Download HRM604 Topic 2 Part 2

HRM604: Strategic Human Resource
Management
Topic 2: Goal Setting – A Strategic Path
to Success
7/4/2017
1
Learning Objectives

Analyze Human Resource Department functions and
their linkages to business goals.

Evaluate the approach to the development of Human
Resource strategies

Discuss the difference between SHRM and HR
strategies

Analyze the approach to achieving strategic fit
7/4/2017
2
Introduction
 Success does not happen by accident
 It is the result of the thoughtful execution of a well designed
plan/strategy
 Example: Strategic/Business plan
 A corporate strategy/business plan helps an organization begin
with end in sight, and
 To develop long term plans, and identify immediate actions


Imagine planning your family vacation;
Like corporate strategy/business plans, both requires good
planning
7/4/2017
3
Introduction
 First, is agreeing on where you want to go? (Where do I
want to be?)
 The same is true for organizational and individual planning
 After determining the desired destination, use a logical process;
and
 Move backwards towards the present state and define a clear
path to success
 You will find critical decision points which call for you to make
choices; and
 Take actions where deemed necessary/appropriate
7/4/2017
4
Introduction

You move from deciding on our vacation destination all the
way back; and
 To determine which way to turn after leaving the driveway
 With an organization’s path defined, each member of the team
can now use the same process; and
 To establish individual goals in support of the organization’s
overall mission, vision, goals & objectives
 Some key points to effective planning and goal setting are:

Begin with End in Mind
Determine destination before you begin the journey
7/4/2017
5
Introduction
You wouldn’t leave for vacation without first knowing your
destination; and
 Once you visualize the future, work
backward towards the
present and determine what to do next


