3995-3628 - Dessler - ch3 New

Human Resource
Management
ELEVENTH EDITION
1
GARY DESSLER
BIJU VARKKEY
Part 1 | Introduction
Chapter 3
Strategic Human Resource Management

and the HR Scorecard
© 2009 Dorling Kindersley (I) Pvt. Ltd.

All rights reserved.
After studying this chapter, you should be able to:
1. Outline the steps in the strategic management process.

2. Explain and give examples of each type of
companywide and competitive strategy.
3. Explain what a strategy-oriented human resource
management system is and why it is important.
4. Illustrate and explain each of the seven steps in the HR
Scorecard approach to creating human resource
management systems.
© 2009 Dorling Kindersley (I) Pvt. Ltd. All rights reserved. 3–2
How effective is your strategy
realisation?
• There are simple ways to judge whether your strategy realisation
process is working:
• Obviously look for business results and progress on the delivery of
targets and KPI's (Key Performance Indicators).
• You need also to look for signs that your people have really got the
corporate message and have taken it to heart.
• A well known story illustrates the point:
• A group of US Senators were visiting NASA at the time when
funding was under threat. One Senator asked a man cleaning the
floor "So what are you doing here?" The man answered, "I'm here
putting a man on the Moon!"
• How closely do your people identify and associate their own roles
with your organizational purpose?
• Do your people really know what your corporate aims are, and if so
do they see and agree with how they fit into the scheme?
• Sadly in many organizations the vast majority of staff do not
understand the corporate aims, let alone see themselves as an
integral part of the effort.
• Companies can reduce their marketing expenditures, for example,
if they use the same ads in all their markets. PepsiCo, for example,
uses the same televisions ads in all of its national markets, saving
an estimated $10 million a year. Besides marketing savings, global
strategies can lead to other kinds of benefits and advantages in
areas such as design, packaging, manufacturing, distribution,
customer service, and software development.
• Some people argue that companies must customize their products
or services to meet the needs of various international markets, and
hence must use a multi-domestic strategy at least in part. For
example, KFC planned a standardized approach to its foray into
the Japanese market, but the company soon realized it had to
change its strategy to meet the needs of Japanese consumers and
customize its operations in Japan. Consequently, KFC introduced
smaller pieces of foods to cater to a Japanese preference, and
located restaurants in crowded areas along with other restaurants,
moving away from independent sites. As a result of these changes,
the fast-food restaurant experienced stronger demand in Japan.
Grand Strategies
• Identification of various alternatives strategies is an important
• Aspects of strategic management as it provide the
alternatives which can be considered and selected for
implementation in order to arrive at certain result. At this stage, the
managers are able to complete their environmental analysis and
appraisal of their strengths and they are in a position to identify
what alternatives strategies are available for them in the light of
their organizational mission.
• In this there are four main strategies:

• 1) Stability Strategy
• 2)Growth/Expansion Strategy
• 3)Retrenchment Strategy
• 4) Combination Strategy
1) Stability Strategy:
• Basic approach in the stability strategy is ‘maintain
present
• course: steady as it goes.’
• In an effective stability strategy, companies will
concentrate their resource where the company
recently has or can rapidly develop a meaning full
competitive advantage in the narrowest possible
product market scope consistent with the firm’s
resource and market requirements.
• Many companies in different industries have been

forced to adopt stability strategy because of over
capacity in the industries concerned.
For Example:
• Steel Authority of India has adopted stability
strategy because of over capacity in steel
sector. Instead it has concentrated on
increasing operational efficiency of its various
plants rather than going for expansion. Others
industries are ‘heavy commercial vehicle’, ‘coal
industry’.
2) Growth/Expansion
• Growth strategy is much talked in the present Indian
environments, if we look at the corporate performance in the recent
years. We find out that various organizations have grown both in
terms of sales and profit as well as assets.
Someorganizationshave
grown so fast.
For Example:
• Nirma ltd., Reliance Industry Ltd., infact, in the life of any
organization, growth strategy is necessary at some point of time.
James has identified those five stages emergence, growth maturity
and decline.
• TISCO establish in 1907 is still the leader in steel sector. It

suggests that the strategies fooled by organizations will determine
the application of various stages.
• “A strategy is one that an enterprise pursue
when it increase its level of objectives upwards
in significant increment, much higher than an
exploration of its past achievement level. The
most frequent increase indicating a growth
strategy is to raise the market share and or
sales objectives upwards significantly.”
3) Retrenchment Strategy
• A Retrenchment grand strategy is followed when an
organization aims at a contraction of its activities through
substantial reduction or the elimination of the scope of one or more
its businesses, in terms of their respective customer groups,
customer functions or alternatives technologies either singly or
jointly on order to improve its overall performance.
• Retrenchment involves a total or partial withdrawal from

either a customer group or customer functions, or the use of an
alternatives technology in one or more of firms businesses, as can
be seen from the situation as given below:
• Types of Retrenchment Strategies:

