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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.

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.

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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 McGraw-Hill/Irwin

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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 McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Strategy Formulation External analysis Opportunities Threats Strategic Mission Goals Strategic Choice Internal analysis Strengths Weaknesses McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Strategy Implementation Organizational structure Task design Types of Information Performance Product market strategy Reward systems Selection, training, and development of people McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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). McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Directional Strategies External Growth Strategy Concentration Strategy Downsizing Internal Growth Strategy Acquisitions Mergers McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

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. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Human Resource Competencies Professional and Technical Knowledge Business Competence HR Professional Integration Competence Ability to Manage Change McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.