Strategic human resource management

Definition

• Strategy:

it is a future oriented plan to achieve

organizational objectives.

Strategic management :

process of crafting strategies, implementing them and then evaluating the strategies.

Strategic human resource management:

it is the process of developing practices, programes , policies that help organizations to achieve its goals.

Shrm continued..

• It includes:

• Human resource strategy to be aligned with overall organizational strategy.

• Human resource policies to cohere both across policy areas and across hierarchies.

• It results in above average performance of the firm.

• Human resource practices to be adjusted and accepted and used by line managers and employess.

Roles of an hr manager in strategy making

• HR manager needs to define the architecture of the firm.

• HR needs to conduct an organizational audit.

• HR manager should emerge as an strategic partner by identifying ways in which organization can be revamped in areas which require renovation.

• HR manager must take account of its own work and set clear priorities.

Traditional HRM vs Strategic HRMBasis Traditional hrm Strategic hrm

Responsibility of HRM Staff Specialists Line managers

Focus Employee relations Partnerships with internal and external customers

Role of hr Transactional, change follower , respondent

Transformational, change leader , initiator

Initiatives Slow ,reactive , fragmented Fast ,proactive ,integrated

Time horizon Short term Short, medium, long

Control Bureaucratic ,policies , procedures

Organic-flexible

Job design Division of labour, independence, specialization

Broad ,flexible, cross training teams

Key investments Capital products People ,knowledge

Accountability Cost centre Investment centre

Benefits of SHRM

Shrm has various benefits:

• Contributes to enhanced performance.

• Ensures increased employee and organizational productivity.

• Increases survival rate of the business as an entity.

• Enhances customer satisfaction

• Ensures that HR department justifies its existence.

Barriers to strategic HR

• Short term mentality/focus on current performance.

• Inability of HR to think strategically.• Lack of appreciation as to what HR can contribute

in organizational development.• Failure to understand general manager role as an

HR manager.• Difficulty in quantifying many HR outcomes.• Perception of human assets as higher risk

investments.

Model of SHRM

Resource based view Of the firm

Behavioural Approach

Resource dependence institutional

CyberneticAgency/transaction cost

Model of SHRM

1. Resource based perspective: provides competitive advantage

such as allocation of resources ,organizational culture, core competencies.

2.Behavioural view: explains practices formulated to influence attitudes and behaviors.

3. Cybernetics: it explains the adoption and abandonment of practices resulting from feedback on contribution to strategy.

Model of SHRM

4. Agency/transactional cost : it explains why firm uses performance evaluation and rewards systems.

5. Institutional /political forces : seeks to explain practices such as the inappropriate performance evaluation systems.

6. Resource dependence and power variable: explains practices caused by power and political influence.

STRATEGIC MANAGEMENT PROCESS

Environmental Scanning

Environment needs to be scanned in order to determine trends and projections of factors that will affect fortune of the organization.

Scanning helps identifying threats and opportunities prevailing in the environment.

What might be a threat to one company could be an opportunity for another.

Strategy formulationStrategy is formulated at three levels:

Corporate level

Business unit level

Functional level

It is formulated by the top level management.

Major decisions are taken regarding:

What type of business should the company be engaged in.

What are the goals and expectations for each business.

How should resources be allocated to reach these goals.

BUSINESS UNIT LEVEL

Strategy at this level emphasizes on :

Prevailing competition in the chosen industry or business.

A business unit is an organizational subsystem that has a market, set of competitors ,and a goal distinct from those of other subsystems in the group.

Functional level strategy

• Each business unit consists of several departments like finance ,manufacturing , hr department etc.

• Functional level strategy identifies basic course of action that each of the department must perform in order to attain the organizational goals.

• Each functional department must merge its activities with the activities of the other functional department .

MATERIALS MANAGEMENT MARKETING

KEY STEPS IN STRATEGY FORMULATION

• Be clear whether the hr strategy is meant for corporate ,unit or functional level strategies.

• Next step is to identify the trends in the environment .

• Third step is to have a SWOT analysis of the firm.

• Fourth step is to identify key Hr practices:

• Flow of people: hiri ng,promotion,transfers,training and development.

• Flow of performance management :measurements,follow-up,rewards .

• Flow of information:managing internal communication,designing IT infrastructure.

• Flow of work : organisation structure,work process design.

Strategy ImplementationImplementing strategies requires such attentions as altering sales territories, adding new departments, closing facilities, hiring new employees, changing an organization's pricing strategies, developing financial budgets, formulation new employee benefits, establishing cost-control procedures, changing advertising strategies, building new facilities, transferring managers among divisions, and building a better computer information system.

Strategy implementation is primarily an operational process.

It requires special motivation and leadership skills.

It requires co-ordination among many persons.

Strategy EvaluationStrategic management process leads to decision that can have significant and long- lasting consequences.

Strategy evaluation assumes greater relevance.

Strategy evaluation helps determine the event to which the company’s strategies are successful in attaining its objectives.

Some basic objectives are:

Establishing performance targets , standards and tolerance limits for the objectives, strategies and implementation plans.

Measuring the performance in relation to the targets at a given time.

