Strategic Role Of HRM

(Chapter 3)
Compiled By:
Nirav Vyas
Asst Professor
JVIMS-Jamnagar
 Objectives of the Chapter
• Meaning Of Strategy, Strategic Plan and
Strategic Management
• Steps in Strategic Management
• Levels Of Strategies
• HRM’s Strategic Roles
• Creating SHRM
 Meaning
• Strategy
– The organizational long term view for how it
will balance its internal strength and
weakness with its external opportunities and
threats to maintain a competitive advantage
• Strategic Plan
– The organizational Plan for using its strengths
and opportunities to overcome its weakness
and threats and to achieve the achieve
towards the competitive advantage
 Meaning
• Strategic Management
– The process of identifying and executing the
organizational mission by matching its
capabilities with the demands of its
environment
 Meaning of Vision and Mission
• To understand the meaning of strategic
management, we should first understand
the meaning of Vision and Mission
• Vision
– It is a company’s general statement of its
intended direction that shows in a broad term
– A vision statement sums up in just a few
words, the promoter’s image of where the
business should move.
– “What we want to become”
 Meaning of Vision and Mission
• Mission
– Mission lays outs in broad terms what main
tasks are needed to move in the direction of
vision
– It is more concrete and quantifiable
– Spells out who the company is, what it does
and where is headed
– Most important phrase is “How can we
become”
 Examples
• Vision
– "To bring inspiration and innovation to every athlete*
in the world" If you have a body, you are an athlete.
• Nike
• Mission Statement of Nike
– To Provide for the best athletic accessories to the
inspiring athletes
 Examples
• Vision
– "The become leader in the Indian automobile
industry, creating customer delight and
shareholder's wealth; a pride for India.”
• Maruti Udyog
• Mission Statement of Maruti Udyog
– To create customer obsession through innovation,
creativity, networking, partnership, openness and
learning.
Steps in Strategic Management
Strategic Management Process
• Define Current Business
• Perform External and Internal Audits
• Formulate New Business and Mission Statements
• Translate Mission into strategic goals
• Formulate Strategies to achieve goals
• Implement the Strategies
• Evaluate Performance
Strategic Management Process
• Define the Current Business
– This does not mean mentioning the core business about what we
are doing. It means identifying the segment to which our
products are most appealing to
– The organization must also define the area of its operation
– A clear Vision statement should be there accompanied with a
mission statement
• Perform External and Internal Audits
– This is done to check the strengths, weakness, opportunities and
threats faced by the organization
– Decision of strategies and tactics will be based on this mix
– SWOT analysis is to be used for this
Example of SWOT of Amul

Strengths Weaknesses
•High and •Perishability
regular demand •Logistics
•Easy availability Problem
of raw material

Opportunities Threats

Export Potential Unorganized

Sector
Strategic Management Process
• Formulate new business and mission
statements
– Based on the situation analysis, what should our new business
be, in terms of what products it will sell, where it will sell them
and how its products or services will differ from its competitors
• Translate Mission Statements in goals
– Segment the overall mission statement into goals of different
department
– E.g. Saying “We want to make best quality goods” is one thing
and operationalizing the statement into goal of achieving 6
sigma for production department is other
Strategic Management Process
• Formulate Strategies to achieve the
strategic goals
– It shows how the organization will move from the business it is
in now to the business it wants to be in.
– It takes into consideration the results of SWOT analysis
– Eg. Strategy of Wal-Mart is “Low Prices Everyday”. What
would be the implementation of strategy
• Low Cost everyday
Strategic Management Process
• Implement the strategies
– It means translating the strategies into actions and results.
– Actual hiring (or firing) people, entering in to new markets,
opening or closing plants, adopting technologies etc.
• Evaluate Performance
– An basic evaluation model has to be thought of for evaluating
what we were expecting after the implementation of strategies
and what actually has happened
– This is basically called strategic control
Levels of Strategies
Common elements of any strategy
• Low Costs
• Customer Focus
• Incremental Profits
 Corporate Strategy

