hr strategy integration
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Strategic HRM in Action
HR Strategy defined, purpose,
types of HR strategies, Content of
HR strategies, Formulating HR
strategy, criteria for an Effective
HR strategy, integrating the
business and HR strategies.
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HR strategy“HR strategies set out what the organiation intends to
do about its human resource management policies and
practices, and how they should be integrated with the
business strategy and each other.!
" #yer and Reeves $%&&'( as )internally consistent bundles
of human resource practices*," +eter o-all $%&&( they provide )a framewor/ of critical
ends and means*.
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#istinction between SHR0 and HR Strategy
" Strategic HR0 can be regarded as a general
approach to the strategic management of human
resources in accordance with the intentions of
the organiation on the future direction it wants
to ta/e.
" HR strategies will focus on the specific intentions
of the organiation on what needs to be doneand what needs to be changed.
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TYPES OF HR STRATEGIES" Overarching HR strategies - describe
the general intentions of the organiation
" Specific HR strategies- Specific HRstrategies set out what the organiation
intends to do in specific areas
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CRITERIA FOR A EFFECTI!E HR STRATEGY
" will satisfy business needs1
" be founded on detailed analysis and study, not 2ust wishful thin/ing1
" can be turned into actionable programmes that anticipate
implementation re3uirements and problems1" is coherent and integrated, being composed of components that fit
with and support each other1
" ta/es account of the needs of line managers and employees
generally as well as those of the organiation and its other
sta/eholders.
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Formulating and implementing HR
strategies
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F"#AMETA$ PROCESS COSI#ERATIOS
" 4nteractive $not unilinear( relationship between business strategy
and HR0
" HR strategies are not necessarily developed formally and
systematically but may instead evolve and emerge
" Strategy formulation is about )preferences, choices, and matches*
rather than an e-ercise )in applied logic*. 4t is intentions shared
amongst the top team
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5 linear strategic HR0 model
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CHARACTERISTICS OF THE PROCESS
" Propositions
" Schools of strategy development
" Levels of strategic decision making
" Strategic options and choices
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Strategy formulation propositions
" 6here are many HR strategies in a firm
" usiness strategy is one of the factors that influence
strategy formulation
" Historical compromises and trade7offs from sta/eholders
" 8ot all managements respond from shift from historical
pattern of strategy formulations
" 8o one set of constructs available
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Schools of strategy development
+urcell, 9::%" 6he design school 7The design school is deliberate and
is ‘based on the assumption of economic rationality*. 4t uses
3uantitative rather than 3ualitative tools of analysis and Formulating
and implementing HR strategies focuses on mar/et opportunitiesand threats. ;hat happens inside the company is )mere
administration or operations*.
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" 6he process school7 adopts a variety of approaches and is concerned with how
strategies are made and what influences strategy formulation.
7 )4t is much more a study of what actually happens with e-planationscoming from e-perience rather than deductive theory.*
7 downplays the role of systematic analysis and Emphasies the role
of intuition and vision, fails to provide a clear basis for reasoned
choices $0intberg(
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" 6he configuration school < 5ssumptions
" strategies vary according to the life cycle of the =rganiation
" Strategies will be contingent to the sector of the organiation and," they will be about change and transformation.
“ 6he focus is on 4mplementation strategies, which is where +urcell thin/s
HR can play a ma2or role!
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Levels of strategic decision making
- Do strategy flow from business strategy
7 s strategy parallel to businessdecisions
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5 methodology for formulating HR strategies was developed by #yer
and Holder $%&>>( as follows?
1.Assess feasibility – number, time and cost
2.Determine desirability – examine the implications of strategy in terms
of sacrosanct HR policies $eg a strategy of rapid retrenchment would
have to be called into 3uestion by a company with a full employment
policy(.
@. Determine goals – these indicate the main issues to be wored on
and they derive primarily from the content of the business strategy.
A. Decide means of achie!ing goals – the general rule is that the
closer the e-ternal and internal fit.
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5pproaches to strategy development
7 est fit approach
7 6he best practice approach
7 6he configuration approach
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5pproaches to development of HR strategies
" 6he classical se3uential approach
" 6he empirical need based approach
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Concepts in strategy formulation
" Resource capability < firms tries to de!elop
strategies concerned more on ac"uisition, de!elopment
and retention of human capital for gaining competiti!e
ad!antage through the human
" 5lignment to business strategy
" 5chieving horiontal fit
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4ssues in strategy formulation" usiness issues7 intentions , proposals on increasing
competitive advantage, perceived need to develop performance and
customer oriented culture and any other philosophy li/e
engagement, commitment etc.,
" Conte-tual factors < globaliation, profitability through
growth, technology, importance of intellectual capital and non7stop
change
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SETTIG O"T THE STRATEGY1. #asis $business needs 1 environmental factors and analysis1 cultural factors
9. %ontent – details of the proposed &' strategy
@. 'ationale – the business case for the strategy
A. (mplementation plan $ action programme1 responsibility for each stage1
resources re3uired1 proposed arrangements for communication,consultation, involvement and training1
'. %osts and benefits analysis – an assessment of the resource implications of
" the plan $costs, people and facilities( and the benefits that will accrue,
" for the organiation as a whole, for line managers and for individual
" employees $so far as possible these benefits should be 3uantified in" terms of value added(.
ut there is no standard model1 it all depends on the circumstances of the
=rganiation.
