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A Strategic Management
Approach to HRM

McGraw-Hill/Irwin
Human Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
2-3
Introduction
Taking a strategic HRM approach means:
Making human resources management a top priority
Integrating HRM with the company’s strategy,
mission, and goals
HRM can make significant contributions if included
in the strategic planning process from the outset
The strategic management process helps determine:
What must be done to achieve priority objectives
How they will be achieved
2-4
Introduction

Many strategic plans use:

A three to five year timeline
Annual monitoring and
modification
Good HR strategy results in a fit between organiza-
tional strategy and HRM policies and programs
Recruitment, selection, outsourcing, telecommuting,
performance evaluation, compensation
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A Model to Organize HRM
ARDM means:
Acquiring
Rewarding
Developing
Maintaining and protecting

Thegoals of the ARDM model are:

Socially responsible and ethical practices
2-6
A Model to Organize HRM

Theeventual success of any HRM activity is:

The organization's employees are the best qualified
They perform jobs that suit their needs, skills, and
abilities
Matching people and activities in order to
accomplish goals is easier with a diagnostic approach
2-7
Taking a Diagnostic Approach to HRM
The ARDM model has four specific steps:
Diagnosis
Prescription
Implementation
Evaluation
Managers typically diagnose a work situation by
observing and identifying key factors
A prescription is then made to translate the diagnosis
into action
Most human resource problems are too complex to
have a single correct prescription
2-8
Taking a Diagnostic Approach to HRM
Implementing a solution is the next step, followed by
evaluation
Evaluation tells managers whether improvement in
the ARDM process is needed
If
an organization teaches its members to focus on
ARDM plus the environment, it is likely to achieve:
Socially responsible, ethical behaviors
Competitive, high-quality products and services

The ARDM model calls for thorough, timely, and

systematic review of each situation
2-9
External Environmental Influences
HRM processes are influenced by both the internal
and external environments
External influences include:
Government laws and regulations
Union procedures and requirements
Economic conditions
The labor force
HR planning must operate within:
Guidelines
Limits of available resources
Competencies
2-10
External Environmental Influences
HRM is one important function among others:
Finance
Accounting
Research and development
Marketing
Production
The interaction of these internal programs sets the
tone for the entire organizational system
2-11
Government Law and Regulations
Government regulations affect:
Hiring
Promotion
Managing diversity
Downsizing
Discipline
Major areas of legislation and regulation include
EEO and human rights legislation
These directly affect recruiting, selection, evaluation,
and promotion
2-12
Government Law and Regulations
EEO and human rights legislation indirectly affects:
Employment planning
Orientation
Career planning
Training
Employee development
2-13
Government Law and Regulations
Otherareas of legislation and regulation include:
Employment of illegal aliens
Discrimination based on sex, age, and disability
Compensation regulation
Benefits regulation
Workers' compensation and safety laws
Labor relations laws and regulations
Privacy laws
2-14
Government Law and Regulations

Government regulation has increased substantially

In 1940, the U.S. Dept. of Labor administered
18 regulatory programs
In 2004, it administered more than 135
And that is just one government agency
2-15
Government Law and Regulations
Government regulation impacts a manager’s job:
Regulation encourages simplistic thinking on
complicated issues
Designing and administering regulations is
complex, leading to slow decision making
Regulation leads to complicated legal maneuvering
Many regulations are out of date and serve little
social purpose
There is regulatory overlap and contradiction among
regulatory agencies
2-16
The Union
A union directly affects most aspects of HRM,
including:
Working conditions
Wages and salaries
Fringe benefits
Employees’ rights
Grievance processes
Work hours
There are cooperative unions and combative unions
2-17
The Union
Unions were once concentrated in a few sectors of
the economy
Today, the fastest-growing sectors are the public
sector and the third sector
It is no longer useful to think of unionized employees
as blue-collar factory workers
Engineers, nurses, teachers, secretaries, salespersons,
college professors, professional football players, and
even physicians belong to unions
2-18
Economic Conditions
Two economic factors affect HRM programs:
Productivity
The work sector of the organization

Productivity is:
An important part of a nation's economic condition
Representative of an organization’s overall efficiency
The output of goods and services per unit of input
(resources) used in a production process
2-19
Economic Conditions
Before productivity can be managed and improved,
it must be measured
Isolate the outputs
Determine the costs that went into producing the
output
Compare the current year's figures with those of the
previous year
Productivity measures are crude and subject to
short-term error, but over time can show a trend
2-20
Economic Conditions
Suggestedsolutions for increasing productivity:
Reduce government controls
Develop more favorable income tax incentives
Reindustrialize the business-industrial complex

