Chapter 3

Integrating HR Strategy with Business Strategy

Human Resource Management, 5E

Learning Objectives
Understanding the Nature of Strategic HRM Describe the Strategic Management Process Integrate HR Functions with Strategic Management Process

Human Resource Management, 5E

Traditional HRM vs. Strategic HRM

Traditional HRM Strategic HRM Line managers Partnership with internal and external customers Transformational, change leader and initiator

Responsibility for HRM

Focus Role of HR

Staff specialists Employee relations Transactional, change follower and respondent

Initiatives
Time horizon Control Job design Key investments Accountability

Slow, reactive, fragmented

Short term Bureaucratic roles, policies, procedures Tight division of labour, independence, specialisation Capital, products Cost centre

Fast, proactive, integrated

Short, medium, long Organic-flexible, whatever is necessary to succeed Broad, flexible, crosstraining teams People, knowledge Investment centre

Human Resource Management, 5E

Strategic HR Model
Firm strategy
Institutional/ Political forces

Resource-based view of the firm

HRM Practices

Resource dependence institutional

Cybernetic Agency/ Transaction Costs

HR Capital Pool (skills, abilities)

Behavioural Approach

HR Behaviours

Firm-level Outcomes (performance, satisfaction, absenteeism, etc.)

Human Resource Management, 5E

Strategic Management Process

Environmental Scanning Strategy Formulation
Corporate level Business unit level Functional level

Strategy Implementation Strategy Evaluation

Human Resource Management, 5E

Benefits of Strategic Management

Allows identification, prioritisation and exploitation of opportunities. Provides an objective view of management problems. Represents a framework for improved co-ordination and control of activities. Minimises the effects of adverse conditions and changes. Allows major decisions to better support established objectives. Allows more effective allocation of time and resources to identified opportunities. Allows fewer resources and lesser time to be devoted to correcting erroneous or adhoc decisions. Creates a framework for internal communication among personnel. Helps to integrate the behaviours of individuals into a total effort. Provides a basis for the clarification of individual responsibilities. Gives encouragement to forward thinking. Provides a co-operative, integrated and enthusiastic approach to tackling problems and opportunities. Encourages a favourable attitude towards change. Gives a degree of discipline and formality to the management of a business.
Source: Fred R. David, op. cit., p. 18.

Human Resource Management, 5E

HR Role in Strategic Management

In strategy formulation HR manager supplies competitive intelligence that is useful In strategy implementation Encouraging proactive behaviour Explicit communication goals Stimulate critical thinking Productivity Quality and Service Proficient strategic management
Human Resource Management, 5E 7

Components of Building A Capable Organisation

An organisation capable of good strategy execution Staffing the Organisation Putting together a strong management team Hiring and retaining talented people

Building Core Competencies and Competitive Capabilities Developing a competency/capability portfolio suited to current strategy Updating and reshaping the portfolio as external conditions and strategy change

Structuring the Organisation and Work Effort Organising business functions and process, value chain activities and decision making

Human Resource Management, 5E

Reality Check
HR role in Strategic Management seems to be merely platitudinal but little in practice. Rarely is HR executive consulted in vital decision, such as mergers or acquisitions. This popular perception, invites your attention towards a reality check. Talk to select HR executives and discover the truth.

Human Resource Management, 5E

Reality Check
Select at least five companies of your choice. Bring out their corporate, unit and functional level strategies. What significant differences do you observe among them?

Human Resource Management, 5E

10

Reality Check
Can you draw SWOT analysis of a firm you know well? Try.

Human Resource Management, 5E

11