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Strategic HRM in Action

HR Strategy defined, purpose,
types of HR strategies, Content of
HR strategies, Formulating HR
strategy, criteria for an Effective
HR strategy, integrating the
business and HR strategies.

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HR strategy

HR strategies set out what the organization intends to

do about its human resource management policies and
practices, and how they should be integrated with the
business strategy and each other.

Dyer and Reeves (1995) as internally consistent bundles

of human resource practices,
Peter Boxall (1996) they provide a framework of critical
ends and means.

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Distinction between SHRM and HR Strategy

Strategic HRM can be regarded as a general
approach to the strategic management of human
resources in accordance with the intentions of
the organization on the future direction it wants
to take.
HR strategies will focus on the specific intentions
of the organization on what needs to be done
and what needs to be changed.

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TYPES OF HR STRATEGIES
Overarching HR strategies - describe
the general intentions of the organization
Specific HR strategies- Specific HR
strategies set out what the organization
intends to do in specific areas

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CRITERIA FOR AN EFFECTIVE HR STRATEGY

will satisfy business needs;

be founded on detailed analysis and study, not just wishful thinking;
can be turned into actionable programmes that anticipate
implementation requirements and problems;
is coherent and integrated, being composed of components that fit
with and support each other;
takes account of the needs of line managers and employees
generally as well as those of the organization and its other
stakeholders.

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Formulating and implementing HR

strategies

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FUNDAMENTAL PROCESS CONSIDERATIONS

Interactive (not unilinear) relationship between business strategy

and HRM
HR strategies are not necessarily developed formally and
systematically but may instead evolve and emerge
Strategy formulation is about preferences, choices, and matches
rather than an exercise in applied logic. It is intentions shared
amongst the top team

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A linear strategic HRM model

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CHARACTERISTICS OF THE PROCESS

Propositions
Schools of strategy development
Levels of strategic decision making
Strategic options and choices

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Strategy formulation propositions

There are many HR strategies in a firm
Business strategy is one of the factors that influence
strategy formulation
Historical compromises and trade-offs from stake
holders
Not all managements respond from shift from historical
pattern of strategy formulations
No one set of constructs available

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Schools of strategy development

Purcell, 2001

The design school -The design school is deliberate and

is based on the assumption of economic rationality. It uses
quantitative rather than qualitative tools of analysis and Formulating
and implementing HR strategies focuses on market opportunities
and threats. What happens inside the company is mere
administration or operations.

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The process school

-

adopts a variety of approaches and is concerned with how

strategies are made and what influences strategy formulation.
It is much more a study of what actually happens with explanations
coming from experience rather than deductive theory.
downplays the role of systematic analysis and Emphasizes the role
of intuition and vision, fails to provide a clear basis for reasoned
choices (Mintzberg)

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The configuration school

Assumptions
strategies vary according to the life cycle of the Organization
Strategies will be contingent to the sector of the organization and,
they will be about change and transformation.

The focus is on Implementation strategies, which is where Purcell thinks

HR can play a major role

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Levels of strategic decision making

- Do strategy flow from business strategy
- Is strategy parallel to business
decisions

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A methodology for formulating HR strategies was developed by Dyer

and Holder (1988) as follows:
1.Assess feasibility number, time and cost
2.Determine desirability examine the implications of strategy in terms
of sacrosanct HR policies (eg a strategy of rapid retrenchment would
have to be called into question by a company with a full employment
policy).
3. Determine goals these indicate the main issues to be worked on
and they derive primarily from the content of the business strategy.
4. Decide means of achieving goals the general rule is that the
closer the external and internal fit.

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Approaches to strategy development

- Best fit approach
- The best practice approach
- The configuration approach

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Approaches to development of HR strategies

The classical sequential approach

The empirical need based approach

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Concepts in strategy formulation

Resource capability firms tries to develop
strategies concerned more on acquisition, development
and retention of human capital for gaining competitive
advantage through the human

Alignment to business strategy

Achieving horizontal fit

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Issues in strategy formulation

Business issues- intentions , proposals on increasing
competitive advantage, perceived need to develop performance and
customer oriented culture and any other philosophy like
engagement, commitment etc.,

Contextual factors globalization, profitability through

growth, technology, importance of intellectual capital and non-stop
change

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SETTING OUT THE STRATEGY

1. Basis -business needs ; environmental factors and analysis; cultural factors

2. Content details of the proposed HR strategy

3. Rationale the business case for the strategy
4. Implementation plan - action programme; responsibility for each stage;
resources required; proposed arrangements for communication,
consultation, involvement and training;
5. Costs and benefits analysis an assessment of the resource implications of
the plan (costs, people and facilities) and the benefits that will accrue,
for the organization as a whole, for line managers and for individual
employees (so far as possible these benefits should be quantified in
terms of value added).
But there is no standard model; it all depends on the circumstances of the
Organization.

