1. Human Resource Management: Gaining a Competitive Advantage
Chapter 2
Strategic Human Resource Management
Chapter 2 introduces Strategic Human Resource Management. In today’s competitive market, organizations must engage in strategic planning to survive and prosper.
McGraw-Hill/Irwin
Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

2. Learning Objectives
Describe the differences between strategy formulation and strategy implementation.
2. List strategic management process components.
3. Discuss HRM function’s role in strategy formulation.
4. Describe the linkages between HRM and strategy formulation.
5. Discuss typologies of strategies and associated
HRM practices.
Describe HR issues and practices associated with various directional strategies.
scribe the differences between strategy formulation and strategy implementation.
2. List strategic management process components.
3. Discuss HRM function’s role in strategy formulation.
4. Describe the linkages between HRM and strategy formulation.
5. Discuss typologies of strategies and associated
HRM practices.
Describe HR issues and practices associated with various directional strategies.
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3. Introduction
Goal of strategic management is to deploy and allocate resources in a way that gives an organization competitive advantage.
HRM function must be integrally involved in the company’s strategic management process.
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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4. What is Strategic Management?
Strategic human resource management is the pattern of planned HR activities and deployments intended to enable an organization to achieve its goals.
Strategic management is a process to address the organization’s competitive challenges.
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.
HR Managers should be trained to identify the competitive issues faced by the organization. To take a strategic approach to HRM, first understand the role of HRM in the strat5egic management process.
Strategic human resource management is the pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals.
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5. Strategic Management Process Phases
Strategy Formulation-
process of deciding
company’s strategic
direction by defining its
mission and goals,
external opportunities
and threats, and internal
strengths and weaknesses.
Strategy Implementation-
process of devising
structures and allocating
resources to enact a
company’s chosen
strategy.
Strategic Management has two distinct yet independent phases:
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. This process entails as constant cycling of information and decision making.
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6. 5 Categories of Directional Strategies
Concentration
This slide relates to XX-XX.
Internal Growth
External Growth
Downsizings
Summary Overview
XXXX
Major Title
Heading.
Mergers & Acquisitions
5 Categories of Directional Strategies include concentration, internal and external growth, downsizings and mergers and acquisitions.
Concentration focuses on increasing market share, reducing costs or creating and maintaining a market niche for products and services.
Internal growth focuses on new market and product development, innovation and new joint ventures.
External growth emphasizes acquiring vendors and suppliers or buying businesses that allow a company to expand into new markets.
Downsizings is the planned elimination of large numbers of personnel, designed to enhance organizational effectiveness.
HR needs to be involved in mergers and acquisitions.
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7. 5 Strategic Management Process Components
Mission
This slide relates to XX-XX.
Goals
External Analysis
Internal Analysis
Summary Overview
XXXX
Major Title
Heading.
Strategic Choice
5 components of the strategic management process include mission, goals, external and internal analysis and strategic choice.
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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8. 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.
HRM function can be thought of as having six menus of HRM practices, from which companies can choose the ones most appropriate for implementing their strategy. Each of these menus refers to a particular functional area of HRM: job analysis/design, recruitment/selection, training and development, performance management, pay structure, incentives, and benefits, and labor-employee relations. Job Analysis - the process of getting detailed information about jobs.
Recruitment - the process through which the organization seeks applicants.
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.
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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9. Strategic Management Process Model
Strategy Formulation
Strategy Implementation
HR Practices
Recruiting
Training
Performance management
Labor relations
Employee relations
Job analysis
Job design
Selection
Development
Pay structure
Incentives
Benefits
External Analysis
Opportunities
Threats
Firm
Performance
Productivity
Quality
Profitability
Mission
Goals
Strategic
Choice
Human
Resource
Needs
Skills
Behavior
Culture
Human
Resource
Capability
Skills,
Abilities
Knowledge
This figure presents the Strategic Management Process Model. The success of the strategic management process depends largely on the extent to which the HRM function is involved. The mission, goals and strategic choice, along with an external and internal analysis encompass the strategy formulation that precedes strategy implementation. HR needs shapes the HR practices based on HR capabilities and actions that ultimately determine the firms’ performance.
Human
Resource
Actions
Behaviors
Results
Internal
Analysis
Strengths
Weaknesses
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10. Strategy- Decisions About Competition
Where, how and with what will we compete?
Where- in what markets?
How – what criteria?
cost?
quality?
reliability?
delivery?
With what resources?
- How will we acquire, develop and deploy
resources?
The strategic choice really consists of answering questions about competition- that is, where, how and with what will we compete?
in what markets? based on what criteria- cost, quality, reliability or delivery? with what resources? How will we acquire, develop and deploy
resources?
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11. Strategic Planning and HRM Linkages
Administrative
One-way
Two-way
Integrative
4 Strategic Planning and HRM Linkages are administrative, one-way, two-way and integrative.
Administrative linkage is the lowest level of interaction. HRM’S function’s attention is focused on day to day activities.
In one-way, he firm’s strategic business planning function develops the strategic pan then informs the HRM function of the plan.