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4ntegrating the usiness
Strategy and HR Strategy
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" Each of the business strategy needs differentapproaches or types of HR strategy to managepeople and the investment towards HumanCapital.
" 6herefore, Bin/ing between HR Strategy andusiness Strategy is important
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+orter*s classification of usiness Strategy
" 6hree types of strategies $ porter, %&>'(
adopted by an organiation to gain
superior performance and advantage areCost leadership
#ifferentiation
Focus
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Cost leadership" 4ncreases in efficiency cutting of costs, then passing savings to
consumer
" 5ssumes price elasticity in demand for products or services is high
" 5ssumes that customers are more price sensitive than brand loyal
HR Strategy" HR strategy focuses on short7term performance
measures of results promoting efficiency through 2ob
specialiation cross7training
Bin/ing between HR Strategy and usiness Strategy
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#ifferentiation" 4n order to demand a premium price from consumers
< 5ttempting to distinguish organiational products or
services from other competitors or
< Creating perception of difference
HR Strategy
" =rganiation offers employees incentives
compensation for creativity
" HR strategy focuses on e-ternal hiring of uni3ue
individuals on retaining creative employees
Bin/ing between HR Strategy and usiness Strategy
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group or narrow mar/et segment" Strategic intent is to gain consumer loyalty of neglected
groups of consumers
" High concern for 3uality product
HR Strategy
" Strategic HR issue is ensuring employee awareness ofuni3ueness of mar/et segment
< 6horough employee training focus on customersatisfaction are critical factors
< Hiring members belonging to the target segment whoare empathetic to customer in that target segment
Bin/ing between HR Strategy and usiness Strategy
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eaumont*s classification of HR strategies
" 8oted @ bases for classifying HR Strategies and
its relationship to usiness Strategies
7 #ifferent types of business strategies < that
different business strategies will lead to different
HR strategies $ similar approaches of +orter and
Schuler and Dac/son(
7 Stages in business or product life cycle7 6ypes and number of products
Bin/ing between HR Strategy and usiness Strategy
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HR +ractices corresponding to the stages of organiation*s Bife Cycle
Life cycle stages HR Practices
Start up Flexible pattern of work
Recruitment of highly motivated and committedemployees
Competitive payLess formal systems
o unions
!rowth "ore planned recruitment and selection
#raining and development focus
Performance management processes
Focus on high commitment
$eveloping stable employee relations
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HR +ractices corresponding to the stages of organiation*s Bife Cycle
"aturity %ttention to the control of labour costs
Focus on increasing productivity
Strained employee relations
Control compensation
$ecline &mphasising on down si'ing mechanisms
%bandoning some long withstanding practices to cut oncosts
Career consulting services
Retraining
#rade unions marginalised
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6ypes and number of products" Fombrun et al $%&>A( suggested that the
strategy aimed at achieving variations in product
focus results in structural modifications andinfluences in HR Strategy.
" Eg., organiations with single product*s HR
Strategy will be different from organiations thatfollows strategy of growth by ac3uisitions.
