Strategic HRM:

Alignment Business and HR Excellence

www.humanikaconsulting.com
www.hipotest.com
Seta A. Wicaksana
0811 19 53 43
wicaksana@humanikaconsulting.com
What is strategy?

• Is it a plan?
• Does it refer to how we will obtain the ends we
seek? Is it a position taken?
• Just as military forces might take the high ground
prior to engaging the enemy?
• might a business take the position of low-cost
provider?
• does strategy refer to perspective, to the view one
takes of matters, and to the purposes, directions,
decisions and actions stemming from this view?
• Does strategy refer to a pattern in our decisions
and actions?
• Does repeatedly copying a competitor’s new
product offerings signal a "me too" strategy?
Definition
• Strategy is a term that comes from the
Greek strategia, meaning "generalship." In
the military, strategy often refers to
maneuvering troops into position before the
enemy is actually engaged
• Strategy is deciding where to go and the
means to get there.
• Strategy is a declaration of intent.
 Levels of Strategy-Making in
a Diversified Company

Corporate-Level Corporate
Managers Strategy

Two-Way Influence
Business-Level
Managers Business Strategies

Two-Way Influence

Functional
Managers Functional Strategies

Two-Way Influence
Operational
managers Operating Strategies
 What is strategic management?
• A continuous, iterative process aimed at keeping an organization as a whole
appropriately matched to its environment (Samuel C. Certo and J. Paul Peter,
Strategic Management)
• Keeping the business in tune with management and marketing forces both outside
and inside the firm
 • Competitive strategy leads to competitive advantage
• Generates supernormal ROI
Competitive • Offers services of value
strategy • Uses cost effective technology
• Avoids erosion of competitive advantage by
exploiting and developing a technological base
Ex 1-6:
Strategic Company mission
Management and social
Process responsibility

Possible?
External
Internal analysis
environment
Desired?

Strategic analysis and choice

Long-term
Generic and grand strategies
objectives

Short-term objectives; Policies that

Functional tactics
reward systems empower action

Restructuring, reengineering
and refocusing the organization
Legend Strategic control and
Major impact continuous improvement
Minor impact
Strategic analysis HRM

“To be competitive, organizations in many industries

must have highly skilled. Knowledgeable workers.
They must also have a relatively stable labour force
since employee turnover works directly against
obtaining the kind of coordination and
organizational learning that leads to fast response
and high-quality products and services”
- Edward Lawler
WHAT IS
SHRM?

• Strategic human
resource management
has been defined as
‘the linking of human
resources with strategic
goals and objectives in
order to improve
business performance
and develop innovative
organizational culture
that foster innovation
and flexibility.
Some Organisational Strategies

Be number one or number

two in every industry in
which we compete, or get
out

Foster innovation

Low prices, every day

 Aim of SHRM

• Long-term Objectives
✓Profitability
✓Return on investment
✓Competitive position
✓Technological leadership
✓Productivity
✓Employee relations
✓Public responsibility
✓Employee development
 • Detailed work planning
• Emphasis on technical qualifications and skills
• Emphasis on job-specific training
Aim –Short term • Emphasis on job-based pay
• Use of performance appraisal as a control device
• Team-based training
 'a human resource system that is tailored to the demands of
the business strategy'
-Miles and Snow 1984
'the pattern of planned human resource activities intended to
HR strategy? enable an organization to achieve its goals'
- Wright and McMahan 1992
“the pattern planned human resource deployments and activities
intended to enable an organisation to achieve its goals”
Types of HR Strategy: General Strategies

High-performance working
team
• Supplying competitive
intelligence regarding the
external environment
• Supplying information
regarding the company’s
internal human strengths
and weaknesses.
• Showing how the firm’s
HR activities can and do
contribute to creating
value for the company
Types of HR
Strategy: Specific
Strategies
Relating to the different aspects of
human resource management such
as
• Learning And Development And
Reward
• Human Capital Management,
• Corporate Social Responsibility,
• Organization Development,
• Engagement,
• Knowledge Management,
• Employee Resourcing,
• Talent Management,
• Employee Relations, And
• Employee Well-being
Difference Between Strategic HRM & HR strategies:

STRATEGIC HRM HR Strategies [ HR StrategiesHRS ]

General Approach to Strategic Mgnt of HR Outcome [manifestation] of general HRM

approach

Aligned with organizational intention about Focus on specific organizational intentions

future direction about what needs to be done.

Focus on long term people issue Focuses on short term performance measures
that is result/outcome.

