Presentation

strategic human resource management

Definition
Proactive management of the employees of a company or organization. Strategic human resource management includes
typical human resource components such as hiring, discipline, and payroll, and also involves working with employees in a
collaborative manner to boost retention, improve the quality of the work experience, and maximize the mutual benefit of
employment for both the employee and the employer.

Importance of Strategic Human Resource Management

The importance of strategic human resource management begins in the human resource department.
Many organizations see human capital development as a key component to success in employee
retention. In order to effectively manage those tedious, cumbersome HR tasks, organizations often
turn to human resource management providers, such as ECI® Empower, for the reasons of employee
information tracking and compliance/policy tracking and reporting. Human resource management
consists of performance review details and notifications, training and certifications, position control
budgeting, Intellisearch/query tools, automated new process wizards, automated letter generation with
letter history, customizable process wizards – business rules and formulas, custom menu builder and
reporting output to ASCII-PDF-Excel-screen and printer forms. It is evident why there is such an
importance of strategic human resource management.

Why Is It Important for HR Management to Be a Strategic Business Partner?

When executive leadership recognizes the importance of human capital there’s encouragement to vote for inclusion of
human resources in the C-level suite. The chief leadership team -- or highest level of management -- such as the chief
executive officer, chief information officer, chief human resources officer and chief financial officer, makes up so-called
the C-level suite. Including human resources means full participation of the company’s essential departments in
organization-wide decisions. Participation from departments throughout the organization ensures that leadership makes
business decisions based on the impact those decisions will have on the organization and its workforce.

Profitability

Profitability is one of the primary reasons why human resources management should be a strategic business
partner. As a strategic business partner, human resources management gains support for enhancing employee
skills and training employees to meet business demands. These are two of the most effective ways to improve
productivity and employee engagement, which in turn prepare the workforce for challenges associated with
production and business demands.

Funding

As a strategic business partner, human resources management can justify adequate funding for human resources
activities. Funding for training, employee development, competitive salaries and benefits packages strengthens
the company’s position and competitiveness in attracting and retaining valuable talent and expertise. Without
employees’ talent and expertise, the business risks losing production capabilities – the inability to achieve
maximum production levels directly affects revenue, profitability and company standing in relationship to its
competitors.

Perception

Human resources departments have traditionally been viewed by employees and leadership as merely operational
areas with limited input in employment functions beyond hiring and firing. Since the 1980s version of personnel
administration, human resources management has transformed into a department with greater influence on
employee satisfaction, engagement and retention. As a strategic business partner, human resources management
can continue to carve out its rightful position as an integral component of the business. Inclusion of HR
management in strategic business planning improves employees’ and leadership’s perception of human
resources.

Balance

Human resources management enables executive leadership to strike a balance within the organization.
Developing strategy based solely on the organization’s capabilities related to production and revenue fails to take
into consideration the company’s resources that make it possible to succeed. Human resources management,
therefore, brings a broader perspective to the boardroom table. Including human resources management as a
strategic business partner enables better decision making because it takes into account the actual workforce that
supports organizational success.

Value

The value HR management brings to strategic planning is paramount in attaining organization-wide goals.
Implementing strategic plans is nearly impossible without the input of human resources and employee
involvement. Recognizing the value of HR management is a critical step in developing business strategy, and it
takes human resources management’s forward-thinking principles and business acumen to put those plans into
action.
What Are HRM Strategies?
A human resources management strategy is the overall plan that leads the implementation of specific HRM functional
areas. HRM strategies guide personnel decisions that ensure the best fit for the organization. All functional areas of HRM
strategies need to match the overall business strategy. Some companies may divide these strategies into four major
areas: culture, people, organization and human resource systems.

Leadership of the Organization Strategy

Top corporate executives and other leaders of the organization affect the success or failure of the organizational
goals. HR plays a major role in the selection of the company executives by earning the respect of the decision-
making team through previous staffing successes and conducting effective searches. As a business partner, HR
professionals need to take leadership roles in making important decisions and recommending ideas and strategies
to other organizational leaders.

Talents Strategy

Human capital talent is one of the most important assets in a company. HRM is responsible for forecasting future
staffing needs and creating plans for recruiting, hiring and retaining top talent. HRM strategy includes the
identification of job competencies such as knowledge, skills and abilities to perform each function and develops
comprehensive job descriptions that describe these competencies and responsibilities. An additional HRM
strategy is continuous training and development of employees.

