The Strategic Role

of Human Resource
Management
 on Strategy
iti
fin
De

l Strategy is deciding where to go and

the means to get there.
l Strategy is a declaration of intent.
 STRATEGIC HUMAN RESOURCE
MANAGEMENT

l Linking HRM with strategic goals and

objectives to improve business performance
and develop organizational cultures fostering
innovation and flexibility.
l Defines the organisation’s intentions and plans
on how its business goals should be achieved
through people.
 Linking Corporate and HR Strategy

External Formulate Business Internal

environment Strategy Strengths &
Weaknesses

Identify Employee Competencies

and Behaviors that HR must
deliver to achieve the strategy

Formulate HR Policies & Activities that will lead

to these Employee Competencies and Behaviors
HR’s evolving role as Strategic
Partner
Corporate strategy

HR operations

Corporate strategy

HR operations

Corporate strategy

HR function
Some Organizational Strategies

Company Strategic Principle

General Be number one or number two in

Electric every industry in which we
compete, or get out

Wal-Mart Low prices, every day

3M Foster innovation
 Strategic Planning
There are three levels
of strategic planning -

Corporate
Strategy

Business Business Business

Strategy Strategy Strategy

Functional
Strategies
Types of Strategic Planning

l Corporate-level strategy
l Identifies the portfolio of businesses that,
in total, comprise the company and the ways
in which these businesses relate to each
other.
l Diversification strategy
l Vertical integration strategy
l Consolidation strategy
l Geographic expansion strategy
Types of Strategic Planning (cont’d)

l Business-level/competitive strategy
l Identifies how to build and strengthen the
business’s long-term competitive position in
the marketplace.
l Cost leadership
l Differentiation
l Focus
Types of Strategic Planning (cont’d)

l Functional strategies
l Identify the basic courses of action
that each department will pursue in
order to help the business attain its
competitive goals.
Business Strategy = Cost Leadership
Common Organizational HR Strategies
Characteristics

• Intense supervision of • Detailed work planning

labor • Emphasis on technical
• Tight cost control qualifications and skills
requiring frequent, • Emphasis on job-specific
detailed control reports training
• Low-cost distribution • Emphasis on job-based
system pay
• Structured organization • Use of performance
and responsibilities appraisal as a control
• Products designed for device
ease in manufacture
Business Strategy = Differentiation

Common Organizational HR Strategies

Characteristics
• Strong marketing
abilities • Emphasis on innovation
• Product engineering and flexibility
• Corporate reputation • Broad job classes
for quality or • Loose work planning
technological leadership • External recruitment
• Amenities to attract • Team-based training
highly skilled labor,
scientists, or creative
people.
Business Strategy = Focus
Common Organizational HR Strategies
Characteristics

Choose a market niche

where buyers have • Emphasis on innovation
distinctive preferences, • Seek specialists
special requirements, or • Training to enhance
unique needs and augment special
skills
Develop a unique ability to
serve needs of target
buyer segments
Achieving Strategic Fit

l Michael Porter
l Emphasizes the “fit” point of view that all of
the firm’s activities must be tailored to or fit
its strategy
l Gary Hamel and C. K. Prahalad
l Argue for “stretch” in leveraging resources—
supplementing what you have and doing more
with what you have
HR’s Strategic Roles

l Identify the human issues that are vital to

business strategy.
l Help establish and execute strategy.
l Provide alternative insights.
l Are centrally involved in creating responsive and
market-driven organizations.
l Conceptualize and execute organizational change.
HR’s Strategy Formulation Role

l HR helps top management formulate

strategy in a variety of ways by.
l Supplying competitive intelligence regarding
the external environment
l Supplying information regarding the company’s
internal human strengths and weaknesses.
l Showing how the firm’s HR activities can and
do contribute to creating value for the
company.
HR’s Strategy Execution Role

l The HR department’s strategies, policies, and

activities must make sense in terms of the
company’s corporate and competitive strategies,
and they must support those strategies.
Implications of SHRM
l Successful SHRM efforts begin with
identification of strategic needs.
l Employee participation is critical to linking
strategy and HR practices.
l Strategic HR depends on a systematic and
analytical mindset.
l Corporate HR departments can have an impact on
their organization’s efforts to launch strategic
initiatives.
Is There a “One Best HR Way”?

l Follow a company’s operating and strategic

initiatives
l All companies can benefit from
l Profit sharing programs
l Results oriented appraisals
l Employment security
l Fostering informal relationships - promoting
worldwide communications
l Developing global executives
Cost of HR vs Value added by
HR

HR ACTIVITY VALUE
COST
ADDED
Strategic
10% (Planning) 60%

Operational
30% (Service delivery) 30%

Administrative
60% (Record keeping 10%
and Compliance)
The Bottomline

l Getting results
l The bottom line of managing

l HR creates value by engaging

in activities that produce
the employee behaviors
the company needs to
achieve its strategic
goals.