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Strategic HRM Perspective V. Lale Tzner, Professor

Current Issues in HRM 2015 1IntroductionGoal 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 companys strategic management process.What is a strategy? 2Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-2The goal of strategic management in an organization is to deploy and allocate resources in a way that gives it a competitive advantage.Human resource managers should:have input into the strategic plan,have specific knowledge of the organizations strategic goals,know what types of employee skills, behaviors, and attitudes are needed to support the strategic plan, anddevelop programs to ensure that employees have those skills, behaviors, and attitudes.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.

Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-3Strategic Management is a process for analyzing a company's competitive situation, developing the company's strategic goals, and devising a plan of action and allocation of resources that will help a company achieve its goals.

HR Managers should be trained to identify the competitive issues faced by the organization.

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

Strategy Implementation4Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-4Strategic Management has two distinct yet independent components:Strategy Formulation: Strategic planning groups decide on a strategic direction by defining the companys mission and goals, its external opportunities and threats, and its internal strengths and weaknesses.Strategy Implementation: The organization follows through on the strategy that has been chosen. This includes structuring the organization, allocating resources, ensuring that the firm has skilled employees in place, and developing reward systems that align employee behavior with the strategic goals.Model of the Strategic Management Process5Strategy FormulationStrategy ImplementationHR PracticesRecruiting, Training,Performance management, Labor relations, Employee relations, Job analysisJob design, Selection,Development, Pay structure, Incentives,BenefitsFirmPerformanceProductivity,Quality,ProfitabilityHumanResourceActionsBehaviors,ResultsHumanResourceCapabilitySkills,Abilities,KnowledgeHumanResourceNeedsSkillsBehaviorCultureStrategicChoiceGoalsMissionExternalAnalysisOpportunitiesThreatsInternalAnalysisStrengthsWeaknessesForecasts of Labor DemandMultimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-5This figure presents the strategic management process.Strategy Formulation6ExternalanalysisOpportunitiesThreatsStrategicChoiceGoalsInternalanalysisStrengthsWeaknessesMissionMultimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-6This figure presents the five major components of the strategic management process are relevant to strategy formulation.Strategy FormulationFive 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 futureExternal 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.7Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-7Five components of the strategic management process relevant to strategy formulation: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 futureExternal 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.

Strategy Implementation8ProductmarketstrategyRewardsystemsSelection,training, anddevelopmentof peopleTypes ofInformationOrganizationalstructureTask DesignPerformanceMultimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-8This figure presents the variables to be considered in strategy implementation.Views of Human Resource Management (HRM)Human resources provide a source for competitive advantageThe quality of HRM is a critical influence on the performance of firmsA strategic approach is a characteristic of HRMPersonnel management is seen as operationalThe role of business strategist will be a key role of HR specialists of the future9The HRM Strategic View Sustainable competitive advantage. Why has HR been redesigned? To make our organizations more competitive and create sustainable competitive advantages. This is the basis for strategic HRM. Strategy and strategic planning deal with the concept of creating sustainable competitive advantages. Sustainable competitive advantage is a capability that creates value for customers that rivals cant copy quickly or easily, and allows the organization to differentiate its products or services from competitor products or services. 1010Goals of Strategic HRM (SHRM)The main goals of strategic HRM. In the 21st-century organization, the primary HRM function is no longer just ensuring that the company has (1) the correct number of employees with the levels and type of skills the organization requires and (2) control systems to make sure employees are working toward the achievement of the goals in the strategic plan. This is a control model for organizational management that doesnt work in todays organization. 11Strategic Human Resource ManagementStrategic Human Resource ManagementThe linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility.Involves formulating and executing HR systemsHR policies and activitiesthat produce the employee competencies and behaviors that the company needs to achieve its strategic aims.12FIGURE 36Linking Company-Wide and HR Strategies

Source: Gary Dessler, Ph.D., 2007.13Strategic Human Resource ChallengesCorporate productivity and performance improvement effortsIncreased HR team involvement in design of strategic plansBasic Strategic ChallengesExpanded role of employees in the organizations performance efforts14Human Resource Managements Strategic RolesStrategy ExecutionRoleStrategic Planning RolesStrategy Formulation Role15The Role of HRM in Strategy Formulation16

Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-16Four levels of integration seems to exist between the HRM function and the strategic management function.Administrative Linkage Lowest level of integration; HRM functions attention is focused on day-to-day activities. No input from the HRM function to the companys strategic plan is given.One-Way Linkage The strategic business planning function develops the plan and then informs the HRM function of the plan. HRM then helps in the implementation.Two-Way Linkage Allows for consideration of human resource issues during the strategy formulation process. The HRM function is expected to provide input to potential strategic choices and then help implement the chosen option.Integrative Linkage Is based on continuing, rather than sequential, interaction. The HR executive is an integral member of the strategic planning team.

Relationships Between Organisational Strategy & HR Strategy (1 of 5)

Figure 2.1 Potential relationships between organisational strategy and HR strategyRelationships Between Organisational Strategy & HR Strategy (2 of 5)

Figure 2.1 Potential relationships between organisational strategy and HR strategyRelationships Between Organisational Strategy & HR Strategy (3 of 5)

Figure 2.1 Potential relationships between organisational strategy and HR strategyRelationships Between Organisational Strategy & HR Strategy (4 of 5)Figure 2.1 Potential relationships between organisational strategy and HR strategy

Relationships Between Organisational Strategy & HR Strategy (5 of 5)Figure 2.1 Potential relationships between organisational strategy and HR strategy

Link Between Business & Strategy (1 of 2)Separation typical picture of 20 years ago still exists today in smaller organisationsFit reflects importance of people in achieving organisational strategyDialogue recognises the need for two way communicationLink Between Business & Strategy (2 of 2)Holistic Organisational staff key to competitive advantage

HR Driven Places HR strategy in prime position Theoretical Perspectives of HRMUniversalist approach

Fit or contingency approach

Resource based approach Universalist ApproachOne high commitment model of labour management

Relates to high organisational performance in all contexts

Clarity of goals Fit or Contingency ApproachBased on two critical forms of fit:

- external (vertical integration)

- internal (horizontal integration)

Strength of Fit or Contingency ApproachProvides a simple framework that shows how selection, appraisal, development and reward can be mutually geared to produce the required employee performanceResource Based Approach (1 of 2)Concerned with the relationships between internal resources, strategy, & business performance

Focuses on promoting sustained competitive advantage via developing human capitalResource Based Approach (2 of 2)HR unique and cannot be copied by others

Focus much wider also on skills, knowledge, attitudes and competencies

Value created by matching individual competencies to requirements of the business

Resource Criteria Required To Sustain Competitive AdvantageValuable

Rarity

Inimitable

Non substitutable

(Wright et al, 1994)HR as a Source of Sustained Competitive AdvantageFigure 2.5 A model of human resources as a source of sustained competitive advantageSource: P. Wright, G. McMahon and A. McWilliams (1994) Human resources and sustained competitive advantage: a resource-based perspective, International Journal of Human Resource Management, Vol. 5, No. 2, p. 318. Reproduced with the permission of Taylor and Francis Ltd. See www.tandf.co.uk/journals.

HRM Practices32Job 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 organizations objectives.Pay structure, incentives, and benefits.Labor and employee relations.Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-32HRM function can be thought of as having six menus of HRM practices, from which companies can choose the ones most appropriate for implementing their strategy. Each of these menus refers to a particular functional area of HRM: job analysis/design, recruitment/selection, training and development, performance management, pay structure, incentives, and benefits, and labor-employee relations.Strategic TypesPorter's Generic Strategies overall cost leadership, ordifferentiation.33Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-33Michael Porter has hypothesized that competitive advantage comes from creating value by:-reducing costs (overall cost leadership), or-charging a premium price for a differentiated product or service (differentiation).

HRM Needs in Strategic TypesDifferent 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.34Multimedia Lecture Support Package to Accompany Basic MarketingLecture Script 6-34Different strategies require different types of employees. Role Behaviors are the behaviors required of an individual in his or her role as a jobholder in a social work environment.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.

Factors Affecting The Role of HR Function in StrategySenior HR person being member of board of directors

Overall philosophy of the business towards valuing its people

The mindset of the Chief Executive (CE)

The working relationship between the CE and most senior HR person