STRATEGIC HRM: An

Introduction

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HR’s Strategic Challenges

■ 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.
■ Three basic questions in planning
– Current business position?
– Future business position?
– How to reach the future business position?

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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 strategy is a course of action.
– The company’s long-tem plan for how it will balance its
internal strengths and weaknesses with its external
opportunities and threats to maintain a competitive
advantage.

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The Strategic Management Process
■ Strategic management tasks
– Step 1: Define the Business and Its Mission
– Step 2: Perform External and Internal Audits
– Step 3: Formulate new business and mission
statements
– Step 4: Translate the Mission into Strategic Goals
– Step 5: Formulate a Strategy to Achieve the Strategic
Goals
– Step 6: Implement the Strategy
– Step 7: Evaluate Performance

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Overview of Strategic Management

Figure 3.1
The Strategic Management Process

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 Step 1: Define the Current
Business

■ Decisions on:
– Products and services to provide
– Where to sell them
– Product/Services differences from competitors
– Example: Rolex sells high-priced quality watches vs.
Seiko sells inexpensive but innovative watches

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 Step 2: Perform Internal and External
Audits

■ Analyze external and internal situations

■ Usage of SWOT (Strengths, Weaknesses, Opportunities and
Threats) analysis through the usage of a SWOT chart

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 Step 2: Perform Internal and External
Audits

Figure 3.2
A SWOT Chart

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 Step 3: Formulate a New Business
Mission and Its Vision

■ 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
is headed.

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Step 4: Translate Mission into Strategic
Goals

■ If the company’s mission is “to make quality products”, what

does this mission mean, for each department, in terms of
how to improve quality?

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Step 5: Formulate Strategies to Achieve
Strategic Goals

■ Strategy: A course of action

■ Shows how company will move from the present business to
the new business
■ Simple to understand

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Step 6: Implement the Strategies
■ Implementation = putting into action
– Hiring people
– Building plants adding new product lines
■ Involves management functions:
– Plan
– Organize
– Staff
– Lead
– Control

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Step 7: Evaluate Performance

■ Success of strategies dependent on changes in external

factors
– E.g. New trends may reduce demand in one product and
increase the demand for another
■ Strategic Control necessary
– Process of accessing progress towards strategic goals
and taking corrective actions
– Managers study new situations and make adjustments

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Strategies in Brief
Company Strategic Principle

Dell Be direct
eBay Focus on trading communities
General Electric Be number one or number two in every
industry in which we compete, or get out
Southwest Airlines Meet customers’ short-haul travel needs
at fares competitive with the cost of automobile travel
Vanguard Unmatchable value for the investor-owner
Wal-Mart Low prices, every day

Source: Arit Gadiesh and James Gilbert, “Frontline Action,” Harvard Business Review, May 2001, p. 74.

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Types of Strategic Planning
■ Three types of strategies:
– Corporate strategy
– Competitive strategy
– Functional strategy

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Types of Strategic Planning
■ Corporate strategy
– Company-wide
– Identifies the portfolio of businesses that, in total,
comprise the company and the ways in which these
businesses relate to each other.

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Types of Strategic Planning

Figure 3.4
Corporate Strategies – Company-wide

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Types of Strategic Planning

■ Business-level/competitive
strategy
– Identifies how to build and strengthen the
business’s long-term competitive position
in the marketplace.

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Types of Strategic Planning
■ Three possible competitive strategies:
– Cost leadership: the enterprise aims to become the
low-cost leader in an industry.
– Differentiation: a firm seeks to be unique in its industry
along dimensions that are widely valued by buyers.
– Focus: a firm seeks to carve out a market niche, and
compete by providing a product or service customers can
get in no other way.

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 Types of Strategic Planning

Figure 3.5
Corporate Strategies – Business level

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Types of Strategic Planning
■ Functional strategies
– Identify the basic courses of action that
each department will pursue in order to
help the business attain its competitive
goals.

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HR and Competitive
Advantage
■ Competitive advantage
– Any factor that allows an organization to
differentiate its product or service from
those of its competitors to increase
market share.
– Superior human resources are an
important source of competitive
advantage
■ E.g. Toyota’s self-managed teams

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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.
– Formulating and executing HR systems—HR policies and
activities—that produce the employee competencies and
behaviors the company needs to achieve its strategic
aims.

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Linking Corporate and HR Strategies

Figure 3.6
Linking Company-Wide and HR Strategies
Source: © 2003, Gary Dessler, Ph.D.

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Strategy Execution Role
■ The HR department’s strategies,
policies, and activities must make
sense in terms of the company’s
corporate and competitive strategies,
and they must support those
strategies.

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Creating A Strategic
HR System

Figure 3.7
Three Main Strategic Human Resource System Components
Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy,
and Performance (Boston: Harvard Business School Press, 2001), p. 12. Copyright © 2001
by the Harvard Business School Publishing Corporation; all rights reserved.

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The High-Performance Work System
■ Companies should create a HR system that fits its needs
■ Trend towards installing HR systems that broadly share many
characteristics
■ Aim of these systems is to maximize employees’ competencies
and commitment
■ Employers expect HR managers to introduce HR activities that
create value for the company such as more profit and bigger
market share

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The High-Performance Work System

Figure 3.8
Characteristics of a High-Performance Work Organization

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Translating Strategy into HR Policy and
Practice
■ HR managers to translate:
– Company’s strategy into employee
competencies and behaviors
– These employee competencies and
behaviors into specific HR policies and
practices to achieve company’s goals.

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Translating Strategy into HR Policy and
Practice Formulate business strategy
“What are the strategic goals of the business?”

Identify workforce requirements

“What employee competencies and behaviors must HR deliver to
enable the business to reach its goals?”

Formulate HR strategic policies and activities

“Which HR strategies and practices will produce these employee
competencies and behaviors?”
Figure 3.9
A Basic Model of How to Align HR
Strategy and Actions with Business Develop detailed HR Scorecard measures
Strategy
Source: Adapted from Garrett Walker and J. “How can HR measure whether it is executing well for the business,
Randal MacDonald, “Designing and in terms of producing the required workforce competencies and
Implementing an HR Scorecard,” Human
Resources Management 40, no. 4 (2001), p. behaviors?”
370.

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The HR Scorecard Approach
■ HR Scorecard
– Measures the HR function’s effectiveness and efficiency
in producing employee behaviors needed to achieve the
company’s strategic goals.

■ To create an HR scorecard, you:

– Must know what the company’s strategy is.
– Must understand the causal links between HR activities,
employee behaviors, organizational outcomes, and the
organization’s performance.
– Must have the metrics to measure all the activities and
results involved.

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Basic HR Scorecard
Relationships
Organization
HR activities
performance

Emergent employee Achieve

behaviors strategic goals

Strategically relevant
organizational
outcomes
Figure 3.10
Basic HR Scorecard Relationships

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Using the HR Scorecard Approach

1. Define the Business Strategy

2. Outline the Company’s Value Chain
3. Outline a Strategy map
4. Identify the Strategically Required Organizational Outcomes
5. Identify the Required Workforce Competencies and
Behaviors

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Using the HR Scorecard Approach

6. Identify the Strategically Relevant HR System Policies and

Activities
7. Create HR Scorecard
8. Design the HR Scorecard Measurement System
9. Summarize Scorecard Measures in a Digital Dashboard
10. Periodically Evaluate the Measurement System

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A Simple Value Chain for Hotel International

Source: Copyright © Gary Dessler, Ph.D.

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HR Scorecard for Hotel International*

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 International properties and
thus increase the length of stays and the return rate of
guests, and thus boost revenues and profitability”).

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