Reducing legislative controls can adversely affect the

quality of life and society for decades to come
 Toxic waste, radiation, air pollution, and other forms
of destruction must be carefully controlled
2-21
Economic Conditions
Managers can influence productivity through sound
HRM programs
Diagnosis, prescription,
implementation, and evaluation
Recruitment and selection
Motivational and compensation
techniques
Training and development
2-22
The Work Sector of HRM
60 percent of HR specialists work in the private
sector
30 percent work in the public sector;
10 percent work in the third sector
Private- and third-sector HRM are structured
similarly
HRM in the public sector is structurally different
A manager moving from the private or third sector
to the public sector finds a more complicated job
Politicians, the public, special interest groups, and
reporters all exert outside pressure
2-23
Competitiveness
Atthe macroeconomic level, competitiveness is:
The degree to which a nation can, under free and fair
market conditions, produce goods and services that
meet the test of international markets while
simultaneously maintaining or expanding the real
incomes of its citizens
If you substitute organization for nation, and
employees for citizens, you have the definition of
organizational competitiveness
2-24
Competitiveness
At the organizational level, competitiveness is an
important issue
How effectively do workers produce the product?
How good is the quality of the services or goods?
Can employees handle new technology and produce
the product at lower costs?
Does the firm have the human resources needed to
increase manufacturing to a global level?
Will the push to work harder and faster raise
turnover, absenteeism, and the number of defects?
2-25
Competitiveness

A competitive advantage means having a superior

marketplace position relative to competitors
A sustainable competitive advantage means dealing
effectively with employees, customers, suppliers, and
competitors
The way HRM activities are implemented and
modified can provide competitive advantages
2-26
Competitiveness
Activitiesthat can enhance and sustain competitive
advantage:
Employment security
Selective recruiting
High wages
Incentive pay
Employee ownership
Information sharing
Participation and empowerment
Teams and job redesign
2-27
Competitiveness
Activitiesthat can enhance and sustain competitive
advantage (continued):
Training as skill development
Cross-utilization and cross-training
Symbolic egalitarianism
Wage compression
Promotion from within
Long-term perspective
Measurement of practices
Overarching philosophy
2-28
Competitiveness
Competitors can adopt and/or improve on successful
HRM activities
A firm with fair and equitable treatment of human
resources is less susceptible to losing its competitive
advantage
A few HRM activities can be copied, but imitation of
an entire culture and system of HRM is difficult
2-29
Composition & Diversity of Labor Force
The labor force of the United States comprises all
people age 16 years or older who are:
Not in the military
Employed or actively seeking work

As of 2004, over 146 million Americans were in the

workforce
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Women in the Workforce
In2002, about 47 percent of the full-time U.S.
workforce consisted of women
This is a 235 percent increase since 1947
The number of married male employees has increased
by only 30 percent
Womenshould have equal job opportunities
However, they still face workplace discrimination

There are signs that more women will have

professional jobs
2-31
Minorities in the Workforce
The situation for racial and ethnic minorities in the
U.S. is similar to that for women
Few Hispanics, African-Americans, or Native
Americans are found in high-status, high-paying jobs
Historically, the most recent immigrant groups take
the lowest-level jobs
Minorities were living in the U.S. long before the
immigrants arrived
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Older Employees
The percent of older employees is growing
One of the toughest employment problems today is
the older employee who loses a job through no
personal fault
Higher insurance premiums for older employees
make them more costly to employ
Aswe age, we lose some of our faculties
This is an ongoing process
The key is to match employees with jobs
2-33
Older Employees

Contrary to stereotypes:
Employees 45+ have no
more accidents than
younger ones
Until age 55, absenteeism rates are the same or lower
Employees under 35 have the worst accident rate
When total performance is considered, older
employees are just as effective as younger ones
2-34
Employment Projection
Theten fastest-growing occupations:
Computer software, engineers, applicants
Computer support specialists
Computer software, engineers, systems software
Network and computer system administrators
Network systems and data communication analysts
Desktop publishers
Database administrators
Personal and home care aides
Computer systems analysts
Medical assistants
2-35
Geographic Location of the Organization
The location of the organization influences hiring
practices and HRM activities
Rural versus urban
International versus local
Education
Behavior
Legal-political factors
Economics
Inter-cultural training
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Internal Environmental Influences
HRM programs are influenced by:
Strategy
Goals
Organizational culture
Nature of the task
Work groups
The leader’s style and experience
2-37
Strategy
Astrategy:
Indicates what an organization's key executives hope
to accomplish in the long run
Is concerned with competition and aligning the
resources of the firm
Some companies believe long-term success is linked
to helping employees achieve work-life balance
2-38
Goals
Organizational goals differ within and among
departments
Most departments have similar goals
Differences arise from the importance placed on the
goals
In organizations where profits take precedence,
HRM goals receive little attention
This results in effectiveness problems (absenteeism,
performance decrements, high grievance rates)
2-39
Goals