• Turnaround Strategy
• Divestment Strategy
• Liquidation Strategy
• For Example:
• A pharmaceutical firm pulls out from retail selling to
concentrate on institutional selling in order to
reduce the size of its sales force and increase
marketing efficiency.
• A corporate hospital decides to focus only on

specialty treatment and realize higher revenues by
reducing its commitment
to general cases which are typically less profitable
to deal with.
• Strategy realisation will not happen without the people
being an enthusiastic part of the effort. All to easy to
say; another thing entirely to make happen.
• The 'Man on the Moon' statement is a real benchmark
of the process quality for turning any strategy into action
- whether for a team, a department or a corporation.
• Every single person must know what they are doing,
why they are doing it, and above all, must be fully
committed to doing what they are doing.
• If your methods enable every single person to know
what they are doing, and why, and to be emotionally
committed to it, then the process of turning strategy
into action is probably working.
• Ask yourself some of these questions and you will begin
to see how to make your own strategies happen.
The Strategic Management Process
• Strategic Management
 The process of identifying and executing the
organization’s mission by matching its capabilities
with the demands of its environment.
• Strategy
 A chosen course of action.
• Strategic Plan
 How an organization intends to balance its internal
strengths and weaknesses with its external
opportunities and threats to maintain a competitive
advantage over the long-term.
Business Vision and Mission
• Vision
 A general statement of an organization’s intended
direction that evokes emotional feelings in
organization members.
• Mission
 Spells out who the company is, what it does, and
where it’s headed.
FIGURE 3–1 The Strategic Management Process
FIGURE 3–2 A SWOT Chart
FIGURE 3–3 Strategies in a Nutshell
Source: Arit Gadiesh and James Gilbert, “Frontline

Action,” Harvard Business Review, May 2001, p. 74.
INTRODUCTION
Tata Motors, leader in commercial vehicles, is India's largest automobile

