What Is Strategic HRM?: Has Largely Been Seen As An Administrative Function and As A Cost Center

What is Strategic HRM?
• HRM- the bundle of org. practices and

policies, including: recruitment,
selection, orientation, compensation,
training, evaluation, career planning &
job design, aimed at efficiently
utilizing the human resources of an
org.
Has largely been seen as an administrative
function and as a cost center
• SHRM- Attracting, developing,
retaining, deploying, evaluating, and
motivating human resources to:
1. Further the accomplishment of org.
strategy
2. Generate and sustain competitive
advantages
Seen as an investment and as a value-added
activity
1
Central Themes of SHRM
• Expanded Role of HR
– Administrative Expert
– Employee Champion
– Strategic Partner
– Change Agent
• Emphasis on HR and general
management competencies
• Focus on customers, the value chain &
deliverables; not on HR practices
• HR seen as a source of strategic
advantage; is increasingly important
• People are an investment
• HR can have a HUGE effect on the
bottom line
• HR practices can and must be costed
and evaluated
2
A Model of the HR-Shareholder Value
Relationship
3
Employee
Skills
Design of Productivity
Business Human Employee Improved Profits Market
and Strategic Resource Motivation Creativity Operating and
Value
Initiatives Management Performance Growth
System Job Design Discretionary
& Work Effort
Structures
SHRM Challenges
• The need to be flexible in response
to changing business environments
• Increasing int’l competition and the
expanding global economy
• Increased litigation related to HRM
• Rapid technological developments
• Mergers & Acquisitions
• Changing characteristics of the
workforce
– Older & more diverse
– Generational values
– Projected Labor Shortfall
– Changing Expectations b/t employers
& employees
4
High-Performance Work
Practices
• Large Investment in Training
• Performance-Based Pay and
Bonuses
• Internal Promotions
• Value and Attitude Fit as part of
Selection
• Long-Term Commitment to
Employees
• Generous Benefits
5
The Benefits of Putting
People First
• A One Standard Deviation
Increase (from 50%ile to 84%ile)
in these Practices is Associated
with:
– 7% decrease in turnover
– $27,000 more in sales per employee
– $18,000 more in market value per
employee
– $4,000 more in profits per employee
– $41,000 more in shareholder wealth
per employee
– 10% greater chance of 5 year IPO
survival
6
Overarching Themes
The Performance Equation
• The job of managers is to enhance
the performance of their people. HR
must support managers in this
endeavor
Performance is a function of:

• Ability
• Effort
• Opportunity to Perform
– Appropriate technology, tools,
systems, resources, political cover
– 80% of variance in performance is
system-based (Deming)
How can HR affect these three levers?

7
SHRM & Alignment
• Slate of HR Practices should be aligned
with Org. Strategy, in particular, these 5
Forces:
• Environment
– Social, legal, economic & competitive
forces
• Org. Strategy
– How does org hope to achieve competitive
advantage? Distinct competencies
• Org. Culture
– Norms, values and assumptions that govern
org behavior
• Technology/Type of Job
– How inputs are converted to outputs; Formal
org structure, decision latitude,
specialization, cooperation, layout,
workgroup interdependence
• Workforce Characteristics
– Demography, labor market, skills
8
A Quick Review of Strategy
• Strategic Management is aimed at
identifying (formulation) and executing
(implementation) activities designed to
generate a sustainable competitive
advantage
• Porter’s Generic Strategies:
– Cost vs. Differentiation
– Focused vs. Broad
• Miles & Snow Typology:
– Prospectors, Defenders, Analyzers &
Reactors
• SWOT Analysis-
– Scan the org and its environment to identify
Strengths, Weaknesses, Opportunities &
Threats
• Development of Core Competencies
• Development of rare, inimitable, non-
substitutable and valuable resources
9
Internal Alignment
Slate of HR Practices should be aligned
with and complement each other
• If not, fail to reap full benefit
– E.g., Development & low turnover
• Reinforces management’s message
– Do we really value empowerment?
• Employees (and prospective employees)
know the lay of the land
– ASA model; alignment of efforts
• Increases Internal Equity
• Alignment w/in employee, across

employees, across time
• Is too much alignment a bad thing?
– Wage compression, external equity
– Do we want “class distinctions”?
10
The Roles of SHRM
• Must manage both people and processes
• Must have both day-to-day/operational
focus and a strategic/future focus
Strategic Focus
Strategic Partner Change Agent

Align HR and Ensure change capacity
business strategy and lead change
Processes People
Admin. Expert Employee Champion

Build efficient Listen & respond,
infrastructure increase commitment
Traditional HR Perceptions
Operational Focus
11
The Role of Strategic
Partners
• Create and manage processes to meet
strategic goals and business requirements
• HR follows from Strategy, but also shapes
it over time
• Three approaches to Strategy & HRM:
– “Add-on” approach- Mgt makes business
decisions, using market, product &
technology input. Give plan to HR to help
implement
– “Isolated” approach- HR works on a plan,
presents to mgt for approval, and then
implements
– “Integrated” approach- Mgt and HR work
together to develop plans to highlight HR
activities that help the business achieve goals
• Only the 3rd approach ensures Alignment
& Partnership
12
Challenges for SP’s
• Following Through on Strategy
Execution
• Failing to Measure Deliverables
– A “Balanced Scorecard” approach:
– Economic value-added (EVA)
– Customer value-added (CVA)
– People (emp.) value added (PVA)
• Relying on Quick Fixes-
– the “benchmarking trap” & Fads
• Overcome these through:
– Proving worthy of and demanding
participation in business DM process
– Learning about the whole business
– Management by Walking Around
– Thorough diagnosis and follow-through
– Publicize accomplishments: Becoming
recognized for deliverables
– Encouraging “org. learning”, shaping culture
13
Org. Diagnosis
• Strategic Alignment is accomplished by
conducting and continually updating an
“organizational audit”
– A systematic assessment and alignment of
org. practices to business goals
4 Steps:
• Define an “org. architecture”
– Specify the major systems that compose the
org.
• Work with mgt. to set priorities & goals
• Create an assessment process
– Goals, gaps, types of data to be used,
accountability
• Provide leadership in improvement
practices (lead by example)
14

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What is Strategic HRM?

• HRM- the bundle of org. practices and

Performance is a function of:

How can HR affect these three levers?

• Alignment w/in employee, across

Strategic Partner Change Agent

Admin. Expert Employee Champion

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