Analyze deviations from acceptable tolerance limits.

Execute modifications where necessary and feasible.

CASE STUDY

AIR NATIONALINTRODUCTION :

Air National’s (AN) 1998 Annual Report glowed with optimism.

Bradley Smith, CEO, stated in his letter to shareholders, ‘As a

newly privatized company, we face the future with enthusiasm,

confident that we can compete in a deregulated industry.’

By April 2000, however, the tone had changed, with a reported

pre-tax loss of $93 million. The newly appointed CEO, Clive

Warren, announced a major change in the company’s

business strategy that would lead to a transformation of

business operations and HR practices in Europe’s largest

airline company .

BACKGROUNDDuring the early 1980s, civil aviation was a highly regulated market,

and competition was managed via close, if not always harmonious,

relationships between airlines, their competitors and governments.

National flag-carriers dominated the markets, and market shares were determined not by competition but by the skill of their governments in negotiating bilateral ‘air service agreements’. These agreements established the volume and distribution of air traffic and thereby revenue. Within these markets, AN dominated other carriers; despite the emergence of new entrants, AN’s share of the domestic market in the early 1980s, for example, increased by 60 per cent.

The competition

In the middle of the 1980s, AN’s external environment

was subjected to two sets of significant change. First, in

1986, AN was privatized by Britain’s Conservative

government. This potentially reduced the political

influence of the old corporation and exposed the

new company to competitive forces. Preparation

for privatization required a painful restructuring

and ‘downsizing 'of assets and the workforce, driven largely

by the need to make the company attractive to

initially sceptical investors.

Privatization also offered significant political leverage, which AN was able to deploy to secure further stability in its key product markets. It was this context, rather than the stimulus of market

competition, that gave senior management the degree of stability and security needed to plan and implement new business and HRM strategies.

The second set of pressures, potentially more decisive, was generated by prolonged economic recession and the ongoing deregulation of civil aviation in Europe and North America.

With these environmental forces, AN attempted to grow out of the

recession by adopting a low-cost competitive strategy and joining the industry-wide price war. Bradley Smith, when he addressed his senior management team, stated, ‘this strategy requires us to be aggressive in the marketplace and to be diligent in our pursuit of cost reductions and cost minimization in areas like service, marketing and advertising’. The low-cost competitive strategy failed. Passenger numbers slumped by 7 percent during the late 1980s, contributing to a pre-tax loss. Following the appointment of the new CEO, AN changed its competitive strategy and began to develop a differentiation business strategy (Porter, 1979) or what is also referred to as an ‘added-value’ strategy.

In 2002, following the September 11 attacksin New York and Washington in which four commercialplanes were hijacked and crashed, killing almost 3000 people, international air travel bookings fell sharply. The catastrophes caused the loss of more than 100,000airline jobs around the world. In addition, early in 2002,new discount airlines started operating in Europe, and there was a costly battle for market share between AN, HopJet Airlines and Tango Airlines.

Corporate Management

Group 1 North America

Group 2 Pacific

Group 3India

Group 4Europe

Group 5Domestic

Corporate Level : 1) Differentiation competitive strategy

2)Corporate values recognizing the contribution of Air National employees 3) Effective voice for human resources at the strategy table

HUMAN RESOURCES POLICY LEVEL

1 )Priority given to security of employment2) Investment in workplace learning3) Competitive and equitable pay policies

WORKPLACE LEVEL

1) Broad task design and self-managed teams2) Emphasis on employee empowerment and self-accountability3) Climate of cooperation, commitment and trust

• Clive Warren and Elizabeth Hoffman undertook to ‘open the books’ to the unions and established team briefings and regular, formal consultation meetings with union representatives. A profit-related pay system was also launched,with the full support of the unions.

• Parallely cost reduction was also taken up . Job cuts were managed entirelythrough voluntary severance and redeployment.The requirement to sustain and improve performance in the face of such job losses produced, however, a preoccupation with productivity levels, and attempts to alter shift patterns sometimes provoked conflict.

• Disputes were resolved quickly, usually by the company reminding employees of AN’s commitment to Job security, training and development, and through senior management ‘throwing money at the problem’.

GoJet competitive and human resourcesstrategy

• AN also launched its GoJet product in November 2002 to take advantage of the dramatic shift by European and North American passengers towards discount airlines. GoJet planes have more seats because there is less room between the seats and the business-class section has been removed, which allows the planes to carry an additional 20 passengers.

• GoJet costs will be 20 per cent lower than those of AN’s comparable mainline flights partly because GoJet’s employees will be paid a lower wage than their counterparts at AN. Clive Warren has, however, said that wages will be competitive with GoJet’s competitors in the discount market

• Reviewing the developments, Clive Warren considered that AN had been ‘transformed by re-engineering’. Deep in debt in the late 1980s, AN went into profit in the first quarter of 1998 and then suffered a loss in the last quarter of 2001 and the first quarter of 2002. The company’s aircraft were flying to 164 destinations in 75 countries from 16 UK airports. ‘If we are to maintain our market share in domestic and international passenger traffic we have to have a business plan that recognizes the realities of airline travel in the 21st century’, said Warren.