HRM501

Mohan Thapa
Module 2:
Strategic HRM
Operational to Strategic Transformation of HR
Strategic HRM Key Words Definition
Steps in Strategic Management
Strategic Vs Traditional HR
Types of Strategic Planning
HR’s Strategic Roles
Linking Company-wide Strategy and HR
Strategy
Creating a Strategic Oriented HR System
HR Score Card Approach
Diversity Management & Affirmative Action
 Strategic HRM: Key Words Definition
► Strategy : The company’s long term plan for how it will balance its internal strengths and
weaknesses with its external opportunities and threats to maintain a competitive advantage

► Strategic Plan : A company’s plan for how it will match its internal strengths and weaknesses
with external opportunities and threats in order to maintain a competitive advantage.

► Strategic Management : The process of identifying and executing the organization’s mission by
matching its capabilities with the demands of its environment.

► Vision : A general statement of its intended direction that evokes emotional feelings in
organization members

► Mission : Spells out who the company is, what it does and where it’s headed.

► SWOT Analysis: The use of SWOT Chart to compile and organize the process of identifying
company strengths, weaknesses, opportunities and threats.
 Strategic HRM: Key Words Definition
►Strategic Control: The process of assessing progress towards strategic goals and taking
correction action if required

►Competitive Advantage: Any Factors that allows an organization to differentiate its

products or service from those of its competitors to increase market share.

►HR and Competitive Advantage: In order to have an effective competitive strategy, the
company must have one or more competitive advantages. Technology itself is rarely
enough to set a firm apart as most companies today have easy access to the same
technologies, so that the real differentiation is people and the management system.

►Strategic Human Resource Management: Formulating and executing HR systems-HR

Policies and activities-that produces the employee competencies and behaviors of the
company needs to achieve its strategic aims
Steps in Strategic Management Process
Strategic Vs Traditional HR
Traditional
Parameters Strategic HR
HR
Responsibility for
HR • Staff Specialists • Line Managers

Focus • Employee Relations • Partnership with Internal

and External customers
Role of HR • Transactional • Transformational

Initiatives • Reactive • Proactive

Time Horizon • Short Term • Short , medium , long

Control • Bureaucratic-roles , policies, • Organic- Flexible

procedures.
Job Design • Division of labor • Flexible, Cross training

Key Investments • Capital, products • People, knowledge

Accountability • Cost center • Investment center

Strategic Vs Traditional HR
Possible Roles assumed by the HR Function by Ulrich SP- partner with Senior
and line managers in
Strategic Focus Strategy execution.

AE- expert in the way

Strategic Change
work is organized and
Partner Agent
executed.
People
Systems
Administrative Employee EC- working to increase
Expert Champion employee contribution and
commitment.

Operational Focus CA-agent of continuous

transformation that shapes
processes and culture to
improve an organization’s
capacity for change
Types of Strategic Planning
► Corporate Level Strategy: Identifies the portfolio of business that,
in total comprise the company and ways in which these businesses
are related to each other.
► Business-level/competitive strategy – Identifies how to build and
strengthen the business’s long term competitive position in the
marketplace. Companies try to achieve competitive advantages
for the business they are in, which allow them to differentiate its
product or services from those of its competitors to increase
market share. Examples of competitive strategies include cost
leadership and differentiation.
► Functional Strategy: Functional Strategy identify the basic courses
of action that each department will pursues in order to help the
business attain its competitive goals. The Firm’s functional
strategies should make sense in terms of its business/competitive
strategy.
Corporate Level Strategies
Three Generic Corporate Strategies

Diversification Adding New Product

Corporate Strategy Lines

Expanding firm by
Vertical Integration producing its own raw
Strategy materials , or selling its
products directly

Consolidation Reducing company’s size

Geographic Taking the Business

Expansion Abroad
Business/Competitive Level Strategies

Increase efficiency,
cut costs, pass savings CL-Specialist job, cross
Cost Leadership
to customers. price training, high attrition,
elasticity of demand measure for perf short term.

Differentiation Consumers perceive DIFF-Creativity &

differences. Premium innovation, measure for perf
pricing. Nike long term. External hiring,

Focus Strategy Satisfy one particular FS-Training, hire employees

group. who are part of target mkt.
HR’s Strategic Role
► Human Resources is increasingly assuming more strategic planning
responsibilities and involvement in the process. Among their
contribution to strategic planning are identification of human
issues that are vital to the business strategic, helping to establish
and execute strategy, and forecast potential obstacles to success.
► In order to play this role, HR managers need an in-depth
understanding of the value creating proposition of the firm.

