STRATEGIC

HUMAN RESOURCE
MANAGEMENT
FABRIKAM RESIDENCES
CHAPTER 2
 STRATEGIC
• Strategos - general's grand design
behind war or battle.
• Generalship
• Combining and employing plan of
war
• Directing large military movements
and operations

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 STRATEGIC MANAGEMENT
• addresses the competitive
challenges organization faces
• pattern or plan

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 STRATEGIC HUMAN RESOURCE
MANAGEMENT (SHRM)
• pattern of planned human
resource deployments
• external market-oriented
approach
• resource-based view (RBV)

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Components of the Strategic Management
Process
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It has two distinct yet interdependent phases, namely:

Strategy Formulation
• Need to decide for strategic directions
• Defining the company’s mission and goals
• Identifying internal and external SWOT (Strengths, Weaknesses,
Opportunities, Threats)
• The generation of various strategic alternatives
• Compare alternatives to achieve company’s mission/goals

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Strategy Implementation
• The organization enacts the chosen strategy
• The process includes structuring of organization;
• Properly allocates resources among different departments;
• Ensuring skilled people are in place, and;
• Development of reward system for employees.

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MODEL OF THE STRATEGIC MANAGEMENT PROCESS
Linkage between HR and the Strategic
Management Process
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Strategy Choice (Organization’s Strategy)
• Consists of answering questions about competition
• Competition to achieve goals and missions
• Addressing the issues of;
- ‘where to compete’,
- ‘how to compete’, and
- ‘with what will we compete’
• Give less attention to ‘with what will we compete’ issue
• It results into poor strategic decisions

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STRATEGY – DECISIONS ABOUT COMPETITION
Role of HR in Strategy Formulation
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• HR influences the strategic management process
• Limiting strategic options or forcing thoughtfulness
• Strategic management decisions evolves at top-levels
• HR involvement addresses people-related business issues
• Integration levels exist between HR and SM (Strategic
Management) Functions
- ‘administrative linkage’,
- ‘one-way linkage’,
- ‘two-way linkage’, and;
- ‘integrative linkage’
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 Linkages of Strategic Planning and HRM

Source: Adapted from K. Golden & V. Ramanujam, 1985, ‘Between a dream and a nightmare: on the integration of the
human resource function and the strategic business planning process’, Human Resource Management , 24, pp. 429–51.
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ADMINISTRATIVE LINKAGE
• the lowest level of integration
• HR’s attention focuses on day-to-day activities
• No time to solve HR issues
• Planning exists without input from HR department
• HR department separated from SM (Strategic Management)
process
• Engages administrative work unrelated to business needs

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ONE-WAY LINKAGE
• Develops strategic plan and informs HR
• This integration level constitutes strategic HRM
• HR designs systems/programs to implement plan
• Recognize HR (Human Resource) importance in plan
implementation
• Precludes company from considering HR issues
• Company cannot successfully implement strategic plans

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TWO-WAY LINKAGE
• HR issues consideration during SF (Strategy Formulation)
process
• It occurs in three sequential steps
• Informs HR with strategies company considers
• Strategies implications analyzations and results presentation
• Program/s development for the plan implementation
• Strategic planning and HR functions are interdependent

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INTEGRATIVE LINKAGE
• This linkage is dynamic and multifaceted
• Based on continuing than sequential interaction
• HR executive – senior management’s integral member
• Iterative process of information exchange unused
• Functions built into SF (Strategy Formulation) and
implementation processes
• Involvement’s highest level at implementation stage
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• HR functions involved in both stages (Strategy Formulation &

Implementation)
• HR executives provide strategic planners information
(company’s HR capabilities)
• Information help managers choose best strategy
• Consideration of strategic alternative to implement
• Role changes to HR practices development/alignment
• Designed HR practices elicit employees’ action

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Deloitte Greek Temple
• Deloitte an award-winning professional firm
• model as framework for business strategy
• People and performance team provide input
• Illustrates how HR executive an integral part
• People, culture and HR practices recognition
• Recognizing employee behavior, motivation and
commitment
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Strategy Formulation
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Relevance of the Components of Strategic
Management Process to Strategy Formulation

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• Mission – the organization's reason for being
– accompanied with company’s vision and/or values
• Goals – what to achieve in medium to long-term
– reflect how mission will be operationalized
• Extreme Analysis – identifying environment’s opportunities
and threats
• Internal Analysis – identifying organization’s strengths and
weaknesses
– focuses on resources' quantity and quality
• SWOT – External and Internal combined constitute

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SWOT ANALYSIS
• Identification of SWOT (strengths, weaknesses,
opportunities, threats) in an environment
• Many opportunities and threats are people-related
• Determine human resource-related opportunities and
threats
• Company’s realization – human resources are important
assets
• Organization's value – tangible and intangible assets
• Intangible assets reflect organization’s future value
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EXAMPLES OF THE ROLE OF HR IN STRATEGIC
MANAGEMENT

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• Practices’ proper implementation delivers financial
benefits
• Practices contribute to the organizational performance
• Investing in – and securing, Magna Carta
• Strategically managing human resources provide
competitive advantage
• Importance of considering people-related business
issues
• HR Function Strategy Formulation Strategy Choice
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Strategy Implementation
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• Strategy choices could make economic differences

• Five important variables in strategy implementation:
• Tasks must be designed and grouped
• Organizations staffed with the right people
• Develop performance management and reward
systems
• HR practices must be well-administered.