SBU 1 SBU
Business
2 Strategies

SBU 3

Different Different
Different Different
Depts Depts
Depts Depts

Functional Strategies
 Levels of Strategy
• Corporate level
– An organization’s corporate level strategy identifies
the portfolio of business that, in total, comprise the
organization and the ways these businesses relate to
each other.
• Business level (Competitive)
– It identifies how to build and strengthen the business’s
long term competitive position in the marketplace
• Functional Level (Departmental)
– It identify the basic courses of action that each
department will pursue in order to help the business
attain its competitive goals
Example
 Corporate Level Strategy
• An organization’s corporate level strategy
identifies the portfolio of business that, in total,
comprise the organization and the ways these
businesses relate to each other
• Basically there are five recognized corporate
strategies which are
– Diversification
– Vertical Integration
– Horizontal Integration
– Consolidation
– Geographic Expansion
 Corporate Level Strategy
• Diversification
– Expansion by adding new product lines.
– E.g. Mobile service providers have started new product lines by
providing internet surfing devices
• Vertical Integration
– Forward:- Purchasing the retailers, dealers etc.
– E.g. Factory outlets of various fashion clothing companies
– Backward:- Purchasing the suppliers of raw materials.
• Horizontal Integration
– Mergers and Acquisition
• (If you want to reduce competitors, purchase them)
 Corporate Level Strategy
• Consolidation
– Reducing the organization’s size

• Geographic Expansion
 Business Level (Competitive)
Strategies
• It identifies how to build and strengthen the
business’s long term competitive position in the
marketplace
• Types
• Cost Leadership:-
– It means the organization aims to become the low cost
leader in any industry and acquire a market share.
– E.g Micromax Mobiles
• Differentiation:-
– It means an organization seeks to be unique in its industry
along dimensions that are widely valued by buyers
– E.g Rolex is knows for style while Casio for durability
 Business Level (Competitive)
Strategies
• Focus strategy
– It basically means identifying a niche into the target
segment and producing customized products in order to
cater to that particular niche.
– E.g. Ferrari
• One thing to note that the organization’s different
business’ strategies should make sense in terms of
its corporate strategy.
 Functional Strategies
• It identify the basic courses of action that each
department will pursue in order to help the business
attain its competitive goals
• Each business is composed of departments such as
sales, marketing, production, HRM. The strategies
adopted by them are called functional strategies
• The organization’s functional strategies should
make sense in terms of its business strategy
HRM Strategic Roles
 HRM Strategic Roles
• Formulating and executing any strategy needs an
HR intervention. HR help the strategy team to
identify the human issues that are vital towards the
strategy.
• HR helps in conceptualizing and executing the sorts
of organizational changes that organization
increasingly need to execute their strategic plans
• Basically there are two roles that HR department
takes
– Strategy Execution Role
– Strategy Formulation Role
 HRM Strategic Roles
• Strategic Execution Roles
– Top management formulates the organizational strategies
and then the HR manager designs policies and practices
that make sense in terms of the overall strategy
– HRM supports the strategy execution by admistrating
firm’s diversification, consolidation or downsizing by out
placing employees, instituting pay for performance plans,
reducing health care costs, helping employees to work in
abroad, giving training etc
 HRM Strategic Roles
• Strategic Formulation Roles
– The HRM manager helps in assessing the SWOT of the
organization before it takes decision on any of its strategy
– It helps in assessing the need of development needed in
the existing employees to make them aligned with the
intended strategies
– They judge on the basis of how many new employees and
of what type should be taken in for creating a particular
strategy etc.
Creating SHRM
 Creating SHRM
• Creating a Strategic Human Resource Management
requires simple but concrete steps.
• It involves basically the following process
– Creating High performance work system
– Measuring HR’s effectiveness
– Translating strategy into HR policies and practices
 Creating SHRM
• Creating High Performance Work System
– Every company tends to create a HR system that’s
uniquely appropriate to its needs.
– HPWS is basically advocating a system which focuses on
learning and performance recognition.
– Several characteristics of HPWS are multi skilled workers,
empowered front line workers, continuous training,
emphasis on better labor relations, commitment to quality
etc.
 Creating SHRM
• Measuring HR’s effectiveness
– Employers today expect their HR manager to build a persuasive
case that shows how the firm’s HR activities contribute to
creating value for the firm.
– It is measured in two terms either low costs or high profits
– Some examples are revenue earned per full time employee. This
is used to measure the productivity of the employee.
– For creating a SHRM, it is very important to create a cost to
benefit ratio of all HR activities to the overall costs or profits of
the organization.
– This cost to benefit ratio should be such which can be expressed
in mathematical terms.
 Creating SHRM
• Translating Strategy into HR policies and
practices
– SHRM in simple terms means formulating and executing
HR polices that produce the desired employee’s
competencies which are helpful to achieve the overall
strategy of the business
– Hence it is very necessary first to translate the business
strategy into HR policies which will produce the desired
employee behavior and competencies
– Let us see a basic model of how to align Business strategy
with the HR practices
Model for translating strategy into HR
practices
Analyze the business strategy Differentiation

