Strategic Human

Resource Management
Prof. TN Krishnan
The session would focus on
 Linkage between HRM and strategy
 HRM needs in different Strategic types
 The idea of alignment
 Role of HR managers
 How does HR provide competitive
advantage?
HRM and Strategy
 Human Resources* could be viewed in two ways in
the field of SHRM
 Human resources as antecedents or as a key input while
making strategic decisions (strategy planning)
 Human Resources as the outcome of strategic decisions
(strategy implementation)
 Empirical studies have shown a positive relationship
between HRM practices and various measures of
organizational performance

* By human resources I mean both the people capability (KSA), the HR system and
culture
 Linking Company-Wide and HR Strategies

Source: Dessler & Varkkey

 Relationships Among Strategies in Multiple-Business Firms

Source: Dessler &

Varkkey
 Types of Strategies
Corporate-Level
Strategies

Vertical Geographic
Diversification Consolidation
Integration Expansion
Strategy Strategy
Strategy Strategy

3–6
Source: Dessler & Varkkey
 Types of Strategies
Business-Level/
Competitive
Strategies

Cost Leadership Differentiation Focus/Niche

Source: Dessler & Varkkey

HRM and Strategy
 The relationship of HRM to competitive
strategy is based on the notion that:
 Each business strategy demands unique sets of
behaviors, performance and attitudes from
employees
 Specific HRM policies produce unique sets of
responses from employees
HRM Needs in Strategic Types
 Different strategies require different types of HR
strategies
 Eg. Build vs Buy for Defender vs. Prospector

 Expected Role behaviors are different and hence

the kind of people recruited and the HR system that
help develop and retain them
 Defender strategy firms seek efficiency and therefore carefully
define the skills they need in employees and train and develop
accordingly
 Prospector firms need creative risk takers, coupled with an
organizational environment that supports this process
The idea of alignment
 There needs to be two types of alignment
 The first is between the overall HR strategy
(e.g.build – buy, innovation - efficiency) and the
business strategy (Vertical alignment / External
fit)
 The second is between the overall HR System
and the individual components of the HR system
(Horizontal alignment – Internal fit)
The idea of alignment
 The relationship of HRM strategy to individual HR
components is based on the notion that
 Communication of consistent and reinforcing messages
result in desired behaviour
 Good horizontal alignment results in the achievement of a
coherent and consistent approach to managing people
Role of HR managers in strategy
formulation and implementation
 Human resource managers should:
 have input into the strategic plan
 have specific knowledge of the organization’s
strategic goals
 know what types of employee skills, behaviors,
and attitudes are needed to support the strategic
plan
 develop programs to ensure that employees have
those skills, behaviors, and attitudes.
How does HR provide competitive
advantage? – Resource based view*

 Looking inside (at resources and capabilities)

for competitive advantage
 Resource and capabilities can be sources of
sustained competitive advantage when they
are:
 Valuable
 Rare
 Imperfectly imitable, and
 Organized

* Wernerfelt, Barney
Resource Based View
 The question of value:
 Do a firm’s resources and capabilities add value
by enabling it to exploit opportunities and/or
neutralize threats?
 The question of rareness:
 How many competing firms already possess
these skills and capabilities?
Resource Based View
 The question of Duplication and/or
substitution:
 Do firms without a resource or capability face a
significant cost and time disadvantage in
obtaining it compared to firms that already posses
it? (ex: HLL, SW airlines)
 Do firms without a resource or capability face a
significant cost and time disadvantage in coming
out with alternatives to firms that already posses
it? (ex: Pagers/Beepers)
Resource Based View
 The question of organization:
 Is the firm organized to exploit the full competitive
potential of its resources and capabilities?
 Formal reporting structure
 Management control systems
 HR policies
In conclusion- 3 things that
distinguish successful firms*
1. A well articulated, widely shared set of
values that act as the foundation of
management practices  core capabilities
 competitive success

* Pfeffer and O’Reilly, 2000

In conclusion- 3 things that
distinguish successful firms*
2. High degree of alignment and consistency
among the HR practices that express its
core values
 It’s the pattern of cues that signify to the employee
on what is important and what is rewarded
 Inconsistency in the signals given lead to confusion
and hence undesired behaviours
In conclusion- 3 things that
distinguish successful firms*
3. The senior managers are leaders whose
primary role is to ensure that values are
maintained and constantly made real to all
of the people in the organization
 Show commitment through action to the values
 Set up systems and processes which could
capture and reinforce these values
 Set up ‘gate keepers’ of values