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Figure 2: How The IBM HR Strategy Supports and Enables the Business
Strategy
Performance-Based
Opportunities

I
B
M
S
T
R
A
T
E
G
Y

IBM
Differentiators:
The Employee
Experience
Innovation

Business
Value

Leadership

Diverse,
Talented People

Flexibility

Values-based
Climate

Focus on
Enterprises that
Value Innovation
Global
Integration

Anticipate and Build Skills

On Demand
Infrastructure

Human
Resources
Focus Areas

Lead the Transformation

Grow IBM

An inspiring
climate in
which
employees
flourish by
creating value
for our clients
and the world

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Integrating the Business

Strategy and HR Strategy

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Each of the business strategy needs different

approaches or types of HR strategy to manage
people and the investment towards Human
Capital.
Therefore, Linking between HR Strategy and
Business Strategy is important

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Porters classification of Business Strategy

Three types of strategies ( porter, 1985)
adopted by an organization to gain
superior performance and advantage are
Cost leadership
Differentiation
Focus

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Cost leadership

Increases in efficiency & cutting of costs, then passing savings to

consumer
Assumes price elasticity in demand for products or services is high
Assumes that customers are more price sensitive than brand loyal

HR Strategy
HR strategy focuses on short-term performance
measures of results & promoting efficiency through job
specialization & cross-training
Linking between HR Strategy and Business Strategy

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Differentiation
In order to demand a premium price from consumers
Attempting to distinguish organizational products or
services from other competitors or
Creating perception of difference
HR Strategy
Organization offers employees incentives &
compensation for creativity
HR strategy focuses on external hiring of unique
individuals & on retaining creative employees
Linking between HR Strategy and Business Strategy

Focus

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Business attempts to satisfy needs of only a particular

group or narrow market segment
Strategic intent is to gain consumer loyalty of neglected
groups of consumers
High concern for quality product
HR Strategy
Strategic HR issue is ensuring employee awareness of
uniqueness of market segment
Thorough employee training & focus on customer
satisfaction are critical factors
Hiring members belonging to the target segment who
are empathetic to customer in that target segment
Linking between HR Strategy and Business Strategy

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Beaumonts classification of HR strategies

Noted 3 bases for classifying HR Strategies and
its relationship to Business Strategies
- Different types of business strategies that
different business strategies will lead to different
HR strategies ( similar approaches of Porter and
Schuler and Jackson)
- Stages in business or product life cycle
- Types and number of products
Linking between HR Strategy and Business Strategy

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HR Practices corresponding to the stages of organizations Life Cycle

Life cycle stages

HR Practices

Start up

Flexible pattern of work

Recruitment of highly motivated and committed
employees
Competitive pay
Less formal systems
No unions

Growth

More planned recruitment and selection

Training and development focus
Performance management processes
Focus on high commitment
Developing stable employee relations

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HR Practices corresponding to the stages of organizations Life Cycle

Maturity

Attention to the control of labour costs

Focus on increasing productivity
Strained employee relations
Control compensation

Decline

Emphasising on down sizing mechanisms

Abandoning some long withstanding practices to cut on
costs
Career consulting services
Retraining
Trade unions marginalised

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Types and number of products

Fombrun et al (1984) suggested that the
strategy aimed at achieving variations in product
focus results in structural modifications and
influences in HR Strategy.
Eg., organizations with single products HR
Strategy will be different from organizations that
follows strategy of growth by acquisitions.