Companies with integrative linkage have their HRM functions built right into the strategy formulation and implementation processes.
Two way linkage allows for consideration of of HR issues during the strategy formulation process.
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12. Strategy Formulation External Analysis Internal Analysis Mission Goals
Opportunities
Threats
Mission
Goals
Strategic
Choice
Internal
Analysis
Strengths
Weaknesses
This figure illustrates the five major components of the strategic management process relevant to strategy formulation. Next, each component will be defined.
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13. Strategy Formulation
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 examines the organization's operating environment to identify strategic opportunities and threats.
Internal analysis identifies 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.
Five components of the strategic management process relevant to strategy formulation:
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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14. Strategy Implementation Variables
Organizational
Structure
Task
Design
Types of
Information
Performance
Product
Market
Strategy
This figure presents the five important variables that determine success in strategy implementation: organizational structure, task design, selection, training and development of people and reward systems and types of information and information systems.
Reward
Systems
Select
Train
Develop
People
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15. Strategic Implementation
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
Strategic
Choice
Human
Resource
Needs
Skills
Behavior
Culture
Human
Resource
Capability
Skills,
Abilities
Knowledge
This figure presents the strategic management process from strategic choice to firm performance, illustrating the relationship of HR need, practices capability and actions.
Human
Resource
Actions
Behaviors
Results
-productivity
-absenteeism
- turnover
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16. Recruitment & Selection Training & Development
HRM Practices
Job Analysis & Design
This slide relates to XX-XX.
Recruitment & Selection
Training & Development
Summary Overview
XXXX
Major Title
Heading.
Performance Mgmt.
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17. Job Analysis and Design
process of getting
detailed information
about jobs.
Job Design-
defining the way work
will be performed and
tasks required in a
given job.
Job analysis and job design are two of the six menus of HR practices. Job Analysis- process of getting detailed information about jobs.
Job Design- defining the way work will be performed and tasks required in a
given job.
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18. Recruitment and Selection
process by which an
organization identifies
applicants with
necessary knowledge
skills, abilities and
characteristics that
will help it to achieve
its goals.
Recruitment-
process of seeking
applicants for potential
employment.
Recruitment and selection are two of the six menus of HR practices. Recruitment- process of seeking applicants for potential employment.
Selection- process by which an organization identifies applicants with necessary knowledge
skills, abilities and
characteristics that will help it to achieve its goals.
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19. Training and Development
Training- planned
effort to facilitate
learning of job-related
knowledge, skills and
behaviors
Development- acquisition
of knowledge, skills and
behaviors that improve
an employee’s ability
to meet changes in job
requirements and in
client and customer
demands.
Training and development are two of the six menus of HR practices. Training- planned effort to facilitate learning of job-related knowledge, skills and behaviors. Development- acquisition
of knowledge, skills and
behaviors that improve an employee’s ability to meet changes in job requirements and in client and customer demands.
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20. Performance Management
…the means through which managers ensure that employees’ activities and outputs are congruent with the organization’s goals.
Performance management is the means through which managers ensure that employees’ activities and outputs are congruent with the organization’s goals. 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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21. HRM Practice Options Job Analysis & Design Recruitment & Selection
Training & Development
Performance Management
Pay Structure, Incentives & Benefits
Labor & Employee Relations
Two additional HRM practice options include pay structure, incentives and benefits and labor and employee relations.
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22. Strategic Types Porter's Strategies
…competitive advantage stems from a company’s ability to create value in two ways…
Cost leadership
Differentiation
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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23. HRM Needs Strategic Types
Different strategies require different types of employees.
Role Behaviors:
Cost strategy firms seek efficiency, carefully define needed employee skills and use worker participation to seek cost-saving ideas.
Differentiation firms need creative risk takers.
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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24. Directional Strategies
Concentration
Strategy
External Growth
Strategy
Internal
Growth
Strategy
Companies have used five possible categories of directional strategies to meet objectives: external growth, concentration, internal growth, mergers and acquisitions, and downsizing.
Downsizing
Mergers and
Acquisitions
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25. 2 Ways HR Provides Competitive Advantage
Emergent Strategies- strategies
that evolve from the grass roots of the organization.
Enhancing Competiveness- developing human capital in a learning organization
HR can provide a strategic competitive advantage in two additional ways- by emergent strategies and enhancing competitiveness.
Emergent strategies are those strategies that evolve from the grass roots of the organization, which is 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’s competitiveness occurs bydeveloping a rich pool of talent, HR can assure the company's ability to adapt to a dynamic environment.
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26. Summary Human resources are the most important asset
and single largest most controllable cost within the business model.
HR professionals must develop business,
professional-technical, change management
and integration competencies.
HRM has a profound impact on the strategic plan implementation by developing and aligning HRM practices that ensue the company has motivated employees with necessary skills.
Human resources are the most important asset and the single largest most controllable cost within business model.
HRM has a profound impact on the strategic plan implementation by developing and aligning HRM practices that ensue the company has motivated employees with necessary skills. HR professionals must develop business,
professional-technical, change management and integration competencies.
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