Strategic HRM

The Context of SHRM

Strategic Management
ch 3
Lecture Two
Dr. Maha Dajani
1

Three HR Approaches
Micro HRM MHRM
International HRM IHRM
Strategic HRM SHRM
2

HRM Practices
Job Analysis/Design

Recruitment
/Selection

2-3

Benefits of a Strategic Approach to

HR
1. Facilitates development of high-quality
workforce through focus on types of
people & skills needed
2. Facilitates cost-effective utilization of
labor, particularly in service industries
where labor is generally greatest cost
3. Facilitates planning & assessment of
environmental uncertainty & adaptation
of organization to external forces
4

What is strategy?

A Strategy is a plan of action for the future so

as to gain competitive advantage
1) Where
are we
now?

2) Where
are we
going?

3) How will
we get
there?

Process of Strategic Management

Strategy

Strategy
Formulation

Implementation

2 Phases of
Strategic

Management
2-8

Strategic Management Process Model

Strategy Formulation

Strategy Implementation
HR Practices

External Analysis
Opportunities
Threats

Mission

Goals

Strategic
Choice

Internal
Analysis

Strengths
Weaknesses

HR
Needs

Skills
Behavior
Culture

Recruiting
Training
Performance management
Labor relations
Employee relations
Job analysis
Firm
Job design
Performance
Selection
Productivity
Development
Quality
Pay structure
Profitability
Incentives
Benefits

HR
Capability

Skills,
Abilities
Knowledge

HR Actions
Behaviors
Results

2-9

Linkage between HRM and

business Strategy
Both strategy formulation and strategy
implementation involve people-related
issues and therefore necessitate the
involvement of the HR function.
Four levels of integration exist between
the HR function and the strategic
management function
10

Four Types of linkages

 1- Administrative LinkageThis is the

lowest level of integration, in which the 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.

2.One-Way

LinkageThe

firm's
strategic business planning function
develops the plan and then informs the
HRM function of the plan. HRM then
helps in the implementation.

12

 3. Two-Way LinkageThis 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.

4. Integrative LinkageThis is based on

continuing, rather than sequential, interaction.
The HR executive is an integral member of the
strategic planning team.
13

Strategy Implementation
Variables
Organizational
Structure
Types
of
Information

Product
Market
Strategy

Task
Design

Performance
Reward
Systems

Select
Train
Develop
People

2-14

Corporate Strategies: Growth

Benefits
Gaining economies of scale in
operations & functions
Enhancing competitive position
vis--vis industry competitors
Providing
opportunities
for
employee
professional
development & advancement

HR Issues
Planning for new hiring
Alerting current employees
Ensuring
quality
&
performance standards are
maintained
15

Internal Methods
Penetration of existing markets
Developing new markets
Developing new products or
services for existing or new
markets

External Methods
Acquiring other organizations
Vertical integration

HR Issues in M&A
Merging organizations
Dismissing redundant
employees

Corporate Strategies: Stability

Maintaining status quo due to limited
environmental opportunities for gaining
competitive advantage
Few employees will have opportunities
for advancement
Critical that management identify key
employees & develop specific HR
retention strategies to keep them
16

Corporate Strategies:

Turnaround or Retrenchment
Downsizing or streamlining organization
in cost-cutting attempt to adjust to
competitive environment
Few
opportunities
&
many
environmental threats
Important to develop HR practices to
manage survivors
17

Porters Three Types of

Competitive Strategies
Business-Level
Competitive Strategies

Cost leadership

18

Differentiation

Focus/Niche

Business Unit Strategies: Cost

Leadership
Increases in efficiency & cutting of costs, then
passing savings to consumer
Assumes price elasticity in demand for products or
services is high
Assumes that customers are more price sensitive
than brand loyal

HR strategy focuses on short-term

performance measures of results &
promoting efficiency through job
specialization & cross-training
19

Business Unit Strategies:

Differentiation
In order to demand a premium price from consumers
Attempting to distinguish organizational products or
services from other competitors or
Creating difference

Organization offers employees

compensation for creativity

incentives

&

HR strategy focuses on external hiring of

unique individuals & on retaining
creative employees
20

Business Unit Strategies: Focus

Business attempts to satisfy needs of only a
particular group or narrow market segment
Strategic intent is to gain consumer loyalty of
neglected groups of consumers
Strategic HR issue is ensuring employee
awareness of uniqueness of market segment
Thorough employee training & focus on
customer satisfaction are critical factors
Hiring members of target segment who are
empathetic to customer in target segment
21

Porters Strategy in Relation to HR

Strategy

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