SHRM Chapter 7

CHAPTER 7
HUMAN RESOURCE STRATEGY

Learning Objectives
By the end of this chapter you should be able to:
● Define ‘HR strategy’.
● Explain several different approaches that can be used to develop
an HR strategy.
● Participate in the development of an HR strategy.
● Demonstrate awareness of the content domains of an HR
strategy.
● Critically evaluate an organization’s HR strategy in light of
underlying theories.
● Explain the process, content, and implementation issues of an
HR strategy.
About this Chapter
In this chapter we will examine:
1. HR strategy from the perspectives of content, process, and
implementation.
2. the range of choices available to HR professionals when
developing an HR strategy.
3. the construct of the HR architecture.
4. the propositions that have been put forward to explain the
process by which HR strategies can be developed
5. the critical role that line managers play.
6. the issues of implementation.
What is HR strategy?
• Boxall and Purcell (2008) define HR strategy as a firm’s pattern
of strategic choices in labour management.
• Gratton and Truss (2003, p. 74) define people strategy as: “a
strategy, with its underpinning policies and processes, that an
organization develops and implements for managing its people
to optimal effect”.
• These definitions imply that HR strategy is to achieve certain
organizational outcomes through the effective management of
people.
• In large, complex organizations, HR strategies are likely to be varied,
with different approaches selected for different employee groups.
• Lepak and Snell (1999) refer to this as the ‘HR architecture’.
• Becker and Gerhart (1996) suggest that there are three levels to an
HRM system:
• System architecture, which is the overarching HR strategy and guiding
principles.
• Policy alternatives, which refers to choices available at the HR policy
level.
• Practices, i.e. individual HR practices and implementation.
• When considering HR strategy, it is important to bear in mind
that there are three linked areas:
• HR strategy content
• HR strategy process
• HR strategy implementation
• Bowen and Ostroff (2004) point out HRM content and process
must be integrated effectively in order for prescriptive models of
SHRM
HR strategy: content issues
• HR strategy content refers to the nature of the HR strategy
itself and its constituent elements.
• The content of any organization’s HR strategy will be heavily
influenced by a range of internal and external factors
• External factors (e.g., supply and demand within labour markets,
economic climate, and demand for the firm’s products)
• Internal factors (e.g., include the firm’s culture, structure, and
technology)
• The external and internal factors influence the fit between
HR strategy and corporate objectives
• There is no clear-cut evidence that any one particular HR
strategy is appropriate for any specific corporate strategy
(vertical fit)
• Beside vertical fit, it is important to achieve horizontal fit
within the HR strategy
• Wright and Snell (1998) also refer to this notion of

consistency or horizontal fit, and argue that both fit and
flexibility are important within the HRM system
• Flexibility gives the firm options in terms of its positioning

in the competitive environment
• In addition to the requirement for flexibility, the way in
which people are managed is likely to depend, at least in
part, on two factors:
• The strategic value, i.e. the potential to improve efficiency
and effectiveness
• The uniqueness, i.e. the extent to which the human
capital meets the resource criteria of RBV
• These two factors give rise to four potential employment
modes:
• Commitment-based HR
• Productivity-based HR
• Compliance-based HR
• Collaborative-based HR
• Commitment-based HR
• Core employees who can contribute to the firm’s strategic
objectives.
• Most likely to include knowledge workers
• The focus is on employees’ skills and competencies
• Workers are empowered to make decisions
• Skills acquisition is likely to rewarded
• Productivity-based HR
• Identifies human capital with strategic value but limited
uniqueness
• These employees are likely to make a significant
contribution, but without unique skills
• They are likely to be employed to carry out particular tasks
• Employers are likely to pay the market-based wage
• Compliance-based HR
• Where employees are neither of high strategic value nor
unique
• They are candidates for outsourcing
• Short-term contractual arrangements may therefore be
desirable
• The focus may be on ensuring compliance with the contract
• Collaborative-based HR
• Firms rely on alliances or partnerships
• Unique but of insufficient strategic value to employ internally
• The focus would be on sharing information, and
• Developing trust in a teamwork setting
Mooney (2001)
offers an additional
model for selecting
HR strategy
depending on the
industry.
HR strategy: process issues
● Who should be involved in the process?

● How should the process work?
● What is the starting point?
● How innovative are we prepared to be?
● What form should the strategy take and when should it
be reviewed?
• Wright et al. (2004) interviewed representatives from 20 large
US companies about how they developed their HR strategies
and outline:
1. Scan the firm’s external environment
2. Identify the strategic business issues that need to be addressed
3. Pinpoint people issues critical to the success of the business
4. Develop a strategy to address the relevant issues, including
connecting relevant metrics to the strategy
5. Communicate the strategy
Ulrich and Brockbank (2005) identified 12 sources of competitive advantage
• HR strategy design process also needs to include considerations