•
•
Develop a Road Map for Success
After determining both your destination and your starting
point, you should now break the journey into manageable
parts; and
Develop a method to guide you along the way
7/4/2017
6
Introduction
Celebrate Success
 A critical but often overlooked part of
any
planning process is to recognize success
 Celebrating success encourage people
to seek it
out. Make sure to plan a celebration once mission is
accomplished
7/4/2017
7
Key Concepts of Strategy
 Strategy may be defined as a statement of what the
organization wants to become, where it wants to go and,
broadly, how it means to get there
 Strategy determines the direction in which the enterprise is
going in relation to its environment in order to achieve
sustainable competitive advantage.
 Strategies define longer-term goals but they are more
concerned with how those goals should be achieved.
Strategy is the means to create value. A good strategy is one
that works, one that guides purposeful action to deliver the
required result.
7/4/2017
8
Key Concepts of Strategy
 The concept of strategy is based on three subsidiary concepts:
competitive advantage, distinctive capabilities and strategic fit
Competitive advantage
 Formulated by Michael Porter (1985)
 Competitive advantage arises out of a firm creating value
for its customers.
 To achieve it, firms select markets in which they can excel
and present a moving target to their competitors by
continually improving their position.
7/4/2017
9
Key Concepts of Strategy Cont.
Competitive advantage
 He developed three generic strategies that organizations
can use to gain CA:
 innovation – being the unique producer;
 quality – delivering high-quality goods and services to
customers;
 cost leadership – the planned result of policies aimed
at ‘managing away expense’.
7/4/2017
10
Key Concepts of Strategy Cont.
Distinctive capabilities
 ‘The
opportunities for companies to sustain…competitive
advantage are determined by their capabilities’ (Kay, 1999)
 A distinctive capability or competence can be described as
an important feature that ‘confers superiority on the
organization’
 There is a difference between distinctive capabilities and
reproducible capabilities
 Distinctive capabilities are those characteristics that cannot
be replicated by competitors, or can only be imitated with
great difficulty.
7/4/2017
11
Key Concepts of Strategy Cont.
Distinctive capabilities
 Reproducible capabilities are those that can be bought or
created by any company with reasonable management skills,
diligence and financial resources. Most technical capabilities
are reproducible.
 Distinctive capabilities or core competences describe what
the organization is specially or uniquely capable of doing.
 They are what the company does particularly well in
comparison with its competitors.
7/4/2017
12
Key Concepts of Strategy Cont.
Strategic fit
 The concept of strategic fit states that to maximize
competitive advantage a firm must match its capabilities
and resources to the opportunities available in the external
environment
 As Hofer and Schendel (1986) conclude: ‘A critical aspect
of top management’s work today involves matching
organizational competences (internal resources and skills)
with the opportunities and risks created by environmental
change in ways that will be both effective and efficient over
the time such resources will be deployed.’
7/4/2017
13
THE FUNDAMENTALS OF
STRATEGY
 Fundamentally, strategy is about defining intentions (strategic
intent) and achieving strategic fit by allocating or matching
resources to opportunities (resource-based strategy).
 The effective development and implementation of strategy
depends on the strategic capability of the organization, which
will include the ability not only to formulate strategic goals but
also to develop and implement strategic plans through the
processes of strategic management and strategic planning.
7/4/2017
14
THE FUNDAMENTALS OF
STRATEGY
Strategic intent
 In its simplest form, strategy could be described as an expression
of the intentions of the organization – what it means to do and how
the business means to ‘get from here to there
 Strategic intent could be a very broad statement of vision or
mission and/or it could more specifically spell out the goals and
objectives to be attained over the longer term.
 The strategic intent sequence has been defined by Miller and
Dess (1996) as:
1. a broad vision of what the organization should be;
2. the organization’s mission;
3. specific goals, which are operationalized as:
4. strategic objectives.
7/4/2017
15
THE FUNDAMENTALS OF
STRATEGY
Resource-based strategy
 The resource-based view of strategy is that the strategic
capability of a firm depends on its resource capability.
Resource-based strategy theorists argue that sustained
competitive advantage stems from the acquisition and
effective use of bundles of distinctive resources that
competitors cannot imitate.
 Competitive success does not come simply from making
choices in the present; it stems from building up distinctive
capabilities over significant periods of time.’
7/4/2017
16
THE FUNDAMENTALS OF
STRATEGY
Strategic capability
 Strategic capability is a concept that refers to the ability of an
organization to develop and implement strategies that will
achieve sustained competitive advantage.
 It is therefore about the capacity to select the most
appropriate vision, to define realistic intentions, to match
resources to opportunities and to prepare and implement
strategic plans.
7/4/2017
17
THE FORMULATION OF STRATEGY
 The formulation of corporate strategy can be defined as a
process for developing a sense of direction.
 It has often been described as a logical, step-by-step affair,
the outcome of which is a formal written statement that
provides a ultimate guide to the organization’s long-term
intentions.
