‫بسم اهلل الرمحن الرحيم‬

GSB
Advanced HRM

4
External Analysis & HR Strategic
Alignment
Dr. Abdelnasser Ghanem
Dr. Abdelnasser ghanem (aahhg@hotmail.com)
Objectives & Contents

1 Scanning External Environment

2 Conclusion of External Analysis

3 Achieving The Strategic Fit

4 HRM STRATEGY – DESIGN PRINCIPLES

5 Alignment with Corporate Strategies

6 Alignment with Competitive Strategies

2 7 Key features of a successful HR strategy

 Scanning External Environment
Key environmental variables can be
classified to three levels:

Social
environment

Industry
environment
Shareholders

Internal
environment

The External environment consists

of variables affect the organization
Competitors (Opportunities & Threats) that are
outside the organization and not
within the short-run control of its
management.
 Nature of External Environment
Two classifications of external environment :
first, complexity refers to number of elements
affecting the organization: the fewer, the
simpler, and the larger and unfriendly, the
more complex the environment.

Simple Complex
(A simple, unstable (Complex unstable The second is based on level of
Unstable

environment) environment) stability: If the changes of external

Medium environment Such as factors are few, environment is
(closer to organic telecommunications
considered stable, and if they are
organization) suitable companies,
for clothing factories computers, mobile in continuous or rapid change, it is
and all related to and high-tech devices considered unstable.
preference (Stable complex)
(Simple stable A medium
By mixing the two
environment) environment is closer
to mechanical classifications organization
An assured
Stable

environment such as organization such as can face one of four types

government schools, universities of environment:
institutions and and pharmaceutical
necessary goods companies
 Nature of External Environment

The nature of environment affect the Designs and Dimensions

of the suitable structure in areas such as:
Dimension Organic Structure Mechanical Structure
Control span Wide Narrow
Centralization Low High
Formalization Low High
Expert Power High Low
Position Power Low High
 Scanning External Environment

A PESTEL analysis (or known as PEST analysis)

is a framework used to analyze the external
factors that may have impact on an
organization's performance. This tool is
useful when starting a new business or
conducting a strategic review.

P E S T L E
Political Economic Social Technological Legal Environment
•Governmen •Interest rates •Demographic •Technological •Consumer •Climate
t system •Taxes changes development
•the customs Laws seasons
•Democracy •exchange rate •Age distribution •Rapidity of
•Laws of •Geography of
•Disorders •Economic •Professional change
•Stability Monopoly the country
growth Trends •Interest in R&D
•Freedom of •Unemployment •Social classes •Resources
•Health and •Disaster areas
trade •Income levels safety laws •Infrastructure
•holidays •Concern to
•Inflation level • Labor rules • Environmental
•Regulation development
Laws

Please analyze external factors that may impact the strategic direction of
your organization?
 Scanning External Environment

Gaining a competitive advantage

emerges from the ability to identify
and respond to environmental changes
well in advance of competitors.
Identifying important factors to us is a
result of two issues: Probable Impact
The importance of the strategic High Medium Low
external factor (if occur) and its impact
on the industry/ organization. High High Medium

Probability of Occurrence
High
The probability of these trends actually Priority Priority Priority
occurring, from low to medium to high.

Medium
High Medium Low
Priority Priority Priority

Based on your PESTEL analysis, Please

Low

classify the priorities of your Medium Low Low

organization’s external factors. Priority Priority Priority
 Conclusion of External Analysis Example :EFAS of (Apple)
External Factors Weight – 0 Rating – 1 to 5 Weighted Comments
to 1 relative Management Score
importance Response
Opportunities
• Economic integration of 0.2 4.1 .82
Community
• Demographics favor quality 0.1 5 .50
appliances 0.05 1 0.05
• Economic development of Asia
• Opening of Eastern Europe 0.05 2 .10
• Trend to “Super Stores” 0.1 1.8 .18
Threats:
- Increasing government 0.10 4.3 .43
regulations
- Strong competition 0.10 4.0 0.40
- New product advances 0.15 1.2 .018
- Japanese appliance companies 0.15 1.6 .024

