Human Resource Management: Gaining a Competitive Advantage Chapter Strategic Human Resource Management McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc All rights reserved Learning Objectives Describe the differences between strategy formulation and strategy implementation List strategic management process components Discuss HRM function’s role in strategy formulation Describe the linkages between HRM and strategy formulation Discuss typologies of strategies and associated HRM practices Describe HR issues and practices associated with various directional strategies 2-2 Introduction Goal of strategic management is to deploy and allocate resources in a way that gives an organization competitive advantage HRM function must be integrally involved in the company’s strategic management process 2-3 What is Strategic Management? Strategic human resource management is the pattern of planned HR activities and deployments intended to enable an organization to achieve its goals Strategic management is a process to address the organization’s competitive challenges 2-4 Strategic Management Process Phases Strategy StrategyFormulationFormulationprocess processof ofdeciding deciding company’s company’sstrategic strategic direction directionby bydefining definingits its mission missionand andgoals, goals, external externalopportunities opportunities and andthreats, threats,and andinternal internal strengths strengthsand andweaknesses weaknesses Strategy Implementationprocess of devising structures and allocating resources to enact a company’s chosen strategy 2-5 Categories of Directional Strategies Concentration Concentration Internal Internal Growth Growth External External Growth Growth Downsizings Downsizings Mergers Mergers && Acquisitions Acquisitions 2-6 Strategic Management Process Components Mission Mission Goals Goals External External Analysis Analysis Internal Internal Analysis Analysis Strategic Strategic Choice Choice 2-7 HRM Practices • Job Analysis - the process of getting detailed information about jobs • Recruitment - the process through which the organization seeks applicants • Training - a planned effort to facilitate learning of jobrelated knowledge, skills, and behavior • • Job design - making decisions about what tasks should be grouped into a particular job • Selection - identifying the applicants with the appropriate knowledge, skills, and ability • Development - the acquisition of 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 2-8 Strategic Management Process Model Strategy Formulation Strategy Implementation HR Practices External Analysis •Opportunities •Threats Mission Goals Strategic Choice Internal Analysis •Strengths •Weaknesses Human Resource Needs •Skills •Behavior •Culture •Recruiting •Training •Performance management •Labor relations •Employee relations •Job analysis •Job design •Selection •Development •Pay structure •Incentives •Benefits Human Resource Capability •Skills, •Abilities •Knowledge Firm Performance •Productivity •Quality •Profitability Human Resource Actions •Behaviors •Results 2-9 StrategyDecisions About Competition Where, how and with what will we compete? Where- in what markets? How – what criteria? – – – – cost? quality? reliability? delivery? With what resources? - How will we acquire, develop and deploy resources? 2-10 Strategy Formulation External Analysis •Opportunities •Threats Mission Strategic Choice Goals Internal Analysis •Strengths •Weaknesses 2-12 Strategy Formulation 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 examines the organization's operating environment to identify strategic opportunities and threats Internal analysis identifies 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 2-13 Strategy Implementation Variables Organizational Organizational Structure Structure Types Types of of Information Information Product Product Market Market Strategy Strategy Task Task Design Design Performance Performance Reward Reward Systems Systems Select Select Train Train Develop Develop People People 2-14 Strategic Implementation HR Practices Strategic Choice Human Resource Needs •Skills •Behavior •Culture •Recruiting •Training •Performance management •Labor relations •Employee relations •Job analysis •Job design •Selection •Development •Pay structure •Incentives •Benefits Human Resource Capability •Skills, •Abilities •Knowledge Firm Performance •Productivity •Quality •Profitability Human Resource Actions •Behaviors •Results -productivity -absenteeism - turnover 2-15 HRM Practices Job Job Analysis Analysis && Design Design Recruitment Recruitment && Selection Selection Training Training && Development Development Performance Performance Mgmt Mgmt 2-16 Job Analysis and Design Job Job AnalysisAnalysis- process processof ofgetting getting detailed detailedinformation information about aboutjobs jobs Job Designdefining the way work will be performed and tasks required in a given job 2-17 Recruitment and Selection SelectionRecruitmentRecruitment- process processof ofseeking seeking applicants applicantsfor forpotential potential employment employment process by which an organization identifies applicants with necessary knowledge skills, abilities and characteristics that will help it to achieve its goals 2-18 Training and Development TrainingTraining-planned planned effort effortto tofacilitate facilitate learning learningof ofjob-related job-related knowledge, knowledge,skills skillsand and behaviors behaviors Development- acquisition of