High Performance Culture Strategy

According to the American Management Association, a high-potential organization is one that has clearly
defined performance measures. Top leaders influence employees in the importance of workplace behaviors that
affect the success of the company. HRM strategies support leaders in the planning of activities to foster an
organizational culture where employees enjoy working and are appreciated. In a high-performance organization,
employees are recognized for high performance levels and creative ideas.

Strategic Planning

Some successful
organizations
attribute strategic planning to
the success with their customers
and employees. HRM
strategies play an important
role in defining and
implementing many
of these plans. One of the
strategic tools used in retaining capital talent is the employee satisfaction survey. Employees are asked their
opinions regarding various policies, amenities, benefits and career development. Conducting customer interviews
is another possible tool to determine satisfaction. HRM plays a significant role in each of these processes.

Steps in developing HRM strategy

Step 1: Get the 'big picture'

Understand your business strategy.

 Highlight the key driving forces of your business. What are they? e.g. technology, distribution, competition, the
markets.
 What are the implications of the driving forces for the people side of your business?
 What is the fundamental people contribution to bottom line business performance?

Step 2: Develop a Mission Statement or Statement of Intent

That relates to the people side of the business.

Do not be put off by negative reactions to the words or references to idealistic statements - it is the actual process
of thinking through the issues in a formal and explicit manner that is important.

 What do your people contribute?

Step 3: Conduct a SWOT analysis of the organization

Focus on the internal strengths and weaknesses of the people side of the business.

 Consider the current skill and capability issues.

Vigorously research the external business and market environment. High light the opportunities and threats
relating to the people side of the business.

 What impact will/ might they have on business performance?

 Consider skill shortages?
 The impact of new technology on staffing levels?

From this analysis you then need to review the capability of your personnel department. Complete a SWOT
analysis of the department - consider in detail the department's current areas of operation, the service levels and
competences of your personnel staff.

Step 4: Conduct a detailed human resources analysis

Concentrate on the organization's COPS (culture, organization, people, HR systems)

  Consider: Where you are now? Where do you want to be?
 What gaps exists between the reality of where you are now and where you want to be?

Exhaust your analysis of the four dimensions.

Step 5: Determine critical people issues

Go back to the business strategy and examine it against your SWOT and COPS Analysis

 Identify the critical people issues namely those people issues that you must address. Those which have a key
impact on the delivery of your business strategy.
 Prioritize the critical people issues. What will happen if you fail to address them?

Remember you are trying to identify where you should be focusing your efforts and resources.

Step 6: Develop consequences and solutions

For each critical issue highlight the options for managerial action generate, elaborate and create - don't go for the
obvious. This is an important step as frequently people jump for the known rather than challenge existing
assumptions about the way things have been done in the past. Think about the consequences of taking various
courses of action.

Consider the mix of HR systems needed to address the issues. Do you need to improve communications, training
or pay?

What are the implications for the business and the personnel function?

Once you have worked through the process it should then be possible to translate the action plan into broad
objectives. These will need to be broken down into the specialist HR Systems areas of:

 employee training and development

 management development
 organization development
 performance appraisal
 employee reward
 employee selection and recruitment
 manpower planning
 communication

Develop your action plan around the critical issues. Set targets and dates for the accomplishment of the key
objectives.
Step 7: Implementation and evaluation of the action plans

The ultimate purpose of developing a human resource strategy is to ensure that the objectives set are mutually
supportive so that the reward and payment systems are integrated with employee training and career
development plans.

There is very little value or benefit in training people only to then frustrate them through a failure to provide
ample career and development opportunities.

Aligning HR Strategy with Business Strategy

As a young HR Executive working for a French MNC that specialized in power generation, very offend the CM (Country
Manager) would be telling my superior that the HR Dept annual action plan need to be aligned towards the business
strategies. During that time (early part of 1990's) - I did not understand  what the CM was talking about (his expectation). 
You can say that I was still the era of 'Personnel Management' and my HRM knowledge during that time were limited to
HR Admin and payroll administration.

I would like to share this 'HR-Business Strategy Aligning' model with young HR professionals and potentials HR Managers
(and Business Leaders). It is a self-explaining model on some HR strategies can be considered assuming that the business
strategy is focusing on either (i) divestment, (ii) M&A or (iii) business expansion.