SHRM decisions are built into strategic business HRSs decisions are derived from SHRM.
plan

Deals with macro-concerns such as quality, HRSs are concerned with ensuring availability of
commitment, performance, culture & mgnt an efficient workforce, training, good employee
development relations

Defines areas in which specific HR strategies HRSs facilitate the successful achievement of
need to be developed. corporate objectives + goals
Approaches to SHRM

• The resource-based approach-A

resource-based approach will address
methods of increasing the firm’s
strategic capability by the development
of managers and other staff who can
think and plan strategically and who
understand the key strategic issues.
• 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.
 Aims to make an impact on the performance of the
High- firm through its people in such areas as productivity,
performance quality, levels of customer service, growth, profits
and, ultimately, the delivery of increased
Management shareholder value.
High- Practices include rigorous recruitment and selection
procedures, extensive and relevant training and
performance management development activities, incentive pay
Management systems and performance management processes.
High-commitment
Management
High-involvement
Management
The aim is to create a
climate in which a
continuing dialogue
between managers
and the members of
their teams takes
place in order to
define expectations
and share information
on the organization’s
mission, values and
objectives.
Types of Strategic Planning
Types of Strategic Planning:
Corporate-level strategy
Identifies the portfolio
of businesses that, in
total, comprise the
company and the ways
in which these
businesses relate to
each other.
• Diversification
strategy
• Vertical integration
strategy
• Consolidation
strategy
• Geographic
expansion strategy
Types of Strategic Identifies how to build and strengthen the business’s long-
Planning: Business- term competitive position in the marketplace.

level/competitive • Cost leadership

strategy • Differentiation
• Focus
 Identify the basic courses of
Types of Strategic action that each department
Planning: Functional will pursue in order to help
strategies the business attain its
competitive goals.
 • Strategic analysis
• Environmental analysis
• human resource environment
• human resource legal environment
• Establish organizational direction
Methodology • Strategy formulation
• Human resource planning
for strategy • Strategy implementation
development • Work force utilisation and employment
practices
• Reward and development system
• Strategic control
• Performance impact of human resource
practices
• Human resource evaluation
Strategy
formulation
• What are the purpose(s)
and objective(s) of the
organization?
• Where is the organization
presently going?
• What critical
environmental factors
does the organization
currently face?
• What can be done to
achieve organizational
objectives more
effectively in the future?
Strategy Formulation • Development of
organizational philosophy
Process and mission statement
• Environmental scanning
• Analysis of SWOT
• Formulation of strategic
objectives
• Generation of alterative
strategy
• Evaluation and selection
of strategies
• Informal /
incremental
strategic planning
• Managed/logical
incremental
planning

A strategy is the pattern or plan that

integrates an organisation’s major
goals, policies, and action sequences
into a cohesive whole
SHRM concern • HR management is fully
integrated with the strategy and
strategic needs of the firm
• HR policies cohere across policy
areas and areas of hierarchy
• HR practices are adjusted and
used by line manages and
employees as part of their
everyday work
• Strategic HRM is about
improving business
performance through people.
• The major concerns of strategic
HRM are to meet the business
needs of the organization and
the individual and collective
needs of the people employed
in it.
• strategic HRM can make a
contribution to improving
business performance.
 • Needs investment –ROI
• Cost of investment
• Reduction in total Labour cost
• Efficiency in operation
• Optimal use of human resources
• A source of competitive advantage
• Technical skills (pace of technological change)
• Knowledge and capabilities
• Management of critical and Difficult HR areas
• Management of change (Resistance to change)
Strategic HRM • Lack of trust
• Antagonistic labour
(IMPORTANCE) • Motivational problems
• Management relations
• Economic turbulence
• Within the country (turbulence)
• Globalisation
• Dramatically changing demographics
• Differences in workforce values
Strategic human resource management and ∟ HRP are considered
important to manage uncertainties; HR is integrated with strategy;
Integrating and aligning HR function with strategy
 1. Identifying and analysing external opportunities and threats that may be crucial to the
company's success.
2. Provides a clear business strategy and vision for the future.
Benefits of 3. To supply competitive intelligence that may be useful in the strategic planning process.

SHRM 4.
5.
To recruit, retain and motivate people.
To develop and retain of highly competent people.
6. To ensure that people development issues are addressed systematically.
7. To supply information regarding the company's internal strengths and weaknesses.
8. To meet the expectations of the customers effectively.
9. To ensure high productivity.
10. To ensure business surplus thorough competency
 Theoretical frame work of SHRM

Firm strategy Institutional /

Political forces

Resource dependence
Resource institutional
based view
of the firm HRM Practices
Behavioral
Cybernetics
approach
Agency/transaction costs
Firm level outcomes
HR Capital pool HR behaviors (performance,
satisfaction,
(Skills, abilities) absenteeism etc)
 • Strategy driven
• Resource based view
• Competitive advantage based on unique allocation of
resources {selection /Compensation package} (TCS)
• Behavioral view
• Control and influence the behaviors of individuals
(Infosys)
• Cybernetics systems
Theoretical • Adoption or abandonment of practices based on
feedback on contributions to strategy (Bosch – MICO)

frame work • Agency/transactions cost view

• Use of control systems, performance evaluation and
reward systems etc
of SHRM • (In the absence of performance evaluation strategy
may not be pursued)

• Non-Strategy driven
• Resource dependence and power theories
• Power and politics= legislation, unionization, control
of resources, expectations of social responsibility.
• Institutional theory
• In appropriate performance evaluation dimensions
(inertia / rational decision making.appraisal
 • Multinational, global and transnational strategies

