UNIT 2 - rowkish.files.wordpress.com · Slide 2.1 Eugene McKenna and Nic Beech,Human Resource Management, 2nd Edition, © Pearson Education Limited 2008 UNIT 2 CORPORATE STRATEGY

Slide 2.1

Eugene McKenna and Nic Beech, Human Resource Management , 2nd Edition, © Pearson Education Limited 2008

UNIT 2

CORPORATE STRATEGY AND

STRATEGIC HRM

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Objectives•

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Be aware of the different schools of thought onstrategy Understand the connection between strategy andHRM understand the need for awareness of bothcontent and process in HRM Know the importance of the psychological contract Be able to analyse the role and practice of HRM atthe strategic level

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Introduction

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According to Chaffee 1985:Strategy affects the overall direction and

success of an organisation

It is concerned with the fit between theenvironment and the organisation

It deals with non-routine activities

Simply: it is about setting organisationalobjectives and deciding on a comprehensivecourse of action to achieve them.

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Corporate Strategy• According to Johnson, Scholes and Whittington (2005),

strategic decisions are those concerned with the longterm direction of the organisation . They have impact on:

The scope of activities: what the organisation does

(how broad or tight focused activities are) It aims to achieve advantage for the organisation over

its competitors The fit between the organisation and its environment How the core competence, skills and knowledge of the

organisation will be developed and utilize

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• For Johnson et al (2005), strategic management has three primaryaspects:

The strategic position:focused on the external environment and the organisation’s ability to

influence it.e.g political, legal, economic, technical and social settings of the

organisation

Strategic choice:the way organisations / strategists react to the internal and external

environment. e.g allocating resources to some activities and removingthem from some activities; pursuing particular opportunities

Strategy into action:ensuring that the structure of the organisation is fit for purpose, managing

change to gain commitment to the direction and enabling successthrough the provision of resources, technology, skills and knowledge

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Each of the elements of strategy affectsand is affected by the behaviour ofpeople in the organisation. Therefore there is close interactionbetween HRM and organisationalstrategies.

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Models of corporate strategy

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Prescriptive school: (design, planning, positioning). Descriptive school: (vision, learning, power, culture).

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Prescriptive Schools – (Mitzberg et al, 1998)

• This school emphasises three areas:

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Steps in Strategic Planning (Designing and Planning)– Walker (1980)

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Corporate philosophy and mission statement

Environmental scanning (external conditions)- PEST(LE)

Evaluation of organisation’s strengths and weaknesses(Internal capabilities)

Development of objectives and goals (focused on performance)

Development of strategies deciding on the changes needed to achieve objectivesand goals. Eg finance, technology. relates directly to HR policies – skills/ training needed

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Positioning – Michael Porter 1980, 1985

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Michael Porter’s (1985) Five Force

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Challenges / Problems with thePrescriptive School

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Strategic decisions are not rational because oflimitation in time and resources available Decision making and implementation are not entirelyseparate Strategy is ‘emergent’ rather than fully planned inadvance of taking a decision

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Descriptive Schools –Mitzberg et al 1998

• Perspective:

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Implications for SHRM•

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Greater degree of involvement and upwardcommunication development of employees skills and knowledge Incremental process of change rather than one-offstrategic plan Todays business require adaptability, responsivenessto customers, commitment of employees

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STRATEGIC HRM

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1. Matching or best-fit model: (life cycle and competitiveadvantage approaches). – by Michigan School (Fombrunet al 1984

Focuses on strategic integration - a fit between HRpolicy and company policy. Includes:

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Focus of SHRM

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Criticism of the matching or best-fit approach.just like the prescriptive and rational decision makingIncongruity between Corp Strategy and SHRM eg labour cost

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2. Resource-based model (Barney 1991): (focus onthe internal resource of the organisation, and thesignificance of:

Value: HRM creating value through efficiency, customerselection and retention, meeting customer’s needs

Rarity: nurturing rare characteristics of the organisation’shuman resources to gain competitive advantage

Inimitability: developing characteristics that cannot be easilyimitated – culture of fun, empowerment etc

Criticism:Too introspective, not much external environmentConflict of interest between employer and employees

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3. Best practice model (high commitment): Marchington and Wilkinson (2002):

importance of quality selection,training and development,teamwork,secure employment andpotential for progression andperformance-related rewardsReduction in status differential among employeesteamwork. Criticism:What is the best combination of best practice techniques?Subscribes to unitarism, ignores inherent pluralism

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Processual approach:

Strategy is not only about setting policies but also about‘realise’ strategy (what occurs in practice) recognises the outcome of both planned and unplannedactivities (like the descriptive strategy) on strategies

Eg use of best practices in recruitment as a benchmark(positive)Use of personal bias subverting equal opportunities policy Criticism:Operates at the ‘doing’ level rather than the ‘visioning’ level

Reactive rather than proactivePotential for inconsistencies and unfairness in theapplication of policy

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HRM and organisational performance•

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High performance through people: (e.g. demanding targets,teamwork, group-based rewards, priority on training, good employeerelations, adherence to psychological contract).

Psychological contract concerns the expectations, rights andobligations that employees believe to exist between them andthe organisation.

HRM content and process: people-oriented policies and practices(content) need to be complemented by effective implementation(process). Thinking performer/business or strategic partner: (importance ofthinking and reflection as a prelude to performance by new entrantsto HRM, and HR practitioners entering into a partnership with linemanagers).

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THE END OF UNIT 2

Documents

UNIT 2 - rowkish.files.wordpress.com · Slide 2.1 Eugene McKenna and Nic Beech,Human Resource Management, 2nd Edition, © Pearson Education Limited 2008 UNIT 2 CORPORATE STRATEGY