1-1McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved

Human Resource ManagementGaining a Competitive Advantage

Chapter 2Strategic Human Resource

Management

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Learning Objectives

After reading this chapter, you should be able to:• Describe the differences between strategy formulation

and strategy implementation.• List the components of the strategic management

process.• Discuss the role of the HRM function in strategy

formulation.• Describe the linkages between HRM and strategy

formulation.• Discuss the more popular typologies of generic strategies

and the various HRM practices associated with each.• Describe the different HR issues and practices

associated with various directional strategies.

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Introduction

• Goal of strategic management – To deploy and allocate resources in a way that gives organization a competitive advantage.

• HRM function must be integrally involved in the company’s strategic management process.

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What is Strategic Management?

• Strategic Management is a process, an approach to addressing the competitive challenges an organization faces.

• Strategic human resource management is the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals.

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Components of the Strategic Management Process

• Strategy Formulation

• Strategy Implementation

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Model of the Strategic Management ProcessStrategy Formulation Strategy Implementation

HR PracticesRecruiting,

Training,Performance management,

Labor relations, Employee relations,

Job analysisJob design, Selection,

Development, Pay structure,

Incentives,Benefits

FirmPerformanceProductivity,

Quality,Profitability

HumanResourceActions

Behaviors,Results

HumanResource

CapabilitySkills,

Abilities,Knowledge

HumanResource

NeedsSkills

BehaviorCulture

StrategicChoiceGoalsMission

ExternalAnalysis

OpportunitiesThreats

InternalAnalysisStrengths

Weaknesses

Forecasts of Labor Demand

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The Role of HRM in Strategy Formulation

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Strategy Formulation

Externalanalysis

OpportunitiesThreats

StrategicChoiceGoals

InternalanalysisStrengths

Weaknesses

Mission

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Strategy Formulation

• Five components of the strategic management process:– A mission is a statement of the organization's

reasons for being.– Goals are what the organization hopes to

achieve in the medium-to long-term future– External analysis consists of examining the

organization's operating environment to identify strategic opportunities and threats.

– Internal analysis attempts to identify the organization's strengths and weaknesses.

– Strategic choice is the organization's strategy, which describes the ways the organization will attempt to fulfill its mission and achieve its long term goals.

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Strategy Implementation

Productmarketstrategy

Rewardsystems

Selection,training, anddevelopment

of people

Types ofInformation

Organizationalstructure

Task Design

Performance

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HRM Practices

• Job Analysis - the process of getting detailed information about jobs.

• Recruitment - the process through which the organization seeks applicants.

• Training - a planned effort to facilitate learning of job-related knowledge, skills, and behavior.

• Job design - making decisions about what tasks should be grouped into a particular job.

• Selection - identifying the applicants with the appropriate knowledge, skills, and ability.

• Development - the acquisition of knowledge, skills, and behavior that improves employees' ability to meet the challenges of future jobs.

• Performance management - helps ensure that employees’ activities and outcomes are congruent with the organization’s objectives.

• Pay structure, incentives, and benefits.• Labor and employee relations.

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Strategic Types

• Porter's Generic Strategies – overall cost leadership, or– differentiation.

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HRM Needs in Strategic Types

• Different strategies require different types of employees.

• Role Behaviors:– Cost strategy firms seek efficiency and

therefore carefully define the skills they need in employees and use worker participation to seek cost-saving ideas.

– Differentiation firms need creative risk takers.

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Directional Strategies

Downsizing

External GrowthStrategy

ConcentrationStrategy

Internal GrowthStrategy

Mergers and Acquisitions

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The Role of HR in Providing a Competitive Advantage

• Emergent Strategies - Those that evolve from the grass roots of the organization.

• Enhancing Firm Competitiveness