Diversity refers to any mixture of themes

characterized by differences and similarities
Diversity in organizations is more than demographics
Dealing with workforce diversity means focusing on
the collective picture of differences and similarities
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Goals
Wisconsin Power and Light uses a six-step approach
to diversity training:
Form a diversity steering team
Create a diversity training team
Select a diversity training project manager
Complete a cultural audit
Design a training program
Implement and evaluate the training
2-41
Organization Culture
Afirm's organizational culture is shown by:
The way it does business
How it treats customers and employees
The autonomy or freedom that exists in the
departments or offices
The degree of loyalty expressed by employees
2-42
Organization Culture
Organization culture represents the perceptions held
by the employees
There is no one "best" culture for the development of
human resources
Culturecan:
Impact behavior, productivity, expectations
Provide a benchmark for standards of performance
2-43
Nature of the Task

HRM is the effective matching of

the nature of the task (job)
with the nature of the employee
2-44
Nature of the Task
Jobfactors that attract or repel workers:
Degree of knowledge and ability to use information
Degree of empowerment
Degree of physical exertion
Degree of environmental unpleasantness
Physical location of work
Time dimension of work
Human interaction on the job
Degree of variety in the task
Task identity
Task differences and job design
2-45
Work Group
An employee’s experiences are largely influenced by
the work group
A group is two or more people who:
Consider themselves a group
Work interdependently to accomplish a purpose
Communicate and interact with one another on a
continuous basis
In many cases, work next to each other
2-46
Work Group

An effective group is one in which:

Members function and act as a team
Members participate fully in group discussion
Group goals are clearly developed
Resources are adequate to accomplish group goals
Members furnish suggestions leading to achievement
of goals
2-47
Work Group
Most most effective work groups:
Are small (7 to 14 members)
Have stable membership

Members:
Have eye contact and work closely together
Have similar backgrounds
Depend on the group to satisfy their needs

Effectivegroups support management and the

organization's goals, unless it conflicts with their
own
2-48
Work Group
 Changing the group's norms and behavior requires:
The manager's leadership
The manager's power to reward or discipline
The transfer of some group members

Work groups are directly related to the success of

HRM activities
If a group opposes HRM programs, it can ruin them
Consider permitting work-group participation in
designing and implementing HRM
2-49
Leader’s Style and Experience
Theexperience and leadership style of the operating
manager directly affects HRM activities
Orchestrating the skills, experiences, personalities,
and motives of individuals
Facilitating interaction within work groups
Providing direction, encouragement, and authority to
evoke desired behaviors
Reinforcing desirable behavior
2-50
Strategic HRM: A Key to Success
Three levels of strategy apply to HRM activities:
Strategic (long term)
Managerial (medium term)
Operational (short term)

TheHRM activities are:

Employee selection/placement
Rewards
Appraisal
Development
2-51
Strategic HRM: A Key to Success
Strategic HRM planning leads to:
Growth
Profits
Survival

Planning also:
Expands awareness of possibilities
Identifies strengths and weaknesses
Reveals opportunities
Points to the need to evaluate the impact of internal
and external forces
2-52
Strategic HRM: A Key to Success
Organizational strategic plans permit HR to prepare
for internal and external environment changes
Each organization should adopt a strategy that best
fits its goals, environment, resources, and people
An organization must match its:
Strategic plan
Employees' characteristics
HRM activities
2-53
Strategic HRM: A Key to Success
The days of viewing HRM as only a highly
specialized and technical staff are over
HRM must be involved in all aspects of an
organization's operation
It must make everyday contributions to the
organization
HRM programs must be:
Comprehensive
Adapted to the organization's culture
Responsive to employee needs
2-54
Strategic Challenges Facing HRM
Global competition has become intense
HRM professionals are now being asked to optimize
the skills, talents, and creativity of every employee
Failure to do so will mean the firm cannot compete in
a globally interconnected world
2-55
Strategic Challenges Facing HRM
Technology trends:
Growth in knowledge needs
Shift in human competencies
Global market connection
Business streamlining
Rapid response
Quicker innovation
Quality improvement
Industrial revolution
2-56
Building a Cooperative Workforce
TheU.S. workforce is changing in dramatic ways:
There is a slower increase in the number of Caucasian
workers than other groups
By 2006, white males will no longer dominate the
workforce
Women are entering the workforce in record numbers
The number of Hispanic, Asian, and older workers
will continue to rise
2-57
Building a Cooperative Workforce
The changing look, age, and needs of the workforce
have resulted in more concern about:
Child care
Elder care
Diversity understanding and training