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HR PRACTICES
Menu of HR Practice Options
Job Analysis and Design Recruitment and Selection Employee Learning and
Development
• Few tasks - Many tasks • External sources - Internal • Focus on current job skills -
sources Focus on future job skills
• Simple tasks - Complex tasks
• Limited socialization - • Individual orientation - Group
• Few skills required - Many Extensive socialization orientation
skills required
• Assessment of specific skills - • Train few employees - Train all
• Specific job descriptions - Assessment of general skills employees
General job descriptions
• Narrow career paths - Broad • Spontaneous, unplanned -
career paths Planned, systematic

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Menu of HR Practice Options
Performance management Pay structure, incentives and Industrial relations
benefits
• Behavioural criteria - Results • Pay weighted towards salary • Collective bargaining -
criteria and benefits - Pay weighted Individual bargaining
towards incentives
• Developmental orientation - • Top-down decision making -
Administrative orientation • Short-term incentives - Long- Participation in decision
term incentives making
• Short-term criteria - Long-
term criteria • Emphasis on internal equity - • Formal due process - No due
Emphasis on external equity process
• Individual orientation - Group
orientation • Individual incentives - Group • View employees as expense -
incentives View employees as assets

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JOB ANALYSIS AND DESIGN
• Job analysis – getting jobs detailed information.
• Job design – designating tasks to a job.
• Varies from simple to complex tasks
• Narrow design of jobs increase efficiency
• Broad design of jobs increase innovation
• Jobs moving towards broaderend of spectrum

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EMPLOYEE RECRUITMENT AND SELECTION
• Recruitment – seeks applicants for potential employment.
• Selection – identify applicants with necessary
characteristics.
• They find skilled or knowledgeable people.
• These processes help in achieving goals.
• Different strategies engagement needs different/many
employees.
• Direct impact to the recruited/selected employees.
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EMPLOYEE LEARNING AND DEVELOPMENT
• Learning and development shapes skilled employees
• Employee learning/training – job-related characteristics
learning effort.
• Development – acquiring characteristics to improve
employees.
• Changes in strategies require skill changes.
• Strategy-related skills important in strategy implementation.
• Companies obtain employees for strategy implementation.

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PERFORMANCE MANAGEMENT
• Ensures employees’ works congruent with objectives.
• Evaluation or monitoring employees’ organization
performance
• Specification results to successful strategy implementation.
• Practices enhance employee performance and
contribution.
• HR practices can sustain the organization.
• Sustainability – practices contributing social and financial.
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PAY STRUCTURE, INCENTIVES AND BENEFITS
• Pay system – vital in implementing strategies.
• High level pay/benefits retains high-quality employees.
• Pay to perform elicits employee performance.
• Growing stage high-tech companies – compensation
systems.
• Matured companies – low incentives, high benefits.
• Benefits are considered in broad way.

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INDUSTRIAL RELATIONS
• Refers to employment relationship (employers and
workers)
• Deals with social and economic issues
• Unionized/not companies affect employees’ competitive
advantage.
• Employers adopted approaches to industrial relations.
• Different approaches; different effects to employees
• Different approaches; different effects to industrial
disputation
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HR PRACTICES AND PERFORMANCE
• Employees participate in decision-making is made.
• Rights of the employees are implemented.
• Company’s responsibility for employees are known.
• HR practices maximize performance and
productivity.
• The best set of HR practices.
• HR systems resulted to higher productivity.
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• It resulted high corporate financial performance.

• The employee turnover is low level.
• Configurational perspective has positive organizational
impact.
• Number of different patterns are effective.
• Contingency theory – chosen practices based strategy.
• Practices need to consistently fit strategy.
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Strategy Types
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• Value can be created in one of two ways.

• It is created by reducing costs.
• It is created by product/service differentiation.
• Overall-cost leadership’s strategy – becoming the
lowest-cost producer.
• It provides above-average returns in industry.
• Bars other firms' entry in industry.

