Human Resource Management:

Gaining a Competitive Advantage

Chapter 2

Strategic Human Resource

Management

McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
 Learning Objectives

1. Describe the differences between strategy formulation and

strategy implementation.

2. List strategic management process components.

3. Discuss HRM function’s role in strategy formulation.

4. Describe the linkages between HRM and strategy formulation.

5. Discuss typologies of strategies and associated

HRM practices.

6. Describe HR issues and practices associated with various

directional strategies.

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 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.

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 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.

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Strategic Management Process Phases

Strategy Formulation-
process of deciding
company’s strategic
direction by defining its
mission and goals,
external opportunities Strategy Implementation-
and threats, and internal process of devising
strengths and weaknesses. structures and allocating
resources to enact a
company’s chosen
strategy.

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5 Categories of Directional Strategies

Concentration

Internal Growth

External Growth

Downsizings

Mergers & Acquisitions

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5 Strategic Management Process
Components

Mission

Goals

External Analysis

Internal Analysis

Strategic Choice

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 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 job-related
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.

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 Strategic Management Process Model
Strategy Formulation Strategy Implementation
HR Practices
•Recruiting
External Analysis •Training
•Performance management
•Opportunities •Labor relations
•Threats •Employee relations Firm
•Job analysis
•Job design Performance
Human •Selection •Productivity
•Development •Quality
Resource •Pay structure
Strategic Needs •Incentives •Profitability
Mission Goals Choice •Skills •Benefits
•Behavior
•Culture
Human Human
Internal Resource
Capability Resource
Analysis Actions
•Strengths •Skills,
•Abilities •Behaviors
•Weaknesses
•Knowledge •Results

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 Strategy-
Decisions 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?

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Strategic Planning and HRM
Linkages

Administrative One-way

Two-way

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 Strategy Formulation

External
Analysis
•Opportunities
•Threats

Strategic
Mission Goals Choice

Internal
Analysis
•Strengths
•Weaknesses

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 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.

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Strategy Implementation Variables

Organizational
Structure

Types Task
of Design
Information

Product Performance
Market
Strategy Select
Reward Train
Systems Develop
People

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 Strategic Implementation

HR Practices
•Recruiting
•Training
•Performance management
•Labor relations
•Employee relations Firm
•Job analysis Performance
Human •Job design •Productivity
•Selection
Resource •Development •Quality
Strategic Needs •Pay structure •Profitability
Choice •Skills •Incentives
•Behavior •Benefits
•Culture
Human Human
Resource Resource
Capability Actions
•Skills, •Behaviors
•Abilities •Results
•Knowledge -productivity
-absenteeism
- turnover

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 HRM Practices

Job Analysis & Design

Recruitment & Selection

Training & Development

Performance Mgmt.

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 Job Analysis and Design

Job Analysis-
process of getting Job Design-
detailed information defining the way work
about jobs. will be performed and
tasks required in a
given job.

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 Recruitment and Selection

Selection-
process by which an
organization identifies
Recruitment- applicants with
process of seeking necessary knowledge
applicants for potential
skills, abilities and
employment.
characteristics that
will help it to achieve
its goals.

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 Training and Development

Training- planned
effort to facilitate Development- acquisition
learning of job-related of knowledge, skills and
knowledge, skills and behaviors that improve
behaviors an employee’s ability
to meet changes in job
requirements and in
client and customer
demands.

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 Performance Management

…themeans through which managers

ensure that employees’ activities and
outputs are congruent with the
organization’s goals.

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HRM Practice Options

 Job Analysis & Design

 Recruitment & Selection
 Training & Development
 Performance Management
 Pay Structure, Incentives & Benefits
 Labor & Employee Relations

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 Strategic Types
Porter's Strategies

…competitive advantage stems from a

company’s ability to create value in
two ways…

 Cost leadership

 Differentiation

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 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.

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 Directional Strategies

Concentration
External Growth Strategy
Strategy

Internal
Growth
Strategy

Downsizing
Mergers and
Acquisitions

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 2 Ways HR Provides
Competitive Advantage

1. Emergent Strategies- strategies

that evolve from the grass
roots of the organization.

2. Enhancing Competiveness-
developing human capital in a
learning organization

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 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.

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