knowledge, skills and behaviors that improve an employee’s ability to meet changes in job requirements and in client and customer demands 2-19 Performance Management …the means through which managers ensure that employees’ activities and outputs are congruent with the organization’s goals 2-20 HRM Practice Options Job Analysis & Design Recruitment & Selection Training & Development Performance Management Pay Structure, Incentives & Benefits Labor & Employee Relations 2-21 Strategic Types Porter's Strategies …competitive advantage stems from a company’s ability to create value in two ways… Cost leadership Differentiation 2-22 HRM Needs Strategic Types Different strategies require different types of employees Role Behaviors: Cost strategy firms seek efficiency, carefully define needed employee skills and use worker participation to seek cost-saving ideas Differentiation firms need creative risk takers 2-23 Directional Strategies External Growth Strategy Concentration Strategy Internal Growth Strategy Downsizing Mergers and Acquisitions 2-24 Ways HR Provides Competitive Advantage Emergent Strategies- strategies that evolve from the grass roots of the organization Enhancing Competivenessdeveloping human capital in a learning organization 2-25 Summary Human resources are the most important asset and single largest most controllable cost within the business model HR professionals must develop business, professional-technical, change management and integration competencies HRM has a profound impact on the strategic plan implementation by developing and aligning HRM practices that ensue the company has motivated employees with necessary skills 2-26 [...]...Strategic Planning and HRM Linkages 2-11 Strategy Formulation External Analysis •Opportunities •Threats Mission Strategic Choice Goals Internal Analysis •Strengths •Weaknesses 2-12 Strategy Formulation 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 examines the organization's... cost-saving ideas Differentiation firms need creative risk takers 2-23 Directional Strategies External Growth Strategy Concentration Strategy Internal Growth Strategy Downsizing Mergers and Acquisitions 2-24 2 Ways HR Provides Competitive Advantage 1 Emergent Strategies- strategies that evolve from the grass roots of the organization 2 Enhancing Competivenessdeveloping human capital in a learning organization... which an organization identifies applicants with necessary knowledge skills, abilities and characteristics that will help it to achieve its goals 2-18 Training and Development TrainingTraining-planned planned effort effortto tofacilitate facilitate learning learningof ofjob-related job-related knowledge, knowledge,skills skillsand and behaviors behaviors Development- acquisition of knowledge, skills and... organization's operating environment to identify strategic opportunities and threats Internal analysis identifies 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 2-13 Strategy Implementation Variables Organizational Organizational Structure Structure... learning organization 2-25 Summary Human resources are the most important asset and single largest most controllable cost within the business model HR professionals must develop business, professional-technical, change management and integration competencies HRM has a profound impact on the strategic plan implementation by developing and aligning HRM practices that ensue the company has motivated employees... behaviors that improve an employee’s ability to meet changes in job requirements and in client and customer demands 2-19 Performance Management …the means through which managers ensure that employees’ activities and outputs are congruent with the organization’s goals 2-20 HRM Practice Options Job Analysis & Design Recruitment & Selection Training & Development Performance Management Pay... Information Information Product Product Market Market Strategy Strategy Task Task Design Design Performance Performance Reward Reward Systems Systems Select Select Train Train Develop Develop People People 2-14 Strategic Implementation HR Practices Strategic Choice Human Resource Needs •Skills •Behavior •Culture •Recruiting •Training •Performance management •Labor relations •Employee relations •Job analysis... Benefits Labor & Employee Relations 2-21 Strategic Types Porter's Strategies competitive advantage stems from a company’s ability to create value in two ways… Cost leadership Differentiation 2-22 HRM Needs Strategic Types Different strategies require different types of employees Role Behaviors: Cost strategy firms seek efficiency, carefully define needed employee skills and use worker participation... Performance Mgmt Mgmt 2-16 Job Analysis and Design Job Job AnalysisAnalysis- process processof ofgetting getting detailed detailedinformation information about aboutjobs jobs Job Designdefining the way work will be performed and tasks required in a given job 2-17 Recruitment and Selection SelectionRecruitmentRecruitment- process processof ofseeking seeking applicants applicantsfor forpotential potential... •Development •Pay structure •Incentives •Benefits Human Resource Capability •Skills, •Abilities •Knowledge Firm Performance •Productivity •Quality •Profitability Human Resource Actions •Behaviors •Results -productivity -absenteeism - turnover 2-15 HRM Practices Job Job Analysis Analysis && Design Design Recruitment Recruitment && Selection Selection Training Training && Development Development Performance Performance