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• Differentiation’s strategy – creates impression in

industry.
• It emphasizes more on product/service differentiation.
• Products/services are different from others companies.
• Perceived differentiation comes from different ways.
• Product/service differentiation success achieves above-
average returns.
• Differentiation protects it from price sensitivity.
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HR NEEDS IN STRATEGIC TYPES
• Strategies requires different types of employees.
• It requires employees with specific skills.
• Requires employees with different ‘role
behaviours’.
• Role behaviours are required as workers.
• No fairness; ethic and motivation suffers.
• Negative feelings will rode positive ones.
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DIRECTIONAL STRATEGIES
• Strategies emphasizing market share/operating costs.
• Focus on what it does best.
• Focusing on developing market and products.
• Aiming for innovation or joint ventures.
• Companies channels resources building existing strengths
(Internal Growth Strategy)
• Expand company resources for market strengthening (External
Growth Strategy)

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CONCENTRATION STRATEGIES
• It focuses on increasing market share
• Aims in reducing costs of company
• It creates/maintains market niche for products/services.
• Maintaining the current skills in organization
• Appraisals tend to be more behavioural.
• Behaviours are necessary for effective performance.

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INTERNAL GROWTH STRATEGIES
• Aims new market and product development
• Focuses on innovation and joint ventures
• It also presents unique staffing problems.
• Growth requires hire, transfer, and promotion.
• Market expansion may change necessary skills.
• Appraisals has combination of behaviours and results.

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EXTERNAL GROWTH STRATEGIES
• Emphasis on acquiring vendors and suppliers
• Buying businesses allow new markets expansion
• Consolidation within industries; mergers across
industries
• Mergers and acquisitions continue to increase
• HR must be involved with process
• People Issues – mergers don’t live up to expectations
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• Training in conflict resolution is necessary

• Senior management necessarily decide in beginning
• Merger – leadership provided in senior management.
• Be clear of what skills needed.
• Blending cultures make new organization stronger.
• Also, have a greater competitive advantage.

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DOWNSIZING
• Planned elimination of numerous of personnel.
• Also designed to enhance organizational effectiveness.
• Way achieving increased productivity and profitability
• Lagged behind industry average stock price
• Has an impact on employees remaining
• Presents challenges and opportunities for HRM

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CHALLENGES OF DOWNSIZING
• To boost morale of remaining employees
• Maintain open communication with remaining employees
• Compensation programs that tie individual’s compensation
• Results from downsizing and gainsharing plans
• Early retirement programs is like ‘grenade’ approach
• Don’t distinguish good and poor performers

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OPPORTUNITIES OF DOWNSIZING
• Allows company to ‘get rid of dead wood’
• It makes way for fresh ideas
• Unique opportunity to change organization's culture
• Encourage to cooperate and develop relationships
• Demonstrate to decision makers company’s value
• It is called labour-force management strategy

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STRATEGY EXECUTION, EVALUATION AND CONTROL
• Final component to strategic management process
• Monitor effectiveness in strategy and implementation
• HR policies is not straightforward process
• Both rational and non-rational components
• Formal HR strategy called ‘intended’ strategy
• Actually occurs called as ‘realized’ strategy

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• Monitoring – determines it is being implemented

• Causal strategy maps – link employee behaviours and HR
practices
• Importance of senior management understanding HRM
• Enables achievement of organizational performance outcomes
• The importance of substantive value commitment
• Evaluating and improving – evaluate HR effectiveness

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The role of human resources in
providing strategic competitive
advantage
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EMERGENT STRATEGIES
• Result of the rational decision-making process
• Used to develop a strategic plan
• Strategies that evolve from the grassroots
• Pattern in stream of decisions or actions
• Strategic HRM new focus – intended strategies
• Identified by those lower organizational hierarchy

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ENHANCING FIRM COMPETITIVENESS
• Managers interest in idea “learning organization”
• Expands capacity achieving their desired results
• It requires company constantly learning through;
• Monitoring environment,
• Assimilating information,
• Making decisions,
• Flexibly restructuring to compete
• Learning capability have a competitive advantage.
• Organizational information processing systems as aid.
• Human-capital pool can develop in ways.
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STRATEGY AS IMPLEMENTATION
• Strategic decisions are vital in an organization.
• They involve considerable commitment of resources.
• They are not easily reversible decisions.
• Taken in with conditions of uncertainty.
• Management of strategic change is intricate.
• HR assists by developing implementation strategies.

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STRATEGIC HUMAN RESOURCE EXECUTIVES
SIX MANAGEMENT COMPETENCIES
Strategic positioners, who understand evolving business contexts, stakeholder expectations and
business requirements, and are able to translate them into talent, culture and leadership actions
Credible activists, who build relationships of trust and have a clear point of view about how to build
business performance
Capacity builders, who define, audit and create organisational capabilities required for sustainable
organisational success
Change champions, who initiate and sustain change at the individual, initiative and institutional levels
HR innovators and integrators, who look for new ways to implement HR practices and integrate those
separate practices to deliver business solutions
Technology proponents, who use technology for efficiency to connect employees and to leverage new
communication channels, such as social media

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• HR professionals need credible activist competencies.

• They must be skilled change champions.
• They must have capacity builder competency.
• HR innovator and integrator competency requires innovative
solutions.
• Technology proponent competency requires technology usage.
• HR presents both opportunities and challenges.

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