company with revenue of USD 14 billion in 2008-09. Tata Motors, the first
company from India's engineering sector to be listed in the New York Stock
Exchange and has operations in the UK, South Korea, Thailand and Spain.
Tata Motors started operations in 1945 and entered commercial vehicle sector
in 1954 after forming a joint venture with Daimler-Benz that lasted till 1969. In
more than six decades of its operations, it has grown both organically and
inorganically. In 2004, Tata Motors bought Daewoo’s truck manufacturing unit
in South Korea followed by the acquisition of the Hispano Carrocera in South
Africa. In 2008, it acquired prestigious brands Jaguar and Land Rover from
Ford Motor Company. This acquisition was important since before that Tata
Motors was considered as a formidable global player at lower market segment
only.
Strategic management Process by TATA
Nano : Introduction
• Tata Motors, leader in commercial vehicles, is India's largest
automobile company with revenue of USD 14 billion in 2008-
09. Tata Motors, the first company from India's engineering
sector to be listed in the New York Stock Exchange and has
operations in the UK, South Korea, Thailand and Spain.
• Tata Motors started operations in 1945 and entered
commercial vehicle sector in 1954 after forming a joint
venture with Daimler-Benz that lasted till 1969. In more than
six decades of its operations, it has grown both organically
and inorganically. In 2004, Tata Motors bought Daewoo’s
truck manufacturing unit in South Korea followed by the
acquisition of the Hispano Carrocera in South Africa. In
2008, it acquired prestigious brands Jaguar and Land Rover
from Ford Motor Company. This acquisition was important
since before that Tata Motors was considered as a
formidable global player at lower market segment only.
CORPORATE STRATEGY
• The current strategy of the Tata Motors can best be summarized
as ‘Disruptive Innovation’, wherein it has offered lower priced
products and surpassed the market expectations. Its two latest
offerings have further strengthened the Tata Motors position as a
leading player. While Ace has been a rage in the market, Tata
Nano has taken the world with awe.
• Much of the practices of Tata Motors, including its customer focus,
attributes to the learning and experience of over six decades. Tata
Motors that started with a huge success and market demand faced
its first product failure in the launch of 1516. With the foreign
players entering India, Tata motors that was primarily focusing on
High weight commercial vehicles, included LCV in its offering and
came up with Tata 407. Tata Motors in the meanwhile was also
vying to develop end to end in-house technical competence and
thus ventured into engine design by partnering with Cummins. Tata
motors continuously faced the problem of overloading by the users
and responded by introducing stronger machines. However, a
major change came after a heavy loss of Rs 550 cr in 1999 where
in it re-aligned its marketing team and became more sensitized to
customer needs.
• The revival strategy of Tata motors had three
phased business plan. Firstly, it focused on the
cost reduction initiatives for immediate
turnaround. Secondly, it focused on domestic
and international growth through new products
and improved sales and service. Finally, it
linked long term growth with increased business
in LCVs, new product segments and new
geographies. The strategy and learnings have
gone a long way with Tata Motors earning net
profit of more than Rs 1000 cr even in a lean
FY 2008-09.
SWOT Analysis
FIGURE 3–4 Relationships Among Strategies in Multiple-Business Firms
Types of Strategies
Corporate-Level
Strategies
Vertical Geographic
Diversification Consolidation
Integration Expansion
Strategy Strategy
Strategy Strategy
Divesification
• Conglomerate Diversification Adding new,
unrelated products or services Example:
Diversification of Wipro in Computers, Hair oils and
Soaps. Diversification of RIL from polyester,
Plastics, petrochemicals and Retail. Diversification
of Bharti from Telecommunication, Insurance and
Retail.
• Horizontal Diversification: Adding new, unrelated
products or services for present customers
Examples: Airtel with Asklaila.com, Visa. Nokia
Navigator service. NY Yankees baseball team
merged with New Jersey Nets basketball team.
Vertical Integration
• Reliance
• The Indian petrochemical giant Reliance Industries is a great example of
vertical integration in modern business. Reliance's backward integration
into polyester fibres from textiles and further into petrochemicals was
started by Dhirubhai Ambani. Reliance has entered the oil and natural gas
sector, along with retail sector. Reliance now has a complete vertical
product portfolio from oil and gas production, refining, petrochemicals,
synthetic garments and retail outlets.
• A company exhibits backward vertical integration when it controls
subsidiaries that produce some of the inputs used in the production of its
products. For example, an automobile company may own a tire company,
a glass company, and a metal company. Control of these three
subsidiaries is intended to create a stable supply of inputs and ensure a
consistent quality in their final product. It was the main business approach
of Ford and other car companies in the 1920s, who sought to minimize
costs by centralizing the production of cars and car parts.
• It is contrasted with horizontal integration, in which one part of the
production process is expanded across several different market segments.
A common successful horizontal integration example is how Intel (INTC)
has dominated the computer processor market, supplying such chips to
several different manufacturers, such as Dell (DELL) , Toshiba (TOSBF) ,
and the Hewlett-Packard Company (HPQ) .
• Forward Vertical Integration
• The company sets up subsidiaries that distribute or
market products to the end market or use the products
themselves. An example of this is a movie studio that
also owns a chain of theaters.
• Balanced Vertical Integration
• The company sets up subsidiaries that both supply
them with inputs and distribute their outputs.
• If you view McDonald's (MCD), for example, as
primarily a food manufacturer, backwards vertical
integration would mean that they would own the farms
where they raise the cows, chickens, potatoes and
wheat as well as the factories that processes everything
and turns it all into food. vertical integration would mean
that they own all of the mentioned components.
Types of Strategies (cont’d)
Business-Level/
Competitive
Strategies
Cost Leadership Differentiation Focus/Niche
FIGURE 3–5
The Southwest
Airlines’ Activity
System
Source: Michael E. Porter, “What Is Strategy?” Harvard Business Note: Companies like Southwest tailor all of their activities so
Review, November–December 1996. Reprinted with permission. that they fit and contribute to making their strategies a reality.
Achieving Strategic Fit
• The “Fit” Point of View (Porter)
 All of the firm’s activities must be tailored to or fit
the chosen strategy such that the firm’s functional
strategies support its corporate and competitive
strategies.
• Leveraging (Hamel and Prahalad)
 “Stretch” in leveraging resources—supplementing
what you have and doing more with what you have—
can be more important than just fitting the strategic
plan to current resources.
Strategic Human Resource Management
• Strategic Human Resource Management
 The linking of HRM with strategic goals and
objectives in order to improve business performance
and develop organizational cultures that foster
innovation and flexibility.
 Involves formulating and executing HR systems—HR
policies and activities—that produce the employee
competencies and behaviors that the company needs
to achieve its strategic aims.
FIGURE 3–6 Linking Company-Wide and HR Strategies
Source: © Gary Dessler, Ph.D., 2007.

