1

Chapter

Strategic Human Resource

Management

After reading this chapter, you should be able to:

Describe the differences between strategy formulation and
strategy implementation.
List the components of the strategic management process.

Discuss the role of the HR function in strategy formulation.

Describe the linkages between HR and strategy

formulation.
Chapter

Strategic Human Resource

Management

Discuss the more popular typologies of generic strategies

and the various HR practices associated with each.
Describe the different HR issues and practices associated
with various directional strategies.
List the competencies the HR executive needs to become
a strategic partner in the company.
 Introduction
 The goal of strategic management in an organization is to
deploy and allocate resources in a way that gives it a
competitive advantage.
 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, and
 develop programs to ensure that employees have those skills,
behaviors, and attitudes.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 What is Strategic Management?
 Strategic Management is a process for
analyzing a company's competitive situation,
developing the company's strategic goals, and
devising a plan of action and allocation of
resources that will help a company achieve its
goals.
 Strategic human resource management is
the pattern of planned human resource
deployments and activities intended to enable
an organization to achieve its goals.

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 Components of the Strategic
Management Process
 Strategy Formulation: Strategic planning groups decide
on a strategic direction by defining the company's mission
and goals, its external opportunities and threats, and its
internal strengths and weaknesses.

 Strategy Implementation: The organization follows

through on the strategy that has been chosen. This includes
structuring the organization, allocating resources, ensuring
that the firm has skilled employees in place, and developing
reward systems that align employee behavior with the
strategic goals.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 Model of the Strategic Management
Process
Strategy Formulation Strategy Implementation
HR Practices
External Recruiting,
Analysis Training,
Opportunities Performance management,
Labor relations,
Threats Employee relations, Firm
Job analysis
Job design, Performance
Human Selection, Productivity,
Resource Development, Quality,
Strategic Needs Pay structure, Profitability
Mission Goals Skills Incentives,
Choice Benefits
Behavior
Culture
Human Human
Internal Resource
Capability Resource
Analysis Skills, Actions
Strengths Abilities, Behaviors,
Weaknesses Knowledge Results

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 The Role of HRM in Strategy
Formulation
 Administrative Linkage — Lowest level of integration; HRM
function's attention is focused on day-to-day activities. No input from
the HRM function to the company's strategic plan is given.
 One-Way Linkage — The strategic business planning function
develops the plan and then informs the HRM function of the plan. HRM
then helps in the implementation.
 Two-Way Linkage — Allows for consideration of human resource
issues during the strategy formulation process. The HRM function is
expected to provide input to potential strategic choices and then help
implement the chosen option.
 Integrative Linkage — Is based on continuing, rather than sequential,
interaction. The HR executive is an integral member of the strategic
planning team.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
 Strategy Formulation

External
analysis
Opportunities
Threats

Strategic
Mission Goals
Choice

Internal
analysis
Strengths
Weaknesses

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 Strategy Formulation
 Five components of the strategic management process:
A mission is a statement of the organization's reasons for being.
 Goals are what the organization hopes to achieve in the medium-to
long-term future
 External analysis consists of examining the organization's
operating environment to identify strategic opportunities and threats.
 Internal analysis attempts to identify the organization's strengths
and weaknesses.
 Strategic choice is the organization's strategy, which describes the
ways the organization will attempt to fulfill its mission and achieve
its long term goals.

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 Strategy Implementation

Organizational
structure

Types of Task design

Information

Product
market Performance
strategy Selection,
Reward training, and
systems development
of people

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 HRM Practices
 Job Analysis - the process of getting  Job design - making decisions about
detailed information about jobs. what tasks should be grouped into a
 Recruitment - the process through particular job.
which the organization seeks  Selection - identifying the
applicants. applicants with the appropriate
 Training - a planned effort to knowledge, skills, and ability.
facilitate learning of job-related  Development - the acquisition of
knowledge, skills, and behavior. knowledge, skills, and behavior that
improves employees' ability to meet
the challenges of future jobs.
 Performance management - helps ensure that employees’ activities and
• outcomes are congruent with the organization’s objectives.
 Pay structure, incentives, and benefits.
 Labor and employee relations.
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 Strategic Types
Porter's Generic Strategies —
Michael Porter has hypothesized
that competitive advantage comes
from creating value by:
 reducing costs (overall cost
leadership), or
 charging a premium price for a
differentiated product or service
(differentiation).

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

 HRM Needs in Strategic Types
Different strategies require different types of
employees.
Role behaviors are the behaviors required of an
individual in his or her role as a jobholder in a
social work environment.
 Cost strategy firms seek efficiency and therefore
carefully define the skills they need in employees and
use worker participation to seek cost-saving ideas.
 Differentiation firms need creative risk takers.

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 Directional Strategies

External Growth Concentration

Strategy Strategy

Downsizing Internal Growth

Strategy

Acquisitions Mergers

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 The Role of HR in Providing a
Competitive Advantage
Emergent Strategies - Those that evolve from the
grass roots of the organization.
 What actually is done versus what is planned.
 HR plays an important role in facilitating the
communication of emergent strategies between levels in
the hierarchy.
Enhancing Firm Competitiveness
 By developing a rich pool of talent, HR can assure the
company's ability to adapt to a dynamic environment.

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 Strategic Human Resource
Executives
Four basic competencies:
 Business Competencies - Understanding the company's
economic and financial capabilities.
 Professional/Technical Knowledge - In HR practices
such as selection techniques and compensation systems.
 Change Processes or Organizational Development
Techniques - The ability to diagnose the need for change
and develop and implement the appropriate intervention.
 Integration Competencies - A generalist perspective with
the skills of a specialist in the above three areas.
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 Human Resource Competencies

Professional and
Business Technical
Competence Knowledge

HR Professional

Integration Ability to
Competence Manage Change

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