance of Japanesemanufacturing firms. The results, based on a sample of 312Japanese manufacturers operating in the domestic environment,reveal the existence of links between appropriate strategy and HRM

    policies in predicting performance, providing strong support for theproposition of contingency fit from SHRM theory. The findings areused to discuss how Japanese manufacturers can align their HRMpolicies with business strategies to increase manufacturingperformance.

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    BARRIERSTO STRATEGIC HR Short-term mentality/focus on current performance Inability of HR to think strategically

    Lack of appreciation for what HR can contribute

    Difficulty in quantifying many HR outcomes

    Failure to understand line managers role as an HR

    manager

    Perception of human assets as higher-risk

    investments

    Incentives for changes that might arise

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    SOMEOTHER ISSUES

    HR practices are difficult to change andtransfer

    It is easier for firms to find a new business

    strategy to go with the existing HR practicesand competencies than to develop new HRpractices and competencies to match newbusiness strategies.

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