HR’s Strategy Execution Role:

Strategy execution is traditionally the heart of the HR manager’s
strategic planning job. The company’s HR strategies should flow
directly from its company-wide and competitive strategies.
 HR’s Strategic Role
HR’s Strategy Formulation Role:
►HR increasingly plays an expanded strategic planning role, to include working
with top management to formulate the company’s strategic plans.
Formulating a company’s strategic plan requires identifying, analyzing, and
balancing the company’s external opportunities and threats on the one hand
and its internal strengths and weaknesses on the other.
►HR Management is in a unique position to supply competitive intelligence
that may be useful in the strategic planning process, such as competitors’
incentive plans, pending legislation, and the company’s internal human
strengths and weaknesses.
►By working closely with top management, HR is able to build a persuasive
case through a strategy oriented HR system to shows how the firm’s HR
activities contribute to creating value for the company.
Linking Company-Wide and HR Strategies
Company’s competitive environment
Economic, political, demographic,
competitive and technological trends
Company’s strategic situation
Company’s internal strengths and
weakness
Organizational performance
Company’s strategic plan
For Ex:
•Should we expand geographically?
•Cut costs?
•Diversify?
Company’s HR Strategies
What are the basic course of action
HR will pursues to ensure that the
recruiting, selecting, training,
appraising and compensation
systems support the company’s
strategic plan?
 How are company
Strategy and HR
What does it
Company Strategy
mean to the HR Strategy Strategy related?
employees?

-Strategic
Priorities -Key Functions

-Strategic Competencies -Recruiting

Challenges
Motivation -Development
-Business
Objectives Commitment -Communication

-Company Availability -Layoffs

Vision
 How are company
Company What does it Strategy and HR
Strategy mean to the HR Strategy Strategy related?
employees?

Leadership-Comp
-Development
etencies
Programs
General
Motivated
Growth--increasing -Train Line managers
Employees ready
the size of the for change
to accept
organization to management
changes.
realize economies techniques
of scale,
Commitment to
enlarge the -Train Employees
higher goals
organization's
marketplace -Communication
Availability of
required
-Manpower Planning
workforce
Creating a Strategy Oriented HR
System
► A value-creating strategy-oriented HR process consists of
three basic components which comprise what some
experts refer to as a company’s basic HR architecture:
• HR professionals who have the strategic skills required to build a
strategy oriented HR system;
• HR policies and activities that comprise the HR system itself; and
• Employee behaviors and competencies that the company’s strategy
requires that emerge from the actions and policies of the firm’s
strategy-supporting HR system.
Creating a Strategy Oriented HR
System
► The High Performance Work System: Managers and HR experts advocate that the HR
system itself be a high-performance work system, maximizing the overall quality of
human capital throughout the organization.
• Evidence suggests that high performance HR practices, combined with new
technology, produce better productivity, quality, sales, and financial
performance.
• HPWS practices include high-involvement organizational practices, high-commitment work
practices, and flexible work assignments, as well as practices that foster skilled workforces
and expanded opportunities to use those skills.

► Translating Strategy into HR Policy and Practice: The basic model of how to align
HR strategy and actions with business strategy. HR management formulates HR
strategies, policies, and practices aimed at achieving the desired workforce skills,
attributes, and behaviors. Metrics are identified which can be used to measure the
extent to which new HR initiatives are supporting management’s strategic goals.
Basic Model of How to Align HR Strategy and
Actions with Business Strategy
The HR Scorecard Approach

► HR creates value by engaging in activities that produce the employee behaviors the
company needs to achieve strategic goals.
► Managers use an HR Scorecard to measure the HR function’s effectives and efficiency
in producing these employee behaviors and thus in achieving the company’s strategic
goals. The HR Scorecard – shows the causal link between the HR activities, and the
emergent employee behaviors, and the resulting firm-wide strategic outcomes and
performance.
► Creating an HR Scorecard - Three types of information are needed to create an HR
Scorecard.
1) Company strategy information
2) Causal links between HR activities, employee behaviors, organizational
outcomes, and the organization’s performance
3) Metrics that can be used to measure HR activities, emergent employee
behaviors, strategically relevant organizational outcomes, and organizational
performance.
Using the HR Scorecard Approach

► There are seven steps involved in using the HR Scorecard to create a strategy-oriented HR system
Strategy Map:-Example
Diversity Management
► Diversity: Diversity generally refers to the variety or multiplicity of demographic
features that characterize a company’s workforce, particularly in terms of race,
sex, culture, national origin, handicap, age, and religion.
► Managing Diversity: Maximizing diversity’s potential benefits (greater culture
awareness, and broader language skills) while minimizing its potential barriers such
as prejudices and bias.

► Components in managing Diversity:

 Diversity Management
Questions to Ask?
A) Are there women and minorities reporting directly to senior managers?
B) Do women and minorities have a fair share of the job assignments that are the
traditional stepping-stones to successful careers in the company?
C) Do women and minorities have equal access to international assignments?
D) Is the employer taking steps (including development-oriented performance appraisals
and providing the developmental opportunities) that ensure female and minority
candidates will be in the company’s career development pipeline?
E) Are turnover rates for female and minority managers the same or lower than those for
white male managers?
Equal Employment Opportunity vs
Affirmative Action
► Equal Employment Opportunity: It aims to ensure that anyone, regardless of
race, color, disability, sex, religion, national origin, or age has an equal
opportunity based on his or her qualification.

► Affirmative Action: It goes beyond this by having the employer take actions
(in recruitment, hiring, promotions, and compensation) to eliminate the
present effects of past discrimination.
Steps-Affirmative Action Program
Group Formation and Exercises