Total Score 1 2.072

Based on your External analysis of your organization, please prepare its (EFAS)
 Achieving The Strategic Fit
After the situation analysis (internal & external),
managers aim to a strategic fit between external
opportunities and internal strengths which can be
called Strategy formulation.. This process is concerned
with developing the mission, objectives, strategies.
One desired outcome is identifying a position where
an organization can use its core capabilities to take
advantage of a particular market opportunity through
finding a position in the mark that is currently
unsatisfied.
Such a position may be called a strategic
sweet spot where the organization is able
to satisfy customers’ needs in a way that
competitors cannot.
Finding such a sweet spot is not always
easy. Managers must relay on strengths to
take advantage of opportunities available.
It is matching strengths to opportunities available
The Strategic Fit: TOWS Matrix

TOWS Matrix illustrates how the external

opportunities and threats facing a particular
corporation can be matched with that
company’s internal strengths and weaknesses
to result in four possible strategic alternatives:

Weaknesses (W) : List 5 – 10 Strengths(S) : List 5–10 strengths : INTERNAL

weaknesses : Poor competitive HR Competencies /good Financial FACTORS
(IFAS) EXTERNAL
position / aging technology / Position /Strong Customer FACTORS
poor financial position Relations / good location (EFAS)

Opportunities (O) List 5 – 10

W/O S/O opportunities : ability to open new
markets / faster economic growth/
Mini – Max Max – Max consumers Favor our products

Threats (T) List 5 – 10 external

W/T S/T threats here: entering new
competitors / economic deflation /
Mini - Mini Max - Mini increasing competitive pressures

Based on your organization’s IFAS & EFAS, please prepare its TOWS Matrix, and
Suggest its Strategic direction.
 WHAT IS STRATEGIC HRM?
It can be challenging issue to form the
appropriate HR strategy that support your
corporate strategy. As agreed before, HR
strategy is a sub-strategy of corporate
strategy.
While analyzing current structures is
Internal External
analysis a part of the internal analysis.
analysis
The first step of forming HR strategy
Organizational Strategy is developing appropriate structure
to achieve organizational strategy.
Review current Identify HR structure Then a gap analysis should be
HR structure to achieve the strategy conducted to identify requirements.
Identify Gab Hence HR Strategy that support
these requirements then designed.
HR strategy
The following step is setting HR
policies, including the sub-policies
HR policies
required to justify the gaps between
Staffing – Reward – appraisal - Development
current & desired Structures.
 HRM STRATEGY – DESIGN PRINCIPLES

It is important to note that there is no overall

single HR strategy that can be ideal for all
organizations, however, following are basic
concepts about formulation HR strategy:
 Business strategy may be an important influence on HR strategy but it is only
one of several inputs that should be considered.
 The mix of factors that influence HR strategy is a set of historical organizational
culture and compromises between stakeholders
 The effective implementation of HR strategies depends on the top management
support, and commitment and co-operation of line managers.
 HR strategy will be effective only if there is a HR director who is playing an
active and respected role as a business partner
Barriers to implementation of HR strategies

Designing HR strategy is the starting point for

effective HRM, but the most important is
“Implementation”.
There is often a gap between strong words of
strategy and what is happening on the ground.
Some barriers to implementation of HR strategy:
Failure to see the strategic business needs which will result in irrelevant HR strategy
Inadequate assessment of the (internal /external) factors that affect the HR strategy
Failure to assess the extent to which the strategy will be accepted by all concerned
Lack of support: Inability to motivate stakeholders to support the strategy
Poor horizontal integration: The strategy may fail to support (or get support) from
other functional strategies (Production, Marketing, Financial)
Failure to recognize that the demands on the commitment and skills of the line
managers who may have to play a major part in implementing it
Unavailability of Implementation resources (finance, people and time)
Discuss factors that may impede the application of HR strategy in your organization
 Formulating & implementing HR strategy

STRATEGIC HRM addresses issues relating to changes in structure and culture aiming
to support organizational effectiveness and achieving Strategic objectives.
Formulation & implementation HR strategy is carried out through four main stages:
Evaluation Implementation Strategy Design Foundations of
Gap analysis & strategy
identifying Skills & External &
behaviors required internal analysis
Performance
standers HR strategic Deciding the
• Prepare objectives Corporate
Evaluation operational Strategic
Criteria plans objectives
HR sub-
• Prepare
strategies

