UNIT 4

Organizational Strategy,
Structure, Culture and Policy

Introduction
The immediate context for human resource
management is the organization.
Buchanan define an organization as A social
arrangement for achieving controlled
performance in pursuit of collective goals
Mullins outlines the common factors that
organizations share: interactions and efforts
of people in order to achieve objectives
channelled and coordinated through structure
directed and controlled via management

 Strategy was originally a military term, defined in the

Oxford English Dictionary as: The art of a commander-inchief; the art of projecting and directing the larger military
movements and operations of a campaign.
Strategy has two fundamental meanings. First, it is forward
looking. It is about deciding where you want to go and how
you mean to get there. It is concerned with both ends and
means.
Strategies define longer-term goals, but they also cover
how those goals will be attained. They guide purposeful
action to deliver the required result.
The second meaning of strategy is conveyed by the
concept of strategic fit. The focus is upon the organization
and the world around it. To maximize competitive
advantage a firm must match its capabilities and resources
to the opportunities available in the external environment.

 Companies generally formulate three types of strategies

a) Corporate strategy which identify mix of business firm
will engage in and the ways in which these business will
relate to each other.
b) Business strategies which identify how each of the firms
businesses will compete in the market place
c) Functional strategies which identify how manufacturing ,
marketing and other functions will contribute to the
business strategy
Example : ITC at corporate level several business consists
paper, tobacco, hotel, food etc.
Business level ITC will decide how its welcome group of
hotels will compete with Taj and Oberoi
At functional level the company decides the basic courses
of action which HR and other function will pursue in
order to help the firm to achieve its competitive goals.

Three levels of Strategic Decision making

RANK

COMPANY

STAFF COST (crore)

SBI

6093

SAIL

4758

INFOSYS

2366

BHEL

1656

PNB

1654

MTNL

1445

TATA STEEL

1351

SATYAM

1338

CANARA BANK

1273

10

BANK OF BARODA

1253

Strategic HRM
Strategic HRM is an approach that defines
how the organizations goals will be achieved
through people by means of HR strategies
and integrated HR policies and practices.
Strategic HRM is concerned with seeing the
people of the organization as a strategic
resource for the achievement of competitive
advantage (Hendry and Pettigrew, 1986).
Strategic HRM focuses on actions that
differentiate the firm from its competitors
(Purcell, 1999).

Strategic Human Resource

Management
SHRM is part of strategic planning
Strategic Plan : The Companys plan
for how it will match its internal
strengths and weaknesses with its
external opportunities and threats to
maintain a competitive advantage
Essence is to ask Where are we now
as a business, where we want to be,
and how should we get there

Need and Importance

Changing demand from customers or
the market place
New technology and increasing
pressure from competitors
Changes in the basic business
environment
High levels of uncertainty about
basic business conditions

Rising costs
Rapid technological change
Changing demographics
More limited supplies of highly
trained labor
Rapidly changing government
legislation and regulations
Increased globalization of industries

Strategic HRM, therefore, is concerned

with the following:
1. Analyse the opportunities and threats
existing in the external environment.
2. Formulate strategies that will match the
organization's (internal) strengths and
weaknesses with environmental (external)
threats and opportunities. In other words,
make a SWOT analysis of organisation.
3. Implement the strategies so formulated.
4. Evaluate and control activities to ensure that
organization's objectives are duly achieved.

Organization culture and HRM

Organizational cultureencompasses values
and behaviors that "contribute to the unique
social and psychological environment of an
organization.[
According to Needle (2004), organizational culture
represents the collective values, beliefs and
principles of organizational members and is a
product of such factors as history, product,
market, technology, and strategy, type of
employees, management style, and national
culture. Culture includes the organization's vision,
values, norms, systems, symbols, language,
assumptions, beliefs, and habits.

 Basic HRM practices such as recruitment,

selection, training, etc. affect the performance and
stability of an organisation.
Thus these practices have the ability to influence
employee behaviour and create values that
develop organizational culture.
HR provides the organisation with effective means
of facilitating an organizational culture,
HR practices like on-going training, creating
continuous communication channels, involving
employees, establishing clear goals, creating a fair
reward system, developing employees and
flattening the organizational structures are all
ways through which desired organizational culture
could be promoted.

APPROACHES TO STRATEGIC HRM

The resource-based approach

A fundamental aim of resource-based HR strategy,is to develop strategic

capability achieving strategic fit betweenresources and opportunities
and obtaining added value from the effectivedeployment of resources. A
resource-based approach will address methodsof increasing the firms
strategic capability by the development of managersand other staff who
can think and plan strategically and who understand thekey strategic
issues.

The resource-based approach is founded on the belief that

competitiveadvantage is obtained if a firm can obtain and develop human
resourcesthat enable it to learn faster and apply its learning more
effectively than itsrivals.
Human resources are defined as follows: Human resources include all the
experience, knowledge,judgement, risk-taking propensity and wisdom of
individuals associatedwith the firm

In the resource-based view,the firm is seen as a bundle of tangible and

Strategic fit

The HR strategy should be aligned to the business

strategy (vertical fit).
HR strategy should be an integral part of the business
strategy,contributing to the business planning process
as it happens.
Vertical integrationis necessary to provide congruence
between business and humanresource strategy so that
the latter supports the accomplishment of theformer
and, indeed, helps to define it.
Horizontal integration with otheraspects of the HR
strategy is required so that its different elements
fittogether. The aim is to achieve a coherent approach to
managing people inwhich the various practices are
mutually supportive.

High-performance management

High-performance management aims to make

an impact on theperformance of the firm
through its people in such areas as
productivity,quality, levels of customer service,
growth, profits and, ultimately, thedelivery of
increased shareholder value.
High-performance managementpractices
include rigorous recruitment and selection
procedures, extensiveand relevant training and
management development activities,
incentivepay systems and performance
management processes.

High-commitment management

One of the defining characteristics of HRM is its emphasis on the importanceof

enhancing mutual commitment
High-commitmentmanagement has been described by Wood (1996) as: A form
ofmanagement which is aimed at eliciting a commitment so that behaviour
isprimarily self-regulated rather than controlled by sanctions and
pressuresexternal to the individual, and relations within the organization are
basedon high levels of trust.

The approaches to achieving high commitment

-the development of career ladders and emphasis on trainability andcommitment

as highly valued characteristics of employees at all levels inthe organization;
-a high level of functional flexibility with the abandonment of potentially rigid job
descriptions;
-the reduction of hierarchies and the ending of status differentials;
-a heavy reliance on team structure for disseminating information (teambriefing),
structuring work (team working) and problem solving(improvement groups or
quality circles).

High-involvement management

This approach involves treating employees as partners

in the enterprisewhose interests are respected and who
have a voice on matters that concernthem. It is
concerned with communication and involvement.
The aim is tocreate a climate in which a continuing
dialogue between managers and themembers of their
teams takes place in order to define expectations and
shareinformation on the organizations mission, values
and objectives. This establishesmutual understanding
of what is to be achieved and a framework formanaging
and developing people to ensure that it will be
achieved.