Understanding diversity is an obvious need

Most firms are not yet "diversity-friendly”
The negative financial impact can be significant
There will be increased demand for fair, ethical, and
prompt handling of diversity issues
2-58
Caliber of the Workforce
Recruiting and developing skilled labor is important
A growing number of jobs require higher levels of
education, language, math, and reasoning skills
Strategic HR planning models must carefully weigh
deficiencies and shortages in skills
The skills gap impacts more than HRM
Whole societies must face the consequences of not
having the workforce needed to compete in a global
economy
2-59
Restructuring and Downsizing
Facts about downsizing:
Half of all downsized firms end up with at least as
many employees again within a few years
Downsizing in manufacturing is not new
It is positively correlated to foreign competition
It encourages firms to reduce their costs
Profits increase in the short-run, but not productivity
It leads to lower compensation/wages within the
downsized firm
2-60
Restructuring and Downsizing
Restructuring means changing the reporting and
authority relationships within a firm
Downsizing is a reduction in a company's workforce
Downsizing has a human face and can result in stress-
related health problems
There is a growing sense that job security is a thing
of the past
2-61
Contingent Workers
Contingent workers include:
Temporaries
Part-timers
Contract or leased workers
Others who are hired to handle extra tasks or
workloads
The number of contingent workers has increased
steadily since the early 1970s
2-62
Contingent Workers
Outsourcing means hiring another firm to do work
This includes HRM activities
The outsource firm provides the employees to
complete the job
Professional employee organizations (PEOs) are
growing in popularity because they can:
Save a firm money
Reduce its risks
Improve efficiency
Allow the company to focus on its core business
2-63
People & the HRM Diagnostic Framework
Employees are the most important concern in the
diagnostic model
Even the best HRM activities can backfire if
adjustments for individual differences aren’t built in
People differ in their:
Abilities
Attitudes and preferences
Styles
Intellectual capacities
Ways of doing the job
2-64
Abilities of Employees
Abilitiesor skills are classified as:
Mechanical
Motor coordination
Mental
Creative

Abilitiesthat are the result of genetic factors can

rarely be changed through training
Abilities such as interpersonal skills and leadership
are more subject to change
2-65
Employee Attitudes and Preferences

An attitude is:

A characteristic, long-lasting way of thinking,
feeling, and behaving toward an object, idea, person,
or group
Apreference means:
Evaluating an object, idea, or person in a positive or
negative way
2-66
Employee Attitudes and Preferences
Work:
Allows for the expression of both aggressive and
pleasure-seeking drives
Offers a way to channel energy
Provides income
Offers a justification for existence
Is a way to achieve self-esteem and self-worth

The amount of energy directed toward work

is related to the amount directed to family, interpersonal
relations, and recreation
2-67
Motivation of Employees
Motivation is a set of attitudes that predisposes a
person to act in a specific, goal-directed way
It is an inner state that energizes, channels, and
sustains human behavior to achieve goals
Work motivation channels a person's behavior toward
work and away from recreation or other areas of life
The motivation to work changes as other life
activities change
2-68
Motivation of Employees

Managers who can determine the work motivations

of employees will make better HRM decisions
Work-oriented, hard working employees are usually
motivated by incentive compensation systems
Those consciously motivated to do a better job
benefit from performance evaluation techniques
2-69
Personality of Employees
Personality is how a person thinks and behaves
It includes the person's:
Traits
Values
Motives Because each employee
has a unique personality,
Genetic blue print
it is unlikely that a single
Attitudes set of HRM activities or
Emotional reactivity leadership approaches
will be equally successful
Abilities for all employees
Self-image
Intelligence
Visible behavior patterns
2-70
Personality of Employees
Behavioral scientists have found that:
The employee is both rational and intuitive
A person acts in response to internal inclinations,
choices, and environmental influences
Each person is unique and acts/thinks in a certain
way because of:
 Personality
Abilities
Attitudes
Motives
2-71
Desirable End Results
HRM must make decisions and solve problems in a
socially responsible and ethically sound way
It must help the firm satisfy its customers and
employees
It is a demanding job, but an exciting challenge
2-72
Comments to Reflect On
Organizational effectiveness is critically influenced
by HR management practices
Improvements in productivity, quality, and customer
satisfaction typically depend on changes in multiple
management systems
HR management systems drive behavior; they must
align with other management systems
It is hard to improve organizational performance
without paying attention to HR management
The HR department must be a central player in a
company's competitive efforts