The process of formulating strategy consists of the following
steps:
1. Define the mission.
2. Set objectives.
7/4/2017
18
THE FORMULATION OF STRATEGY
3. Conduct internal and external environmental scans to
assess internal strengths and weaknesses and external
opportunities and threats (a SWOT analysis).
4.
Analyze existing strategies to determine their relevance in the
light of the internal and external appraisal. This may include gap
analysis, which will establish the extent to which environmental
factors might lead to gaps between what could be achieved if no
changes were made and what needs to be achieved. The
analysis would also cover resource capability, answering the
question: ‘Have we sufficient human or financial resources
available now or that can readily be made available in the future
to enable us to achieve our objectives?’
7/4/2017
19
THE FORMULATION OF STRATEGY
5. Define in the light of this analysis the distinctive
capabilities of the organization.
6. Define the key strategic issues emerging from the
previous analysis. These will be concerned with
such matters as product-market scope, enhancing
shareholder value and resource capability.
7/4/2017
20
THE FORMULATION OF STRATEGY
7.
Determine corporate and functional strategies for achieving goals
and competitive advantage, taking into account the key strategic
issues. These may include business strategies for growth or
diversification, or broad generic strategies for innovation, quality
or cost leadership; or they could take the form of specific
corporate/functional strategies concerned with product-market
scope, technological development or human resource
development
Prepare integrated strategic plans for implementing strategies.
9. Implement the strategies.
10. Monitor implementation and revise existing strategies or develop
new strategies as necessary.
8.
7/4/2017
21
Difference between SHRM and HR
strategies
 The terms ‘strategic HRM’ and ‘HR strategy’ are often
used interchangeably, but a distinction can be made
between the two.
 In general sense, the difference between SHRM and HR
strategies is similar to that between strategic
management and corporate business strategies.
 Both SHRM and strategic management describe an
approach adopted by the management and focus on the
long –term issues and provide direction to the
organization.
7/4/2017
22
Difference between SHRM and HR
strategies
 HR strategies and business strategies are outcomes of this
approach which focus on the organizational view concerning key
issues and specific functions or activities.
 SHRM deals with macro concerns such as quality, commitment,
performance, culture, and management development
 It defines the areas in which specific HR strategies need to be
developed.
 HR strategies, on the other hand, are concerned with ensuring
the availability of an efficient workforce, training, rewards, good
employee relations, etc
 HR strategies are more specific and facilitate the successful
achievement of the corporate objectives and goals
7/4/2017
23
Difference between SHRM and HR
strategies
SHRM
HR Strategies
•A
general approach to strategic • Outcome (manifestation) of the general
management of human resources
SHRM approach
•Aligned with the organizational intention
• Focus on specific organizational
about its future direction
intentions about what needs to be done
• Focus on long-term people issue
• Defines the areas in which specific HR • Focus on specific issues that facilitate
the achievement of corporate strategy
strategies need to be developed
• Focus on macro concerns such as • Human resource strategy decisions are
structure, culture
derived from SHRM
• Strategic HRM decisions are built into
the strategic business plan
7/4/2017
24
APPROACHES TO STRATEGIC HRM
 There are five approaches to strategic HRM. These consist
of resource-based strategy, achieving strategic fit, highperformance management, high- commitment management
and high-involvement management
 The resource-based approach
 A fundamental aim of resource-based HR strategy, as
Barney (1991) indicates, is to develop strategic capability –
achieving strategic fit between resources and opportunities
and obtaining added value from the effective deployment of
resources.
7/4/2017
25
APPROACHES TO STRATEGIC HRM
 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
 The resource-based approach is founded on the belief that
competitive advantage is obtained if a firm can obtain and
develop human resources that enable it to learn faster and apply
its learning more effectively than its rivals
 Human
resources include all the experience, knowledge,
judgment, risk-taking propensity and wisdom of individuals
associated with the firm
7/4/2017
26
APPROACHES TO STRATEGIC HRM
 The resource-based approach
 Resource-based theory emphasizes that investment in
people adds to their value in the firm. The strategic goal will
be to ‘create firms which are more intelligent and flexible
than their competitors’ by hiring and developing more
talented staff and by extending their skills base
 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
7/4/2017
27
APPROACHES TO STRATEGIC HRM
 Strategic fit
 Vertical integration is necessary to provide congruence
between business and human resource strategy so that the
latter supports the accomplishment of the former and,
indeed, helps to define it.
 Horizontal integration with other aspects of the HR strategy
is required so that its different elements fit together.
 The aim is to achieve a coherent approach to managing
people in which the various practices are mutually
supportive.
7/4/2017
28
APPROACHES TO STRATEGIC HRM
 High-performance management
 High-performance management aims to make an impact on
the performance of the firm through its people in such areas
as productivity, quality, levels of customer service, growth,
profits and, ultimately, the delivery of increased shareholder