of how employees themselves will experience the strategy.
• Bowen and Ostroff (2004) identified three features of an HRM:
• Distinctiveness: a visible, easily understood, authoritative, and
relevant HR systems captures people attention
• Consistency: sending clear messages about how HR system works,
putting HR policies into practices, and stability
• Consensus: agreement among employees about the way HR
system works
• Decisions also need to be made concerning the speed at which
firms adopt new HR strategies.
• Leaders (11 %): First to adopt HR strategic approaches. See connections
between external environmental changes and internal HR strategies
• Fast followers (39 %): Seek to be ahead of their competitors. But limited
in their approach to innovations compared with leaders
• Slow followers (39 %): Less influenced by environmental changes. More
hampered by company culture and cost
• Laggards (11%): Laggards report substantial barriers to HR change. Have
difficulty getting HR taken seriously within their firms
• All models favor the planned approach however there exist
several barriers to the development of planned HR strategies:
● Some HR teams prefer to work in an emergent way and wait until there is
a clear business strategy
● Some fear being criticized for moving ahead of the business strategy.
● The complexity of issues involved in creating an HR strategy may hamper
development
● Periods of change can undermine the link between corporate and HR
strategy
HR strategy: implementation issues
• A strategy is only good if it’s implemented.
• The less is the gap between intended and implemented,
better the performance
• Gratton and Truss (2003), in a study of 4,500 employees
in 7 organizations over 10 years, found that:
• only 20% employees believed their HR department had a
clear strategy guiding its activities
• only 34% believed the HR function was competent at its job
Gratton and Truss (2003) three-dimensional people strategy
Non-actioned dimension Actioned dimension

Gratton and Truss’s eight dimensions are:

1. Mere Tactics Speak:
• weak vertical and horizontal
alignment
• lack of implementation
• this occurs where there is no people
strategy OR
• a very weak link between people
strategy and corporate objectives
• this is often found in small firms
Non-actioned dimension
2. Mere Process Speak:
• strong horizontal alignment but
weak vertical alignment and
implementation
• This is found in firms with a strong
set of HR policies disconnected
from the corporate strategy
• This may occur where the HR
Director is not closely integrated
with the senior management team
3. Mere Strategy Speak:
• strong vertical alignment, weak
horizontal alignment, and weak
implementation.
• this occurs where there is clearly
articulated HR strategy but no
coherent set of HR policies
• this was found to occur during the
early phase of a merger
4. Mere Rhetoric:
• clearly articulated HR strategy that
is strongly linked both vertically and
horizontally, BUT
• it is not put into practice
• this may happen due to lack of line
management support for HR
5. Tactics Driven:
• weak vertical and horizontal
alignment but strong action
• this is the traditional ‘administrative’
HR function
• there is a focus on implementing
discrete HR policies BUT
• lack connection with one another OR
• with the strategic direction of the firm
Actioned dimension
6. Process Driven:
• weak vertical alignment but strong
horizontal alignment and action
• this occurs where the HR team has
strong process skills BUT
• lacks strategic focus
Actioned dimension
7. Strategy Driven:
• strong vertical alignment and
action, but weak horizontal
alignment
• HR strategy is seen as a line
management responsibility
• strong linkage with the overall
direction of the organization BUT
• lack of systematic reinforcement
through the entire HR system
Actioned dimension
8. Strategy and Process Driven:
• featuring strength along all three
dimensions
• this is the ‘ideal type’ HR strategy
• consequently difficult to achieve
and hard to sustain
Actioned dimension
The role of line managers
• Line managers play central role in implementing HR
strategies
• The relationship between line managers and the HR
department has historically been problematic
• Line managers often feeling that HR as ‘out of touch’,
unresponsive, and sometimes acting in conflict with
business needs
• The trend in many firms now is for HR to work more
closely alongside line managers
• Research has shown that line managers are becoming
more involved in HR work
• ‘poorly designed or inadequate policies can be ‘rescued’
by good management behavior
• ‘good’ HR practices can be negated by poor front line
manager behaviour
• The boundary between HR and the line is continually
shifting
• It is unclear which activities should be undertaken by HR
and which by line managers
• In many firms recruitment and selection are shared
between HR and the line
• Obstacles to line managers’ taking responsibilities for HR
• Lack of skills or knowledge in HR.
• Lack of clarity on the part of line managers about what is
expected of them.
• Lack of confidence.
• Lack of training provided to line managers.
• Reluctance to take on HR work or disdain towards it.
• Obstacles to line managers’ taking responsibilities for HR
• Competing priorities and a focus on the short term on the part of line managers.
• Lack of time.
• Lack of reward for line managers relating to HR activities, leading them to focus
on other areas such as the achievement of objectives.
• Inconsistent application of HR policy.
• Concern by some HR managers such as
• giving up part of their role,
• fears over job security, and
• anxiety at lack of line manager capability.
Advantages and disadvantages of devolution of
responsibility for HR
Advantages Disadvantages
• Low overheads • Lack of synergy
• Flexibility • Lack of structure
• Responsibility given to line managers • Lack of uniformity
• Possibility to tailor HR to needs of • Possible lack of time for line
the line and employee managers to devote to HR
• Inefficiencies
• Arbitrariness

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CHAPTER 7

HUMAN RESOURCE STRATEGY

• Wright and Snell (1998) also refer to this notion of

• Flexibility gives the ﬁrm options in terms of its positioning

● Who should be involved in the process?

• HR strategy design process also needs to include considerations

Non-actioned dimension Actioned dimension

Gratton and Truss’s eight dimensions are:

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