Exhibit 1: Aligning HR Strategy to Business Strategy

Meaning

Manoeuvre= koushol…

The Strategic Role of Human Resource Managers

Strengthening the employer-employee relationship is the strategic role of a human resources manager. However,
there's more than meets the eye to doing this. Human resources managers formulate workforce strategy and
determine the functional processes necessary to meet organizational goals. Their job requires expertise as an HR
generalist, which means they must be familiar with every human resources discipline.

Overview

During the 1980s, personnel departments were responsible for handing out applications, providing employees
with insurance enrollment forms and processing payroll. The role of the personnel department was mainly
administrative. Over the next two decades, the role of personnel administration became more involved with
overall business goals. Companies began to recruit human resources leaders who were capable of managing the
department from a more strategic position. Personnel administration, therefore, evolved into a business now
referred to as human resources management. Human resources managers are responsible for developing strategic
solutions to employment-related matters that affect the organization's ability to meet its productivity and
performance goals.

Workplace Safety

Creating a work environment free from unnecessary hazards is a strategic role of every human resources
manager. Strategic development for workplace safety entails risk management and mitigating potential losses
from on-the-job injuries and fatalities. Workers' compensation insurance is an area in which a strategic plan
helps lower company expense for insurance coverage. Reducing accidents through training employees on the
proper use of complex machinery and equipment is one of the functional tasks associated with creating a safe
work environment.

Compensation and Benefits

An employer's compensation and benefits structure partly determines the company's business reputation and
image. In addition, the decisions that human resources managers make regarding pay scales and employee
benefits can impact employee satisfaction, as well as the organization's ability to recruit talented workers. Job
evaluation, labor market conditions, workforce shortages and budget constraints are factors that HR managers
consider in a strategic plan for pay and benefits. In addition, a strategy includes weighing an employer's choices
between satisfying its workforce and pleasing the company's stakeholders. Pursuant to the health care reform law
passed in 2010, human resources managers for companies with more than 50 employees must decide between
offering group health coverage and paying fines, beginning in 2014.

Employee Training

Human resources managers' strategic role with respect to employee training and development prepares the
workforce for future positions within the company. Succession planning, promotion-from-within policies and
performance evaluation factor into the human resources manager's role. Training and development motivate
employees, and in some cases, improve employee retention.

Recruitment and Selection

Employee recruitment and selection is as much a part of employee relations as it is a separate discipline unto
itself. Therefore, a human resources manager's strategic role is to combine elements of employee relations into
the employer's recruitment and selection strategy. Integrating employee recognition programs into promotion-
from-within policies is an effective form of employee motivation that combines the employee relations and
recruitment and selection areas of human resources.

Employee Relations

Some human resources managers believe that strengthening the employer-employee relationship rests solely in
the employee relations areas of the HR department. This isn't true. Nevertheless, employee relations is such a
large part of every discipline -- including salaries, benefits, safety, training and employee development -- that
sustaining an employee relations program is an important element of human resources strategy. Implementing a
workplace investigation process and enforcing fair employment practices are two components of an employee
relations program. The strategic role of a human resources manager is to determine how to identify and resolve
workplace issues, as well as how best to attract a diverse pool of applicants through effective recruitment and
selection processes.

THE STRATEGIC ROLE OF HR

by Rene T. Domingo (email comments to rtd@aim.edu)

As people become the key competitive advantage in any industry especially banking, the human resource (HR)
development function will and should play a more strategic role. It should go beyond its mere administrative support
function to operations and front line departments. Whether or not company views HR strategically may decide whether
market share, sales, or profits would increase or not. An effective HR strategy becomes equally decisive as the company’s
marketing strategy.

Technology too is changing HR roles. As industries, specifically the banking industry, and the way they compete become
knowledge-based, HR performance indicators will shift from manpower and man-hours supplied to brainpower and brain
hours delivered. The key result areas in people management will also shift from production and quantity to productivity and
quality. Capability, measured in employee ideas generated and implemented, and productivity gained, will be more
important than capacity, measured in man-hours available, man-hours lost, absenteeism, etc.
What is strategic HR? How different is it from the conventional administrative HR? The current HR function is very much
configured like the company’s purchasing department. People, like parts and supplies, are requisitioned by user
departments based on depletion and growth rates of their operations. Both resources are screened for quality control and
cost or budget constraints. The only slight difference is that unlike purchased parts, people are trained or prepared before
they are sent to the requisitioning parties which may train them further before actual deployment or usage. HR is also
involved in the replacement, termination and retirement process of unusable people assets, much like the handling of
depreciated equipment. In short, most HR systems exist only for replenishment and maintenance of a resource called
people.

Strategic HR does not abandon these administrative responsibilities. Otherwise, no other department in the company will
carry out these “operations-sustaining” activities. But its main task is to participate in corporate strategy rather than support
administration. Strategic HR is more proactive rather than reactive in its relationships with the other functional areas. It is
more concerned about what its internal customers need in the future to compete globally. Strategic HR managers do not
wait for instructions, requisition or complaints. It does its homework, does research on the future, and offers proactive
solutions and strategic advice.

Strategic HR is preventive rather than corrective or punitive. It is developmental in orientation. The conventional HR
function is the dispenser or implementers of justice and protector of corporate assets. It views employees as resources not
be wasted rather than strategic resources to be developed. Strategic HR aims to create a working environment conducive
for employees to do things right the first time. It aims to prevent mistakes rather than punish them.

Strategic HR is output driven rather than input oriented. For instance, training results are measured not in terms of training
hours or number of trainees per year, but in terms of improvement in the trainee performance attributable to the training.
Performance improvement can be in terms of productivity, efficiency, quality of work (defects), customer satisfaction or
conversely, number of customer complaints received. Strategic HR personnel are concerned with these results as much as
the operating departments it serves. In spite of the fact that output results are more difficult to measure than input
deployed, strategic HR aims to find ways and means to directly and indirectly measure these more accurate metrics of its
success and effectiveness.

Strategic HR is mainly pre-occupied in molding the employees of the future today. For organizations to survive and excel in
the future, its needs to develop or acquire employees who are multi-skilled, cross-functional, empowered, team players. In
addition, they have to have high emotional intelligence (EQ) and capable of thinking “out of the box” about the future. They
should be capable not only of improving their work, but reengineering or reinventing it if necessary. Front liners who are
engaged in millions of “moments of truth” meeting customers, must have superior flexibility, resourcefulness, and excellent
memories especially if their task requires greeting customers by their first or last names. Strategic HR keeps these
employee attributes as its goals while conducting its basic processes of recruitment, training, job rotation, career pathing,
and performance appraisal.

Strategic HR aligns performance criteria systems with corporate goals and strategies rather than traditional functional
concerns. It includes in performance criteria of both rank and file employees and managers those that will enable them to
contribute to corporate goals. Most traditional HR performance appraisal systems basically gauge how well a subordinate
satisfied his boss or superior during the appraisal period. This degree of satisfaction may or may not be related to how well
the employee contributed to corporate goals. Most of the time, it does not. For this reason, conventional performance
appraisal has become a highly politicized, controversial, wasteful exercise that creates more disharmony than teamwork in
the organization. Strategic HR appraises people on the more relevant output performance like quality, productivity, internal
and external customer satisfaction. If negative criteria are used, these become defects or rework, wastes, and internal and
external customer complaints or returns. In banking, performance appraisal may include lost calls, closed accounts,
queuing time, and clerical errors, ATM downtime, improvement projects. Strategic HR aims to change employee behavior
and attitude by directly connecting his appraisal (and eventually his pay) to what actually matters to corporate performance
and customer satisfaction. It puts less weight on nebulous criteria like teamwork, attendance, boss satisfaction, and
neatness.

HR is no longer a backroom or support function. It is in the forefront of corporate strategy, much like sales and marketing. It
provides and determines competitiveness to an ever increasing degree. All other things being equal – financial, physical,
and product assets – people will make the difference between two competing companies. Strategic HR can make this
difference happen.

Questions:

HR Strategy: Context of HR System

1. Should a company monitor the HR environment and imitate “Best Practices” of HR from successful firms? What
caveats would you want to apply to applying Best HR Practices?

2. Give an example of a type of Organizational Culture that would reinforce strategy: What type of HR practices
would fit with this culture?

3. What type of HR practices would fit with jobs with tasks that are highly ambiguous, uncertain and creative? What
about predictable, routine and certain tasks?

4. Which Roles are Strategic? Foot soldier, guardian or star?

5. What are the advantages of focusing on foot soldiers with the company HR policies?

6. What are the liabilities of stars? When is it advantageous to cultivate and sustain stars?