value
 High-performance management practices include precise
recruitment and selection procedures, extensive and
relevant training and management development activities,
incentive pay systems and performance management
processes.
7/4/2017
29
APPROACHES TO STRATEGIC HRM
 High-commitment management
 One of the defining characteristics of HRM is its emphasis
on the importance of enhancing mutual commitment
(Walton, 1985).
 High-commitment management has been described as ‘A
form of management which is aimed at eliciting a
commitment so that behaviour is primarily self-regulated
rather than controlled by sanctions and pressures external
to the individual, and relations within the organization are
based on high levels of trust.’
7/4/2017
30
APPROACHES TO STRATEGIC HRM
 High-commitment management
 The approaches to achieving high commitment as described by
Beer et al (1984) and Walton (1985) are:
 the development of career ladders and emphasis on trainability
and commitment as highly valued characteristics of employees at
all levels in the organization;
 a high level of functional flexibility with the abandonment of
potentially rigid job descriptions;
 the reduction of hierarchies and the ending of status
differentials;
 a heavy reliance on team structure for disseminating
information (team briefing), structuring work (team working) and
problem solving (improvement groups or quality circles).
7/4/2017
31
APPROACHES TO STRATEGIC HRM
 High-involvement management
 This approach involves treating employees as partners in the
enterprise whose interests are respected and who have a voice
on matters that concern them
 It is concerned with communication and involvement
 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
 This establishes mutual understanding of what is to be achieved
and a framework for managing and developing people to ensure
that it will be achieved.
7/4/2017
32
Best Fit Approach
 The focus of the best fit approach is on the linkage of HR
strategies with the business strategies.
 This linkage is also referred to as external fit or vertical
integration
 Best fit also means that HR strategies should match the
stages of development of the firm, namely start-up,
maturity, decline or degeneration, and regeneration or
transformation.
 Business strategies, and therefore HR strategies, will differ
between a service firm
transformational stage.
7/4/2017
and
one
that
is
in
the
33
Best Fit Approach
 Whenever an organization embarks upon a change or a
transformational programme as part of its business
strategy, appropriate change strategies need to be
developed.
 Human
resource strategies, supportive of business
initiatives, should be developed to manage the
organizational transition from present state to the future
state.
7/4/2017
34
Best Fit Approach
Stages in the business or product cycle
 HR practices are related to variations in the life cycle stages
of a business- Start-up, growth, maturity, and decline.
 Different dimensions of HR practices are important at
various stages of the business life cycle
 For example, in the growth stage, an organisation recruits
an adequate number and mix of qualified people.
 In the maturity stage, the organisation encourages sufficient
turnover to minimise layoffs and facilitate reorganisation.
 At the decline stage, the organization plans and implements
workforce reductions and reallocation
7/4/2017
35
Life Cycle Stages
HR Practices
Start-up
• Flexible patterns of work
•Recruitment of highly motivated and committed employees
•Competitive pay
•Little formality
•No unions
Growth
• More sophisticated recruitment and selection
• Training and development
• Performance Management processes
•Reward systems
•Focus on high commitment
•Developing stable employee relations
Maturity
• Attention to the control of labour costs
• Focus on increasing productivity
•Strained employee relations
•Control compensation
Decline
• Emphasis on rationalization of workforce and downsizing
• Abandoning some longstanding practices to cut costs
•Trade unions have marginalized role
36
•Retraining and consulting service
7/4/2017
Linking Business Strategy and HR
Strategy
Business Strategy
HR Strategy
Cost Leadership
Utilization HR Strategy
 Suitable for repetitive and
predictable behaviour
 Concerned with short-term focus
and quantities (volumes)
 Result-oriented
 HR strategy focussed on short-term
performance measures, that is results or
outcomes
 Efficiency is the norm, job assignments are
specialized, explicit job descriptions
Hierarchical pay, few incentives
Narrow career paths, limited training
Limited employment security
Cost-cutting may involve incentives for
employees to leave the firm
Limited participation
7/4/2017
37
Linking Business Strategy and HR
Strategy
Business Strategy
HR Strategy
Differentiation
 Long-term focus
Creative job behaviour
Moderate concern for quality and
quantity
Facilitation HR Strategy
 Broad career paths
Extensive training
 Equal and fair pay, many incentives for
creativity
Long-term performance measures
 External recruitment and hiring of people who
bring in new ideas
 High employee participation
 Some employment security
Focus
 High concern for quality
 Moderate concern for quantity
 Long/medium-term focus
Accumulation HR Strategy
 Equal and fair pay with many incentives
 Hiring employees belonging to the target
market
 Broad career paths with extensive training
 High employee participation
38
 Some employee security
7/4/2017
Framework linking Business and HR
Strategy
7/4/2017
39
Framework linking Business and HR
Strategy
 Golden and Ramanujam (1985) proposed the following
four types of linkages between HRM and strategy planning
process:
1. Administrative Linkage: HR department adopts the traditional
personnel role, provides routine operational support, and
handles paperwork. Functional managers see HR function as