Objectives met?
Evaluate needed
performance: resources
Communicating
• Organizational • Prepare the strategy to
• Departmental communication all parties
• Individual channels
 HR Sub-strategies
The Sub strategies and tools of human resource
management as a strategic function can be
defined as four functional areas forming the
core of human resource strategy:

Staffing strategy: Reward strategy: Performance Development

Management Strategy
Obtaining people Design and 1. Define job Aiming at ensuring
with appropriate administration of expectations, & that employees
KSAs to fill the reward systems. measure, have the KSAs that
needed jobs. This This role includes: 2. Appraisal , and meet satisfactorily
role includes:  job evaluation, reward, current & future
 HR planning,  design of 3. Provide organization
 Recruitment, and compensations corrective & objectives and allow
 Selection System, improvement them to progress in
 Communicating, suggestions. their careers.
implementation.
 Alignment with Corporate Strategies

Alignment is the extent to which

corporate strategy and HR strategy are
integrated, this extent varies based on
situation. Different mode are following:
Separation model: Here, there is no relationship
HRM Org. between org. and HR strategies. This model used up
Strategy Strategy to the mid 1980s and in many small organizations
still use today. In fact, there is no HR strategy
Fit model: here HR strategy is designed to fit the
HRM Org. requirements of org. strategy. In this model the org.
Strategy Strategy strategies is developed on a top down approach
(traditional model).
The dialogue model: here there is a two-way
HRM Org. communication and debate, where the
Strategy Strategy requirements of the org. strategy may not be
possible and some adjustment may be needed.
Alignment with Corporate Strategies

The holistic approach: people within the

organization are recognized as key to competitive
HRM Org. advantage, not just a tool of implementing org.
Strategy Strategy
strategy, i.e. HR strategy is not just the means of
achieving business strategy but an objective in itself.
The HR driven model: This model places HR strategy
HRM Org. in the driving seat. The argument here is that if
Strategy Strategy people are the key to competitive advantage, then
we need to build on our people strengths.
 Alignment with Competitive Strategies

In the second level where Competitive Strategy (Business Unit Strategy)

aim to translate the corporate strategy and mission of the into specific
competitive strategies for each of the different business units. The
business unit strategy may be one of the following basic forms:

Differentiation Cost Leadership High quality

(doing something different (aim at cut expense) (delivering high-quality
from competitors) goods and services)
 Alignment with Competitive Strategies
Differentiation
Here the objective is to achieve competitive
advantage by doing something different from
their competitors. To be effective, such
organizations need employees who are:
• Creative
• Able to focus on the long term objectives
• Able to share information and work together
• Risk takers
• Able to tolerate unpredictability.
HR strategies, to support a strategy of differentiation, need to promote
Creativity, for example, by designing an appraisal system that rewards innovation
Co-operation and team working, for example, by using a team based compensation
system, team based approach to job design, using appraisals to recognize long term
and group based achievements
Experimentation, by fostering a culture where mistakes are viewed as learning
opportunities and encouraging open communication
Broader jobs and career paths that encourage having a wider range of skills.
 Alignment with Competitive Strategies

Cost Leadership
Organizations that adopt a strategy of cost
leadership aim to achieve competitive advantage
by providing the lowest price products among
their competitors. To be effective, such
organizations need employees who are:
 Able to focus on the shorter term
 Risk averse
 Concerned for quantity of output, to some extent over quality
HR strategies, to support a strategy of cost leadership, need to promote
Narrowly designed jobs and strict job descriptions
Short term, results-oriented performance appraisals
Short term, low cost employment practices such as short term contracts.
Limited training oriented to productivity
 Alignment with Competitive Strategies

Quality strategy
Organizations that adopt a strategy of high
quality aim to achieve competitive advantage
by providing the highest quality products
among their competitors. To be effective, such
organizations need employees who are:

 High levels of employee participation

 Able to focus on the quality implications of strategies
 Concerned for quality of output, to some extent over quantity
 Able to share information and work together
HR strategies, to support a strategy of High Quality, need to promote

Relatively fixed and explicit job descriptions.

