#ary $essler

tenth edition

Cha'ter (

Part % Introd&ction

Strategic Human Resource Management and the HR Scorecard

2005 Prentice Hall Inc. All rights reserved. PowerPoint Presentation by Charlie Cook The University o !est Alaba"a

After studying this chapter, you should be able to:

1. 2. . ".

Outline the steps in the strategic management process. Explain and give examples of each type of companywide and competitive strategy. Explain what a high performance wor! system is and why it is important. #llustrate and explain each of the seven steps in the $% &corecard approach to creating $% systems.
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2005 Prentice Hall Inc. All rights reserved.

HRs Strategic Challenges

&trategic plan
A companys plan for how it will match its internal strengths and weaknesses with external opportunities and threats in order to maintain a competitive advantage

'hree basic challenges

!he need to support corporate productivity and performance improvement efforts !hat employees play an expanded role in employers performance improvement efforts HR must "e more involved in designing#not $ust executing#the companys strategic plan 2005 Prentice Hall Inc. All rights reserved. 33

!he Strategic Management %rocess

&trategic management
!he process of identifying and executing the organi&ations mission "y matching its capa"ilities with the demands of its environment

&trategy
A strategy is a course of action !he companys long'tem plan for how it will "alance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage 2005 Prentice Hall Inc. All rights reserved.

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(usiness Mission and )ts *ision

(ision
A general statement of its intended direction that evokes emotional feelings in organi&ation mem"ers

)ission
Spells out who the company is+ what it does+ and where its headed

2005 Prentice Hall Inc. All rights reserved.

35

Strategic Management %rocess ,contd &trategic management tas!s

Step ./ 0efine the (usiness and )ts Mission Step 1/ %erform 2xternal and )nternal Audits Step 3/ !ranslate the Mission into Strategic 4oals Step 5/ 6ormulate a Strategy to Achieve the Strategic 4oals Step 7/ )mplement the Strategy Step 8/ 2valuate %erformance 2005 Prentice Hall Inc. All rights reserved.

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9verview of Strategic Management

2005 Prentice Hall Inc. All rights reserved.

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37

A S:9! Chart
SWOT Analysis
!he use of a S:9! chart to compile and organi&e the process of identifying company

+trengths+ !eaknesses+ ,pportunities+ and Threats

2005 Prentice Hall Inc. All rights reserved.

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Strategies in (rief
Company
Dell eBay General Electric Southwest Airlines automobile travel Vanguard Wal-Mart Unmatchable value for the investor-owner Low prices, every day

Strategic Principle
Be direct Focus on trading communities Be number one or number two in every industry in which we compete, or get out Meet customers short-haul travel needs at fares competitive with the cost of

2005 Prentice Hall Inc. All rights reserved.

&ource: Arit 4adiesh and ;ames 4il"ert+ <6rontline Action+= $arvard *usiness %eview+ May 1>>.+ p ?5

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!ypes of Strategic %lanning

+orporate,level strategy
)dentifies the portfolio of "usinesses that+ in total+ comprise the company and the ways in which these "usinesses relate to each other
@ $iversi ication strategy implies that the firm will expand "y adding new product lines @ -ertical integration strategy means the firm expands "y+ perhaps+ producing its own raw materials+ or selling its products direct @ Consolidation strategy reduces the companys si&e @ #eogra'hic e.'ansion strategy takes the company a"road

2005 Prentice Hall Inc. All rights reserved.

3 10

!ypes of Strategic %lanning ,contd *usiness,level-competitive strategy

)dentifies how to "uild and strengthen the "usinesss long'term competitive position in the marketplace
@ Cost leadershi'/ the enterprise aims to "ecome the low'cost leader in an industry @ $i erentiation/ a firm seeks to "e uniAue in its industry along dimensions that are widely valued "y "uyers @ *oc&s/ a firm seeks to carve out a market niche+ and compete "y providing a product or service customers can get in no other way

2005 Prentice Hall Inc. All rights reserved.

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!ypes of Strategic %lanning ,contd .unctional strategies

)dentify the "asic courses of action that each department will pursue in order to help the "usiness attain its competitive goals

2005 Prentice Hall Inc. All rights reserved.

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Relationships Among Strategies in Multiple' (usiness 6irms

2005 Prentice Hall Inc. All rights reserved.

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Achieving Strategic 6it

)ichael /orter
2mphasi&es the <fit= point of view that all of the firms activities must "e tailored to or fit its strategy+ "y ensuring that the firms functional strategies support its corporate and competitive strategies

0ary $amel and +. 1. /rahalad

Argue for <stretch= in leveraging resources# supplementing what you have and doing more with what you have#can "e more important than $ust fitting the strategic plan to current resources 2005 Prentice Hall Inc. All rights reserved. 3 14

!he Southwest Airlines Activity System

2005 Prentice Hall Inc. All rights reserved.

&ource: Reprinted "y permission of $arvard *usiness %eview 6rom <:hat is StrategyB= "y Michael 2 %orter+ Covem"er0ecem"er .DD8 Copyright E .DD8 "y the %resident and 6ellows of Harvard College+ all rights reserved

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HR and Competitive Advantage

+ompetitive advantage
Any factors that allow an organi&ation to differentiate its product or service from those of its competitors to increase market share Superior human resources are an important source of competitive advantage

2005 Prentice Hall Inc. All rights reserved.

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Strategic Human Resource Management

&trategic $uman %esource )anagement
!he linking of HRM with strategic goals and o"$ectives in order to improve "usiness performance and develop organi&ational cultures that foster innovation and flexi"ility 6ormulating and executing HR systems#HR policies and activities#that produce the employee competencies and "ehaviors the company needs to achieve its strategic aims