relatively unimportant
2.
One Way Linkage: There is a sequential relationship
between strategic planning and the HR function. The HR
function reacts to and designs HR programmes to support the
strategic objectives of the firm.
7/4/2017
40
Framework linking Business and HR
Strategy
 Golden and Ramanujam (1985) proposed the following
four types of linkages between HRM and strategy planning
process:
3. Two Way linkage: There is a reciprocal, interdependent
relationship between strategic planning and HR function.
Business plans affect and are affected by HR activities. HR
function is seen as important.
4. Integrative linkage: There is dynamic interaction, formal as
well as informal, between HR function and strategic linkage.
The senior HR executive is a strategic business partner with
other senior executive of the firm.
7/4/2017
41
The ‘HR Bundles’ Approach
 Bundling refers to the development and implementation of
several HR practices together so that they are interrelated and
internally consistent.
 Each HR practice complements and reinforces other.
 In general terms, bundles approach is also termed as internal fit
or horizontal integration.
 The purpose of bundling is to bring about coherence between
HR practices. Coherence exists when a mutually reinforcing set
of HR practices is developed to contribute to the strategic
objectives of the organization, so that these practices ensure the
matching of resources to the needs of the organization, and bring
about improvement in performance and quality.
7/4/2017
42
The Best Practice Approach
 Contrary to the internal and external contingency perspectives,
is the view that organizations should adopt the best practice
irrespective of the context.
 According to this view, superior management practices are
readily identified and are transferable across organizations.
 An organization, therefore, should identify any organization
with a reputation for excellence in some functions, and copy its
practices in order to perform well.
 That is, all organizations can attain performance improvements
if they identify and implement the best practice or benchmark.
7/4/2017
43
HR PRACTICES & ORGANIZATION’S
BUSINESS GOALS
1. Change Management
2. Compensation & Benefits
3. Employee Relations
4. Staffing
5.Training & Development
HR PRACTICES & ORGANIZATION’S
BUSINESS GOALS
 CHANGE MANAGEMENT
 When
business group merge, through acquisition or
otherwise, HR department is responsible to effectively blend
the individual corporate values into one;
 Example: Inculcate new values & behaviors
 COMPENSATION & BENEFITS
 Administering
external
salary
surveys
and
industry
benchmarking;
 HR professionals to ensure compensation & benefits offered
by employers are competitive in the market place. Example:
salary relativity/competitive
HR PRACTICES & ORGANIZATION’S
BUSINESS GOALS
 EMPLOYEE RELATIONS
 Keeping the employees happy and motivated is an important
goal of any business;
 HR department is to resolve any employee issues through
investigation and counseling
 STAFFING
 Human resources practices source and recruit the best talent
that an organization can afford;
 Thus, building a strong and
workforce
competent/professional
HR PRACTICES & ORGANIZATION’S
BUSINESS GOALS
 TRAINING & DEVELOPMENT
 Training employees in both business-related & soft skills is
critical;
 HR professionals help enhance business level talent &
develop high-potential employees for advancement within
the Company
 CORPORATE HR STRATEGY
 Corporate HR strategy is a system of personnel practices that
helps employees perform at the highest level possible to
meet organizational goals
 Example, Strategic HR audit
HR PRACTICES & ORGANIZATION’S
BUSINESS GOALS
 CORPORATE HR STRATEGY (CONT)
 It is clearly linked to the overall business or strategic plan; and
 Is focused on the company's specific human resource needs
Components
 An effective corporate HR strategy begins with a formal
planning process that starts from the top; and
 Cascading down the ranks & files in the organization.
Example, management involvement a must
 Communicating the plan to employees is essential; and
 To successfully execute the strategy, a formal process to
review organizational performance must be in place.
Example: feedback mechanism
ROLE OF HR
 For HR to become a strategic partner in the organization;
 HR strategies must be aligned with the overall corporate
strategy/business plans. Example, complimentary role
 With training & experience, HR professionals should
provide valuable input on HR issues;
 Provide professional advice to senior management, Board
of Directors on SHRM
BUSINESS PARTNER MODEL
 This model demands that HR become more strategic, besides

1.
2.
3.
4.

building relationship;
Model made famous by David Ulrich (2005) & defines the
basic role of HR into four (4) areas:
Service Delivery – customer focus/centric
Employee Commitment – show of commitment to work &
business
Change Management – act as change agents
Strategic Action – focus on execution/implementation,
monitoring & feedback on business/strategic plans; and
Check whether HR strategy is aligned (‘strategic fit’) with the
overall Corporate or Business Plan
Summary
 The shaping of an organization, for example reflected in its




structure, culture, systems and HRM, is affected by the context of
that specific organization.
A better fit between the organization and its context is thought to
be more effective than the lack of fit or a misfit.
Fit is an important feature of SHRM aimed at the alignment of
HRM with the organizational context
Three conceptual approaches to SHRM that is, ‘best practice’,
‘best fit’, and ‘HR bundles’ approach, were examined to
understand the concept of ‘fit’ between business strategy and HR
strategy
The best fit approach assumes that HRM is more effective when it
is aligned with its internal and external organization context
7/4/2017
51