Bin/ing between HR Strategy and usiness Strategy
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Schuler and Dac/son*s strategic driven role behaviours and
practices " 6hey focused on +orter*s @ generic approaches but
argued that HR +ractices should be designed toreinforce the behavioral implications of these genericstrategies
" 6he role behaviours needed of employees throughout anorganiation provide a rationale for lin/age betweencompetitive strategies and HR +ractices
" Competitive strategies can be used to e-plain how
different employee behaviours are re3uired forsuccessful implementation of different strategies
" 6hese behaviours are roles that go beyond s/ills,/nowledge, and abilities
Bin/ing between HR Strategy and usiness Strategy
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Business Strategy
%ost )eadership" Suitable for repetitive and
predictable behaviour " Concerned with short7term focus
and 3uantities $volumes(" Result7oriented" Ris/ averse" Comfortable wor/ing themselves
HR Strategy
*tili+ation &' trategy " Focused on short7term performance
measures, i.e., results or outcomes
" Efficiency is the norm" Dob assignments are specialied" Hierarchical pay, few incentives" 8arrow career paths, limited training" Bimited employment security" Cost7cutting may involve incentives for
employees to leave the firm" +rocedures for continuous trac/ing of
wage rates in the labour mar/et" Bimited participation
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Differentiation
" Bong term focus
" Creative 2ob behaviour
" 0oderate concern for 3ualityand 3uantity
" $eg. H+,DD etc.,(
-acilitation &' trategy
" road career paths
" E-tensive training
" E3ual and fair pay, manyincentives for creativity
" Bong term performancemeasures
" E-ternal recruitment and hiring
of people who bring in newideas
" High employee participation
" Some employment security
" Stoc/ ownership options
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-ocus
" High concern for 3uality
" 0oderate concern for3uantity
" Bongmedium term focus
" $eg., toyota(
Accumulation &' trategy
" E3ual and fair pay with
many incentives" Hiring employeesbelonging to the targetmar/et
" road career path with
e-tensive training" High employee
participation in decisionma/ing
" Some employee security
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0ile*s and Snow*s Classification of HR
strategy
" Suggested that HR0 +ractices must be tailored to the demands of the businessstrategy
6hey identified types of organiational strategies on the basis of the dominant culture
of the organiation7
" #efenders7 who see/ , stability and believe in strict control <low cost providers
" +rospectors7 who see/ new opportunities, focus on continuous development andbelieve in fle-ibility < product differentiators and innovators(
" 5nalyers7 who see/ to incorporate the benefits of both defenders and prospectorsuses focused personnel strategy.Eg., manufacturers of electronics , pharma,automobiles
" Reactors < companies with dysfunctional strategies < companies in this category arehighly competitive mar/ets and are at the mercy of their environments
eg., publishing, retail, hotels7 they have few systematic strategic implications
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#ominant Culture o( the
Organi1ation 2Business
Strategy3Defenders
" Find change threatening
" Favour strategies which
encourage continuity andsecurity
HR Strategy
" ureaucratic approach" +lanned and regularly
maintained policies to
provide for lean HR
" uild human resources" Bi/ely to emphasie
training programmes and
internal promotion
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rospectors
" 6hrive on change
" Favour strategies of product
andor mar/et development
" Creative and fle-iblemanagement style
" Have high 3uality humanresources
" Emphasie redeployment andfle-ibility of HR
" Bittle opportunity for long term
HR planning" 5c3uire human resources
" Bi/ely to emphasierecruitment, selection andperformance7basedcompensation
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Analysers
" See/ to match new
ventures with the presentbusiness set7up
" 6hese firms are followers
< the ventures are not
new to the mar/et, onlynew to the firm
" Bow levels of monitoring
and coordination" )uy* as well as )ma/e*
/ey human resources
" Emphasie HR planning7
e-tensive career pathswithin companies
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Schuler*s$%&&9( 7 6he Five +*s 0odel of
SHR0
+roposed the Five + model that lin/s the
strategic business needs with strategic HR0
activities. 6he Five +*s are
$HR( +hilosophy
$HR( +olicies
$HR( +rogrammes$HR( +ractices
$HR( +rocesses
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Schuler*s$%&&9( 7 6he Five +*s 0odel of
SHR0 $contd.(" +hilosophy
< Statements of how organiation values treatsemployees1 essentially culture of the organiation
" +olicies < E-pressions of shared values guidelines for action
on employee7related business issues
" +rograms
< Coordinated strategied approaches to initiate,disseminate, sustain strategic organiationalchange efforts necessitated by strategic businessneeds
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Five +*s 0odel of SHR0" +ractices
< HR practices motivate behaviors that allow individuals
to assume roles consistent with organiation*s
strategic ob2ectives < 6hree categories of roles?
" Beadership
" 0anagerial
" =perational
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Five +*s 0odel of SHR0" +rocesses
<Continuum of participation by all
employees in specific activities tofacilitate formulation
implementation of other activities
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Five +*s 0odel of SHR0" Successful SHR0 efforts begin with
identification of strategic needs
" Employee participation is critical to lin/ingstrategy HR practices
" Strategic HR depends on systematic
analytical mindset" Corporate HR departments can have
impact on organiation*s efforts to launch
strategic initiatives
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Bin/age between HR0 and Strategic planning
process" +roposed by Golden and Ramanu2am $%&>'(
" A types of lin/ages
%.5dministrative Bin/age< traditional role
9.=ne ;ay Bin/age < HR strategy reactive
@.6wo ;ay Bin/age < reciprocal andinterdependent relationship
A.4ntegrative Bin/age < dynamic interactionbetween HR function and strategic lin/age , HRe-ecutive is a strategic business partner withother senior e-ecutives of the firm
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Relationshi) &et.een Business Strategy an' HRP
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Relationshi) &et.een Business Strategy an' HRP
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Com)ensation