Linking between HR Strategy and Business Strategy

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Schuler and Jacksons strategic driven role behaviours and

practices
They focused on Porters 3 generic approaches but
argued that HR Practices should be designed to
reinforce the behavioral implications of these generic
strategies
The role behaviours needed of employees throughout an
organization provide a rationale for linkage between
competitive strategies and HR Practices
Competitive strategies can be used to explain how
different employee behaviours are required for
successful implementation of different strategies
These behaviours are roles that go beyond skills,
knowledge, and abilities
Linking between HR Strategy and Business Strategy

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Business Strategy
Cost Leadership
Suitable for repetitive and
predictable behaviour
Concerned with short-term focus
and quantities (volumes)
Result-oriented
Risk averse
Comfortable working themselves

HR Strategy
Utilization HR Strategy

Focused on short-term performance

measures, i.e., results or outcomes
Efficiency is the norm
Job assignments are specialized
Hierarchical pay, few incentives
Narrow career paths, limited training
Limited employment security
Cost-cutting may involve incentives for
employees to leave the firm
Procedures for continuous tracking of
wage rates in the labour market
Limited participation

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Differentiation
Long term focus
Creative job behaviour
Moderate concern for quality
and quantity

(eg. HP,J&J etc.,)

Facilitation HR Strategy
Broad career paths
Extensive training
Equal and fair pay, many
incentives for creativity
Long term performance
measures
External recruitment and hiring
of people who bring in new
ideas
High employee participation
Some employment security
Stock ownership options

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Focus
High concern for quality
Moderate concern for
quantity
Long/medium term focus

(eg., toyota)

Accumulation HR Strategy
Equal and fair pay with
many incentives
Hiring employees
belonging to the target
market
Broad career path with
extensive training
High employee
participation in decision
making
Some employee security

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Miles and Snows Classification of HR

strategy

Suggested that HRM Practices must be tailored to the demands of the business
strategy
They identified types of organizational strategies on the basis of the dominant culture
of the organization-

Defenders- who seek , stability and believe in strict control low cost providers

Prospectors- who seek new opportunities, focus on continuous development and

believe in flexibility product differentiators and innovators)

Analyzers- who seek to incorporate the benefits of both defenders and prospectors
uses focused personnel strategy.Eg., manufacturers of electronics , pharma,
automobiles

Reactors companies with dysfunctional strategies companies in this category are

highly competitive markets and are at the mercy of their environments
eg., publishing, retail, hotels- they have few systematic strategic implications

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Dominant Culture of the

Organization (Business
Strategy)
Defenders
Find change threatening
Favour strategies which
encourage continuity and
security

HR Strategy
Bureaucratic approach
Planned and regularly
maintained policies to
provide for lean HR
Build human resources
Likely to emphasize
training programmes and
internal promotion

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Prospectors
Thrive on change
Favour strategies of product
and/or market development

Creative and flexible

management style
Have high quality human
resources
Emphasize redeployment and
flexibility of HR
Little opportunity for long term
HR planning
Acquire human resources
Likely to emphasize
recruitment, selection and
performance-based
compensation

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Analysers
Seek to match new
ventures with the present
business set-up
These firms are followers
the ventures are not
new to the market, only
new to the firm

Low levels of monitoring

and coordination
Buy as well as make
key human resources
Emphasize HR planningextensive career paths
within companies

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Schulers(1992) - The Five Ps Model of

SHRM
Proposed the Five P model that links the
strategic business needs with strategic HRM
activities. The Five Ps are
(HR) Philosophy
(HR) Policies
(HR) Programmes
(HR) Practices
(HR) Processes

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Schulers(1992) - The Five Ps Model of

SHRM (contd.)

Philosophy

Statements of how organization values & treats

employees; essentially culture of the organization

Policies
Expressions of shared values & guidelines for action
on employee-related business issues

Programs
Coordinated & strategized approaches to initiate,
disseminate, & sustain strategic organizational
change efforts necessitated by strategic business
needs

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Five Ps Model of SHRM

Practices
HR practices motivate behaviors that allow individuals
to assume roles consistent with organizations
strategic objectives
Three categories of roles:
Leadership
Managerial
Operational

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Five Ps Model of SHRM

Processes
Continuum of participation by all
employees in specific activities to
facilitate formulation &
implementation of other activities

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Five Ps Model of SHRM

Successful SHRM efforts begin with
identification of strategic needs
Employee participation is critical to linking
strategy & HR practices
Strategic HR depends on systematic &
analytical mindset
Corporate HR departments can have
impact on organizations efforts to launch
strategic initiatives

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Linkage between HRM and Strategic planning

process
Proposed by Golden and Ramanujam (1985)
4 types of linkages
1.Administrative Linkage traditional role
2.One Way Linkage HR strategy reactive
3.Two Way Linkage reciprocal and
interdependent relationship
4.Integrative Linkage dynamic interaction
between HR function and strategic linkage , HR
executive is a strategic business partner with
other senior executives of the firm

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Relationship between Business Strategy and HRP

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Relationship between Business Strategy and HRP

Business Strategy and

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Compensation