2005 Prentice Hall Inc. All rights reserved.

3 17

Finking Corporate and HR Strategies

2005 Prentice Hall Inc. All rights reserved.

&ource: E 1>>3+ 4ary 0essler+ %h 0

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HRS Strategic Roles

$% professionals should be part of the firm2s strategic planning executive team.
)dentify the human issues that are vital to "usiness strategy Help esta"lish and execute strategy %rovide alternative insights Are centrally involved in creating responsive and market'driven organi&ations Conceptuali&e and execute organi&ational change 2005 Prentice Hall Inc. All rights reserved. 3 19

HR )nvolvement in Mergers

2005 Prentice Hall Inc. All rights reserved.

&ource: ;effrey Schmidt+ <!he Correct Spelling of M G A (egins with $%,3 $% )aga4ine, ;une 1>>.+ p .>7

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HRs Strategy 2xecution Role

'he $% department2s strategies, policies, and activities must ma!e sense in terms of the company2s corporate and competitive strategies, and they must support those strategies.

2005 Prentice Hall Inc. All rights reserved.

3 21

HRs Strategy 6ormulation Role

HR helps top management formulate strategy in a variety of ways "y
Supplying competitive intelligence that may "e useful in the strategic planning process Supplying information regarding the companys internal human strengths and weaknesses (uild a persuasive case that shows how#in specific and measura"le terms#the firms HR activities can and do contri"ute to creating value for the company 2005 Prentice Hall Inc. All rights reserved. 3 22

Creating a Strategy'oriented HR System

+omponents of the $% process
HR professionals who have strategic and other skills HR policies and activities that comprise the HR system itself 2mployee "ehaviors and competencies that the companys strategy reAuires

2005 Prentice Hall Inc. All rights reserved.

3 23

!he (asic Architecture of HR

2005 Prentice Hall Inc. All rights reserved.

&ource: Adapted from (rian (ecker et al + 'he $% &corecard: 5in!ing /eople, &trategy, and /erformance ,(oston/ Harvard (usiness School %ress+ 1>>.-+ p .1

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!he High'%erformance :ork System

$igh,performance wor! system 6$/7&8 practices.
High'involvement employee practices ,such as $o" enrichment and team'"ased organi&ations-+ High commitment work practices ,such as improved employee development+ communications+ and disciplinary practices 6lexi"le work assignments 9ther practices include those that foster skilled workforces and expanded opportunities to use those skills 2005 Prentice Hall Inc. All rights reserved. 3 25

!ranslating Strategy into HR %olicy and %ractice

(asic Model of How to Align HR Strategy and Actions with (usiness Strategy 2005 Prentice Hall Inc. All rights reserved.
&ource: Adapted from 4arrett :alker and ; Randal Mac0onald+ <0esigning and )mplementing an HR Scorecard+= $uman %esources )anagement 5>+ no 5 ,1>>.-+ p 3?>

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!he HR Scorecard Approach

$% scorecard
Measures the HR functions effectiveness and efficiency in producing employee "ehaviors needed to achieve the companys strategic goals

+reating an $% scorecard
Must know what the companys strategy is Must understand the causal links "etween HR activities+ employee "ehaviors+ organi&ational outcomes+ and the organi&ations performance Must have metrics to measure all the activities and results involved. 2005 Prentice Hall Inc. All rights reserved. 3 27

Strategic HR Relationships

H5 Activities

6"ergent 6"'loyee 7ehaviors

+trategically 5elevant ,rgani8ational ,&tco"es

,rgani8ational Per or"ance

Achieve +trategic #oals

2005 Prentice Hall Inc. All rights reserved.

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!he HR Scorecard Approach to 6ormulating HR %olicies+ Activities+ and Strategies

&ource: Copyright E 4ary 0essler+ %h 0

2005 Prentice Hall Inc. All rights reserved.

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Hsing the HR Scorecard Approach

Step ./ 0efine the (usiness Strategy Step 1/ 9utline the Companys *alue Chain Step 3/ )dentify the Strategically ReAuired 9rgani&ational 9utcomes Step 5/ )dentify the ReAuired :orkforce Competencies and (ehaviors Step 7/ )dentify the Strategically Relevant HR System %olicies and Activities Step 8/ 0esign the HR Scorecard Measurement System Step ?/ %eriodically 2valuate the Measurement System 2005 Prentice Hall Inc. 3 All rights reserved. 30

9utlining the Companys *alue Chain

(alue chain analysis
A tool for identifying+ isolating+ visuali&ing+ and analy&ing the firms most important activities and strategic costs )dentifying the primary and crucial activities that create value for customers and the related support activities
@ 2ach activity is part of the process of designing+ producing+ marketing+ and delivering the companys product or service

Shows the chain of essential activities %rompts future Auestions 2005 Prentice Hall Inc. All rights reserved.

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Simple *alue Chain for <the Hotel %aris=

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&ource: Copyright E 4ary 0essler+ %h 0

2005 Prentice Hall Inc. All rights reserved.

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HR Scorecard for the Hotel %aris )nternational CorporationI

9ote::6An abbreviated example showing selected $% practices and outcomes aimed at implementing the competitive strategy, ;'o use superior guest services to differentiate the $otel /aris properties and thus increase the length of stays and the return rate of guests, and thus boost revenues and profitability38.

2005 Prentice Hall Inc. All rights reserved.

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Jey !erms
competitive advantage HR Scorecard leveraging metrics mission strategic control strategic human resource manager 2005 Prentice Hall Inc. All rights reserved. 3 34 strategic management strategic plan strategy S:9! analysis value chain analysis vision