International • Strategic alliances

• Sustainable global competitive advantage
strategy • Globally competent managers
• Location of production facilities
 HUMAN RESOURCE ACTIVITY TYPOLOGY

High ⚫Performance enhancement

⚫Consulting
⚫Staffingplanning
⚫Employee relations
⚫Benefits of planning ⚫Labour negotiations
⚫Retirement planning ⚫Executive compensation
⚫Employee development
⚫Compliance
⚫Management development
⚫Recruitment interviewing
Strategic value of
activity < IMPORTANT TO EXECUTIVES >
⚫Payroll
⚫Benefits administration
⚫Recruitmentinformation processing
⚫Retirement administration
⚫Employee records ⚫Employee assistance programs
⚫Relocation administration
⚫Recruitment information processing

Low
< IMPORTANT TO EMPLOYEES >

Back Transactional Type of HR activity Relationship

 Generates more solutions to complex
organizational problems

Benefits of Ensures consideration of human resources in

organizational goal setting process
integrating Ensures consideration of human resources in
HRP with assessment of organizational abilities to
accomplish goals and implement strategies

Strategic Reciprocal integration prevents strategy

formulation based on personal
planning rigidities/preferences

Facilitates concurrent consideration of strategic

plans and managerial succession.
 Management awareness

Management of the function

Strategic
components
Portfolio of programs
of HRM
relevant to
internal fit Personnel skills

Information technology

Awareness of the environment

 Change Information
management management
skills skills

Requirements
for SHR- Integration
Planning skills
skills
Managers
Management
skills
 Effective HR Strategy Formulation and
Implementation

Organizational Consistency Environment

Strategies
Fit Fit

Consistency
Consistency

Improved
HR Strategies Firm
Performance

Fit Fit
Organizational Organizational
Characteristics Consistency Capabilities
 Efficient Dealing
utilization with
Strategy of human employee
Implementation resources shortages
Work Force
Utilization And
Dealing
Employment Selection
with
Practices of
employee
employees
surpluses
Strategy implementation
work force utilization and employment practices
• Efficient utilization of human • Cross training and flexibility in assigning
resources work
• Using work teams
• Dealing with employee shortages
• Requirements for effective teams
• Selection of employees • Forming
• Dealing with employee surpluses • Storming
• Norming
• performing
• Operating on a non-union basis
Strategy implementation
work force utilization and employment practices

• Efficient utilization of human • Strategic recruiting

resources • Special recruiting for minorities
• Dealing with employee and women workers
shortages • Flexible retirement as a source
• Selection of employees of labour
• Dealing with employee • Managing vendors of
surpluses outsourced functions
 Career path for technical professionals

Special
implementation Dual career couples

challenges

Strategy implementation system – Reward

and development systems
Strategically oriented
Strategically oriented Employee
performance
compensation systems development
management system
 • Strategically oriented • Performance
performance measurement
Strategy management system approaches
• MBO
implementation • Strategically oriented
• Graphic scale rating
compensation systems
system– Reward • Employee development
• Narratives
and • BARS
• Behavioral
development observation scales
• 360 –degree
systems feedback
• Performance evaluation
of executives
• Effectiveness of
performance
measurement.

YOU GET WHAT YOU MEASURE, YOU MEASURE

WHAT YOU VALUE, YOU CAN NOT CONTROL
WHAT YOU CANNOT MEASURE.
 • Strategically oriented • Traditional
Strategy performance compensation systems
implementati management system • Job analysis > job
• Strategically oriented evaluation >
on system– compensation systems salary/wage
Reward and • Employee development
hierarchy
• Point system
development • Factor
systems comparison
system
• Hybrid system
• Internal equity
• > Wage surveys to
establish external
equity.
Strategy implementation system–Reward
and development systems
• Strategically oriented • Skill based pay
performance management • Broad banding
system
• Team based pay
• Strategically oriented
compensation systems • Variable compensation
• Employee development • Executive compensation
Strategy implementation system–Reward and
development systems
• Strategically oriented • Training programs
performance management • Training methods
system • Apprenticeships
• Strategically oriented • Management development
compensation systems
• Management development for
• Employee development international assignments
• Product life cycle and managerial
fit
• PLC, Evolutionary stage >
Steady state
• Development Vs selection
Barriers to the
implementation
of HR strategies

• Failure to understand the

strategic needs of the
business,

• Lack of assessment of
the environmental and
cultural factors that
affect the content of the
strategies and the
development

• Taking of ill-conceived
and irrelevant actions
 • Satisfies business needs;
• Founded on detailed analysis and study;
• can be turned into actionable programs;
Criteria For • is coherent and integrated;
• Takes account of the needs of line managers and employees generally
An Effective as well as those of the organization and its other stakeholders
HR Strategy • It is coherent and integrated, being composed of components that fit
• with and support each other.
• It takes account of the needs of line managers and employees
generally as well as those of the organization and its other
stakeholders.
Learning and Giving
for Better Indonesia