Democratic treatment and some guarantees of employee security
A mix of group and individual criteria for appraisal that is (results oriented).

Extensive and continuous training and development of employees

 Key features of a successful HR strategy

During forming HR strategy you would like

to know 'what does the ideal HR strategy
look like?’ The bad news is there is no ideal
HR strategy, because each organization is
different, and its external environment is
different.

One of the important features of good HR strategy is the “value of bundling”; or

‘internal integration’ which bring related tools of HRM together in supportive way,
so that training and reward for example are coordinated and support each other.
The good news is that there are certain key features of bundling that promote
excellence and success for HR strategy.
1- Offer job security 2- Offer careers not jobs 3- Good Recruitment &
selection
4- Communication and 5- Investment in learning
involve employees and development 6- Use teams extensively
7- Link reward to 8- promote
performance harmonization
 Key features of a successful HR strategy

1- Offer job security This is not the same as

a job for life. The key is that the psychological
contract contains a section: ‘organization will do
everything reasonably to keep the employee.
Sometimes, terminations may be necessary but
they should last action. Organization will invest
in planning and employment flexibility to
maintain security for core workers.'

2- Career management This would now be expanded to include talent

management, which is a strategic perspective that integrates the range of HRM and
development activities around attracting, identifying, using and developing talent
for the immediate, medium and long term benefit of the organization. High
commitment organizations offer careers rather than jobs.
3- Recruitment and selection The quality of staff joining an organization is critical
to its long-term success. So, time and money spent on being an attractive employer
(employer branding) and careful selection, using a range of ways to gather
information about candidates, does show a long-term return on investment.
 Key features of a successful HR strategy

4 - Employee engagement The style of

communication between management and
employees is a very important factor for high
engagement. If it is linear and often one-way
(from employer to employee) it threaten
engagement. Two-way systems include problem
solving groups and project teams, as well as the
complaint procedure help maintaining high
levels of engagement and commitment. The
concept of the 'employee voice' goes further
recognizes the employee as a principal
stakeholder.

5 - Learning & development Investment in learning and development, when

accurately targeted and carefully used, has been shown to offer a significant return
on investment and is a source of competitive advantage, not only because of the
resulted highly talented employees, but also because these practices improve
employees loyalty and commitment.
 Key features of a successful HR strategy

6 – Team Working Teams are groups

of people with integrated skills committed to a
common goal and share a common
responsibility to achieve that goal. Typically,
team members create a distinct identity
together and work together in a common plan
and mutual support to achieve a their goal.
This team working style offers many advantages such as: Creativity,
Complementary Strengths, Builds Trust, Conflict Resolution Skills, Wider Sense of
Ownership, Healthy Risk-Taking, and other features contribute to team success
7- Performance based reward
This has two linked elements: 1. Higher levels of reward that differentiate the
organization from similar (often less successful), and
1. Reward linked to contribution which maintains high performance culture.
8 - Harmonization This also has twin elements: external (visible) harmonization
(single lunchroom; shared car parking; one union etc.) and the invisible (holidays,
sick pay, pensions etc.). Psychologically harmonization is an expression of team
working on a corporate scale
 The management of change
Strategies require a significant amount of
change that sometimes involves restructuring
or changes in the organization's culture and
other factors. One of the most famous and
oldest models is Lewin model of change,
which was developed in the fifties of the last
century.
(Unfreeze) existing Change attitudes (Refreeze) new behavior
behavior /behaviors
This part aims at breaking Change is concerned Installation is the final
old behavior patterns. with determining what stage and includes
Employees must know the new behavior / reinforcement. Ideally, the
why they are required to process / procedure support methods should
change and commit to is or how it should be be positive in the form of
new patterns before they to encourage reward to adapt to new
are expected to implement individuals and behavior but sometimes
any change. groups to adopt to negative reinforcement
Hence, the process of this new behavior. can be used, such as
“unfreeze" is associated applying penalties to
with communication. those who do not comply.
 Dr. Abdelnasser Ghanem (aahhg@hotmail.com)
27