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Strategic Human Resource Management
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 HR function in strategy formulation.Describe the linkages between HR and strategy formulation.
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Strategic Human Resource Management
Discuss the more popular typologies of generic strategies and the various HR practices associated with each.Describe the different HR issues and practices associated with various directional strategies.List the competencies the HR executive needs to become a strategic partner in the company.
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The 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 organization’s 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.
Introduction
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
What is Strategic Management?Strategic 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.
Strategic human resource management is the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals.
© 2006 The McGraw-Hill Companies, Inc. All rights reservedMcGraw-Hill/Irwin
Components of the Strategic Management Process
Strategy Formulation: Strategic planning groups decide on a strategic direction by defining the company's 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.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Model of the Strategic Management Process
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
Mission Goals StrategicChoice
InternalAnalysisStrengths
Weaknesses
ExternalAnalysis
OpportunitiesThreats
Strategy Formulation Strategy Implementation
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
The Role of HRM in Strategy Formulation
Administrative Linkage — Lowest level of integration; HRM function's attention is focused on day-to-day activities. No input from the HRM function to the company's 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.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Strategy Formulation
GoalsMissionStrategicChoice
InternalanalysisStrengths
Weaknesses
Externalanalysis
OpportunitiesThreats
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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 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.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Strategy Implementation
Organizationalstructure
Types ofInformation
Task design
Selection,training, anddevelopment
of people
Rewardsystems
Productmarketstrategy
Performance
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
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.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Strategic TypesPorter's Generic Strategies —
Michael Porter has hypothesized that competitive advantage comes from creating value by:reducing costs (overall cost
leadership), orcharging a premium price for a
differentiated product or service (differentiation).
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
HRM Needs in Strategic TypesDifferent 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.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Directional Strategies
External GrowthStrategy
ConcentrationStrategy
Internal GrowthStrategy
Downsizing
Acquisitions Mergers
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
The Role of HR in Providing a Competitive Advantage
Emergent Strategies - Those that evolve from the grass roots of the organization.What actually is done versus what is planned. HR plays an important role in facilitating the
communication of emergent strategies between levels in the hierarchy.
Enhancing Firm CompetitivenessBy developing a rich pool of talent, HR can assure the
company's ability to adapt to a dynamic environment.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Strategic Human Resource Executives
Four basic competencies:Business Competencies - Understanding the company's
economic and financial capabilities.Professional/Technical Knowledge - In HR practices such
as selection techniques and compensation systems.Change Processes or Organizational Development
Techniques - The ability to diagnose the need for change and develop and implement the appropriate intervention.
Integration Competencies - A generalist perspective with the skills of a specialist in the above three areas.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Human Resource Competencies
HR Professional
IntegrationCompetence
Professional andTechnical
Knowledge
Ability toManage Change
BusinessCompetence
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin