1. 1

2. Strategic Human Resource Management
Chapter 2
Strategic Human Resource Management
After reading this chapter, you should be able to:
Describe the differences between strategy formulation and strategy implementation.
List the components of the strategic management process.
Discuss the role of the HR function in strategy formulation.
Describe the linkages between HR and strategy formulation.

3. Strategic Human Resource Management
Chapter 2
Strategic Human Resource Management
Discuss the more popular typologies of generic strategies and the various HR practices associated with each.
Describe the different HR issues and practices associated with various directional strategies.
List the competencies the HR executive needs to become a strategic partner in the company.

4. Introduction
The goal of strategic management in an organization is to deploy and allocate resources in a way that gives it a competitive advantage.
Human resource managers should:
have input into the strategic plan,
have specific knowledge of the organization’s strategic goals,
know what types of employee skills, behaviors, and attitudes are needed to support the strategic plan, and
develop programs to ensure that employees have those skills, behaviors, and attitudes.
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5. What is Strategic Management?
Strategic Management is a process for analyzing a company's competitive situation, developing the company's strategic goals, and devising a plan of action and allocation of resources that will help a company achieve its goals.
Strategic human resource management is the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals.
© 2006 The McGraw-Hill Companies, Inc. All rights reserved
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6. Components of the Strategic Management Process
Strategy Formulation: Strategic planning groups decide on a strategic direction by defining the company's mission and goals, its external opportunities and threats, and its internal strengths and weaknesses.
Strategy Implementation: The organization follows through on the strategy that has been chosen. This includes structuring the organization, allocating resources, ensuring that the firm has skilled employees in place, and developing reward systems that align employee behavior with the strategic goals.
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

7. Model of the Strategic Management Process
Strategy Formulation
Strategy Implementation
External
Analysis
Opportunities
Threats
HR Practices
Recruiting,
Training,
Performance management,
Labor relations,
Employee relations,
Job analysis
Job design,
Selection,
Development,
Pay structure,
Incentives,
Benefits
Firm
Performance
Productivity,
Quality,
Profitability
Mission
Goals
Strategic
Choice
Human
Resource
Needs
Skills
Behavior
Culture
Human
Resource
Capability
Skills,
Abilities,
Knowledge
Human
Resource
Actions
Behaviors,
Results
Internal
Analysis
Strengths
Weaknesses
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

8. The Role of HRM in Strategy Formulation
Administrative Linkage — Lowest level of integration; HRM function's attention is focused on day-to-day activities. No input from the HRM function to the company's strategic plan is given.
One-Way Linkage — The strategic business planning function develops the plan and then informs the HRM function of the plan. HRM then helps in the implementation.
Two-Way Linkage — Allows for consideration of human resource issues during the strategy formulation process. The HRM function is expected to provide input to potential strategic choices and then help implement the chosen option.
Integrative Linkage — Is based on continuing, rather than sequential, interaction. The HR executive is an integral member of the strategic planning team.
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9. Strategy Formulation External analysis Opportunities Threats Strategic
Mission
Goals
Strategic
Choice
Internal
analysis
Strengths
Weaknesses
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10. Strategy Formulation
Five components of the strategic management process:
A mission is a statement of the organization's reasons for being.
Goals are what the organization hopes to achieve in the medium-to long-term future
External analysis consists of examining the organization's operating environment to identify strategic opportunities and threats.
Internal analysis attempts to identify the organization's strengths and weaknesses.
Strategic choice is the organization's strategy, which describes the ways the organization will attempt to fulfill its mission and achieve its long term goals.
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.

11. Strategy Implementation
Organizational
structure
Task design
Types of
Information
Performance
Product
market
strategy
Reward
systems
Selection,
training, and
development
of people
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12. HRM Practices
Job Analysis - the process of getting detailed information about jobs.
Recruitment - the process through which the organization seeks applicants.
Training - a planned effort to facilitate learning of job-related knowledge, skills, and behavior.
Job design - making decisions about what tasks should be grouped into a particular job.
Selection - identifying the applicants with the appropriate knowledge, skills, and ability.
Development - the acquisition of knowledge, skills, and behavior that improves employees' ability to meet the challenges of future jobs.
Performance management - helps ensure that employees’ activities and
outcomes are congruent with the organization’s objectives.
Pay structure, incentives, and benefits.
Labor and employee relations.
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13. Strategic Types
Porter's Generic Strategies —Michael Porter has hypothesized that competitive advantage comes from creating value by:
reducing costs (overall cost leadership), or
charging a premium price for a differentiated product or service (differentiation).
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14. HRM Needs in Strategic Types
Different strategies require different types of employees.
Role behaviors are the behaviors required of an individual in his or her role as a jobholder in a social work environment.
Cost strategy firms seek efficiency and therefore carefully define the skills they need in employees and use worker participation to seek cost-saving ideas.
Differentiation firms need creative risk takers.
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15. Directional Strategies
External Growth
Strategy
Concentration
Strategy
Downsizing
Internal Growth
Strategy
Acquisitions
Mergers
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16. The Role of HR in Providing a Competitive Advantage
Emergent Strategies - Those that evolve from the grass roots of the organization.
What actually is done versus what is planned.
HR plays an important role in facilitating the communication of emergent strategies between levels in the hierarchy.
Enhancing Firm Competitiveness
By developing a rich pool of talent, HR can assure the company's ability to adapt to a dynamic environment.
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17. Strategic Human Resource Executives
Four basic competencies:
Business Competencies - Understanding the company's economic and financial capabilities.
Professional/Technical Knowledge - In HR practices such as selection techniques and compensation systems.
Change Processes or Organizational Development Techniques - The ability to diagnose the need for change and develop and implement the appropriate intervention.
Integration Competencies - A generalist perspective with the skills of a specialist in the above three areas.
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18. Human Resource Competencies
Professional and
Technical
Knowledge
Business
Competence
HR Professional
Integration
Competence
Ability to
Manage Change
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© 2006 The McGraw-Hill Companies, Inc. All rights reserved.