Strategic Human Resource Challenges
Basic Strategic
Challenges
Corporate Expanded role of

Increased HR
productivity and employees in the
team involvement
performance organization’s
in design of
improvement performance
strategic plans
efforts efforts
Human Resource Management’s
Strategic Roles
Strategic
Planning
Roles
Strategy Strategy
Execution Formulation
Role Role
FIGURE 3–7 Percent of Successful Mergers in Which HR Manager Was Involved
Source: Jeffrey Schmidt, “The Correct Spelling of M & A Begins with HR,”
HR Magazine, June 2001, p. 105. Reproduced with permission of Soc.
for Human Resource Mgmt. via Copyright Clearance Center.
Creating the Strategic Human Resource
Management System
Components of a
Strategic HRM System
Human Resource Employee

Human Resource
Policies and Behaviors and
Professionals
Practices Competencies
FIGURE 3–8 Three Main Strategic Human Resource System Components
Characteristics of HPWS
• multi-skilled work teams
• empowered front-line
workers
• extensive training
• labor-management
cooperation
• commitment to quality
• customer satisfaction
Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People,
Strategy, and Performance (Boston: Harvard Business School Press, 2001), p. 12.
FIGURE 3–9
Basic Model of How to
Align HR Strategy and
Actions with Business
Strategy
Source: Adapted from Garrett Walker

and J. Randal MacDonald, “Designing
and Implementing an HR Scorecard,”
Human Resources Management 40,
no. 4 (2001), p. 370.
KEY TERMS
strategic plan
strategic management
vision
mission
SWOT analysis
strategy
strategic control
competitive advantage
leveraging
strategic human resource management
HR Scorecard
metrics
value chain analysis
FIGURE 3–A1 The Basic HR Scorecard Relationships
HR
Activities
Emergent
Employee
Behaviors
Strategically
Relevant
Organizational
Outcomes
Organizational
Performance
Achieve
Strategic
Goals
FIGURE 3–A2 The Ten Steps in the HR Scorecard Approach to Formulating HR
Policies, Activities, and Strategies

Creating an HR Scorecard
The 10-Step HR Scorecard Process
Identify required HR policies

1 Define the business strategy 6
and activities
2 Outline value chain activities 7 Create HR Scorecard
Choose HR Scorecard
3 Outline a strategy map 8
measures
Identify strategically required Summarize Scorecard
4 9
outcomes measures on digital dashboard
Identify required workforce
5 10 Monitor, predict, evaluate
competencies and behaviors
FIGURE 3–A3 Simple Value Chain for “The Hotel Paris”

FIGURE 3–A4
Strategy
Map for
Southwest
Airlines
Source: Adapted from “Creating a Strategy Map,”

Ravi Tangri, Team@TeamCHRYSALIS.com.
FIGURE 3–A5
HR Scorecard
Process for
Hotel Paris
International
Corporation*
*Note: An abbreviated
example showing selected
HR practices and outcomes
aimed at implementing the
competitive strategy, “To
use superior guest services
to differentiate the Hotel
Paris properties and thus
increase the length of stays
and the return rate of
guests, and thus boost
revenues and profitability
and help the firm expand
geographically.”

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Human Resource

Strategic Human Resource Management

© 2009 Dorling Kindersley (I) Pvt. Ltd.

1. Outline the steps in the strategic management process.

• In this there are four main strategies:

• Many companies in different industries have been

• TISCO establish in 1907 is still the leader in steel sector. It

• Retrenchment involves a total or partial withdrawal from

• Types of Retrenchment Strategies:

• A corporate hospital decides to focus only on

Source: Arit Gadiesh and James Gilbert, “Frontline

Tata Motors, leader in commercial vehicles, is India's largest automobile

Cost Leadership Differentiation Focus/Niche

Source: © Gary Dessler, Ph.D., 2007.

Corporate Expanded role of

Human Resource Employee

Source: Adapted from Garrett Walker

Source: © Gary Dessler, Ph.D., 2007.

The 10-Step HR Scorecard Process

Identify required HR policies

2 Outline value chain activities 7 Create HR Scorecard

Source: © Gary Dessler, Ph.D., 2007.

Source: Adapted from “Creating a Strategy Map,”

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