Learning aptitude, Less

Identify the desired workforce
resistance to change, ready to
competencies needed
accept challenges

Formulate HR practices that will Develop interactive training

help to achieve those desired methods, recognition on
competencies innovation, increments on new
invention etc

Develop a system for evaluating Cost to innovation ratio, time

the practices and making them devoted to study etc.
quantifiable. HR Scorecards
 Creating SHRM
• Meaning of HR Scorecard and how to use HR Scorecards
– IT is a measurement system, often summarized on a
computer screen which shows the quantitative standards or
metrics the firm uses to measure HR efforts
– Basically it is a system which measures the HR function’s
efficiency and effectiveness in a quantifiable terminology.
– Three basic information is required to create a HR scorecard
• Knowledge of the business strategy
• Casual links between a particular HR practice and the
outcome in terms of employee behavior
• “Metrics” which the HR manager can use to quantify and
measure the effectiveness of the HR practices
 Creating SHRM
• HR scorecard process
– Define Business strategy
– Outline the organizational value chain
– Outline a strategy map
– Identify strategically required organizational outcomes
– Identify the required workforce competencies
– Identify the required HR system and policies
– Create HR scorecard
– Choose HR scorecard measures
– Summarize HR scorecard and digitalize
– Evaluate
 Creating SHRM
• Outline the organizational value chain
– Any manager who wants to understand what
employee behaviors are vital for his firm’s success
must first understand what the firm’s required
activities are.
– E.g High end premium segment hotel’s value chain
would be
• Easy guest reservation
• Inbound guest services
• Faster and polite room service
• Luxurious amenities
• Outbound guest services etc.
 Creating SHRM
• Outline a strategy map
– A strategy map is a diagram that summarizes the chain of
major interrelated activities that contribute to a company’s
success.
– It basically outlines how each department and each
employee needs to contribute in order to achieve the
overall business strategy.
• Identify Strategically require organizational
outcomes
– The strategy map helps the manager recognize the core
outcomes which are needed and relevant for the strategy.
 Creating SHRM
• Identify required competencies and behavior of
employees
– Listing down what does each employee should achieve in
his own specialized area in order that he can contribute to
the overall strategy of the business
• Identify HR system policies and practices required
• Create HR Scorecard
– By expanding the value chain and strategy map, the
manager creates a HR score card which lists down all the
desired competencies of every employee with some
method of measuring it.
 Creating SHRM
• Choose HR scorecard measures
– Basically it means identifying a ground on which the
competencies, HR practices and outcomes can be
measured
– E.g Improve the disciplinary system-How to measure
– Perhaps by judging number of employee and manager
grievances in period of time.
• Summarize the scorecard measures in a digital
dashboard
• Evaluate