Concept of Strategy. What is strategy? “…determines direction in which the enterprise is going...

Concept of Strategy

What is strategy?

• “…determines direction in which the enterprise is going in relation to its environment in order to achieve sustainable competitive advantage.”

– (Armstrong and Baron)– It is a

• Plan- a direction, a guide, a course of action• A pattern- consistency of behaviour over time• A Perspective- fundamental way of doing things• A Ploy- manoeuvre to outwit competitor

– Mintzberg

Strategy Management

• Aims for competitive advantage• Formulating strategy requires– Defining strategic intent– Achieving strategic fit (matching resources to

opportunities)• This requires strategic capability– Ability to determine strategic goals and implement

strategic plans- (strategic management)

What strategies?

• Differentiation• Focus• Innovation• Quality• Cost Leadership

Resource Based Strategy

• “..firms consist of bundles of unique resources and that, if these resources meet the four criteria of value, rarity, inimitability and non-substitutability, then they can constitute a source of sustained competitive advantage to the firm (Boxall, 1996).

• Such unique capability is called distinctive capability or core competencies

Process of Strategy Formulation

• External Analysis• Internal Analysis• Corporate Strategy• Functional Strategy• Implementation Plans• Implementation • Monitor and evaluate

Strategic HRM

Defining Strategic HRM

• “… an approach to making decisions on the intentions and plans of organisations in shape of policies, programmes and practices concerning the employment relationship..”

• Armstrong (2006)• “… means of aligning the management of

human resources with strategic content of business..”

• Walker (1992)

Meaning of Strategic HRM• Use of Planning• Coherent approach to design and management of

personnel systems based on employment policy and manpower strategy and often underpinned by a philosophy

• Matching HRM activities and policies to some explicit business strategy

• Seeing the people of the organisations as a “strategic resource” for achievement of “competitive advantage”

• Armstrong (2006)

Different HR strategies

• Overarching strategies– General intentions of organisations about how

people should be managed and developed• Specific HR Strategies– These setout what organisations intend to do in

different areas

HR Strategies

Overarching strategiesEg. “We want GSK to be a place where the best

people do their best work”» GlaxoSmithKline

Specific HR Strategies Talent ManagementContinuous improvementLearning and developmentReward

Strategic Fit

• Vertical integration– Integration of HR strategies with business

strategies• Horizontal integration– Ensuring that different elements of HR strategy fit

together and are mutually supportive

Resource based Strategic HRM

• Human resources, it has been argued, can constitute a particularly strong source of sustained competitive advantage, provided the firm is organized to exploit them

• (Truss 2004)

RBV Ideas• Competitive advantage is obtained if a firm

can obtain and develop human resources that enable it to learn faster and apply its learning more faster than its competitors

Hamel and Prahald (1989)

• Human Resources includes.. experiences, knowledge, judgment, risk-taking propensity and wisdom of individulas

– Barney (1995)

RBV Aim

• Improve resource capability– Achieving strategic fit– Obtaining added value from effective deployment

of resources

Human Capital

• Human Capital AdvantageGeneral skills that are available to all firms are, it is argued, a potential source of competitive parity, whereas firm-specific skills, such as knowledge of particular systems or culture, are more likely to constitute a resource

Human Process Advantage:• HR systems (set of interrelated activities, functions and

processes directed at attracting, developing and maintaining HR) add value by facilitating development of firm-specific competencies, produce complex social relationships and generate tacit organizational knowledge

• Both processes needs to be dove-tailed to get human resource advantage.( It is not enough to recruit people with talents and ability, it needs to have in place processes, systems and practices to ensure that people work effectively)

Models of Strategic HRM

• How to achieve competitive advantage through people– Best Practice (Universalistic )– Best Fit (Contingency)– Configurational- (Bundling)

• What to do to achieve competitive advantage– High-Performance Management (HP Working)

• Enhancing skills and engaging enthusiasm- r/s, pm, t/d, inc

– High-Commitment Management• Enhancing mutual commitment-career l, func flex, hierarchy, team

– High Involvement Management• Treating people as partnwrs-commn, partcpn

Linking HR Strategies with Business Strategies

• Sequential Approach– Assess feasibility, determine desirability,

determine goals, decide means to goals (fit)• Empirical Need-Based Approach– Identify business issues, needs and intentions– Determine options– Make strategic choices– Plan implementation

Linking HR and Competitive strategies

• Linking HR and Competitive Strategies