Human Resource Management: Gaining a Competitive Advantage

Chapter 2

Strategic Human Resource Management

Learning Objectives

1. Differentiate between 1. a business model and a strategy/strategic choice. 2. strategy formulation and strategy implementation 3. Strategic Management and Strategic Human Resource Management 4. The audit and analytic approaches to evaluating HRM effectiveness

2. List strategic management process components. 3. Compare HRM function’s ideal role in strategy formulation with four

four types of linkages found in organizations 4. Describe how internal and external analysis is used in the basic

process for developing an HR strategy 5. Discuss employee role behaviors associated with cost versus

differentiation directional strategies. 6. Describe the position and role of the CHRO

PART 1:LINKING HR TO COMPANY’S BUSINESS MODEL, STRATEGY & STRATEGIC MANAGEMENT PROCESS

What is a Business Model?

Story of how the firm will create value for customers and how it will do so profitably

Example: Consumer coffee business

How does Tim Horton’s compete for a share of this market?

How does Starbucks/Williams Coffee Pub/Second Cup compete for a share of this market?

What is Strategy

1. Where will we compete?

2. How do we compete?

3. What do we need to compete?

Generic Strategic Types

Michael Porter:

1.Cost Leadership – lowest priced products

2.Differentiation – differentiated products/services (broad customer base)

3.Focus – unique products for niche set of customers

What is Strategic Management?

Strategic management : process to address the organization’s competitive challenges, which results in the strategy (outcome).

1.3 Generic strategies: cost, differentiation, focus (niche) e.g. Wal-Mart, Bay, Holt Renfrew

2.Plus specific strategies in light of the current environment – current challenges such as upcoming entry of Target into Canadian market

TIM HORTON’S

• Business Model – what do their customers value?

• Generic Strategy – how do they meet customer needs but remain profitable?

• What’s been their specific strategy to deal with: – growing # of coffee shops? – Increasing price of coffee beans?

Strategy Formulation & Implementation

Phase 1 – Strategy formulation: Strategic direction decided upon by defining the company’s mission and goals, its external opportunities and threats and its internal strengths and weaknesses. Various strategies are then generated.

Phase 2 – Strategy Implementation: Follow through on the chosen strategy by each area of the company e.g. HRM, Marketing, Operations, IT, R & D, Accounting, Finance.

Company’s Mission

Company’s Goals

Internal Analysis (Strengths & Weaknesses)

External Analysis (Opportunities &

Threats)

Here are our new

capabilities

These are our keys to

success

Here’s what we did/how

it worked

out

These are the specific things we’ll

look at/change

Company PerformanceStrategic

Choice (Strategy)

Strategy Formulation

1. Mission is a statement of the organization's reasons for being.

2. Goals are what the organization hopes to achieve in the medium-to long-term future – should be quantitative (measurable)

3. External analysis examines the organization's operating environment to identify strategic opportunities and threats.

4. Internal analysis identifies the organization's strengths and weaknesses.

5. 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.

Tapping Into Multicultural Markets

• Many formerly WASC (white, anglo-saxon, christian) areas have been repopulated with people from many different cultures

• Do you stand back and let someone else come in and take the business?

• OR

• Do you change your approach to capitalize on the business?

EXAMPLE

• MARKHAM ONTARIO

• 1970’s – probably less than 2% visible minority population

• By 2006, 65% visible minority population (Statistics Canada)

• If you are the owner of local funeral home do you accept decreasing market share (market getting larger) OR do something to get new business?

HRM Involvement in the Strategic Management Process

1. Have input into the strategic plan in terms of people-related issues and of the ability of the human resources pool to implement particular strategic alternatives.

2. Have specific knowledge of the organization’s strategic goals.

3. Know what types of employee skills, behaviours and attitudes are needed to support the strategic plan.

4. Develop programs to ensure that employees have those skills, behaviours and attitudes.

Strategy Implementation

HRM function must: 1. design and group tasks into jobs in a way

that is efficient and effective. 2. ensure that the organization is staffed with

people who have the necessary knowledge, skill and ability (planning, recruitment, selection, placement, training, development and career development).

3. develop performance management and reward systems.

4. Lots of choices – see Table 2.1 on page 52

HR’s Role in “Keeping it Real”

• Limiting strategic options

• How and at what cost the firm might gain or develop the human resources necessary for strategy to be successful

Model of the Strategic HRM Process

Strategy Implementation for Generic Strategies

• Role behaviours – those that are required of an individual in his or her role as a jobholder in a social work environment.

• Different strategies require different types of employees with different types of behaviours and attitudes. See Table 2.2 on page 54

1. Cost strategy firms

2. Differentiation firms

Essential to Strategy Implementation Strategy Evaluation and Control

Monitor effectiveness of strategy and implementation strategy

• Identify problem areas

• Revise existing structures and strategies

• Devise new structures and strategies

Getting HR involved in Strategic Management

1. Goal of strategic management is to deploy and allocate resources in a way that gives an organization competitive advantage.

1. Physical resources

2. Technology resources

3. Financial resources

4. Human resources

2. HRM function must be integrally involved in the company’s strategic management process

When Does HR Get To Think About Choices?

Four levels of integration between HR and strategic management:

1.Administrative linkage – no clue

2.One-way linkage – just do it

3.Two-way linkage – give us your thoughts

4.Integrative linkage – we need you in on this from the start

See Figure 2.3 on page 47

The Role of the Chief Human Resource Officer (see Fig 2.9, page 68)

1. Strategic adviser **

2. Talent architect

3. Executive counsellor/confidante/coach **

4. Leader of the HR function

5. Liaison to the board **

6. Workforce sensor

7. Representative of the firm

** combined almost 50% of role

Strategy Implementation for Directional Strategies

1. Concentration strategy: focus on increasing market share, reducing costs or creating and maintaining a market niche for products and services.

2. Internal growth strategy: focus on new market and product development, innovation and joint ventures.

3. External growth strategy: focus on mergers and acquisitions, acquiring vendors and suppliers or buying businesses that allow a company to expand into new markets.

4. Divestment strategy: focus on downsizing, retrenchment, divestitures or liquidation.

Strategy Implementation Directional Strategies

Downsizing: planned elimination of large numbers of personnel, designed to enhance organizational effectiveness

e.g. RIM: 5,000 employees laid off between August & December 2012

PART II: DEVELOPING AND IMPLEMENTING HR STRATEGY

What is Strategic Human Resources Management? Strategic human resource management: the pattern of planned HR activities and deployments intended to enable an organization to achieve its goals.

This consists of structuring the organization, allocating resources, ensuring skilled employees are in place, develop reward systems that align employee behaviour with the organization's strategic goals.

The Role of Human Resources in Providing Strategic Competitive Advantage

1. Emergent Strategies: strategies that evolve from the grass roots of the organization. 1.People come up with new ideas for company direction not

senior management or head office specialists

2. Enhancing Firm Competiveness: developing human capital (knowledge, skills, abilities) in a learning organization (ongoing development)

Model of the Strategic HRM Process

Building an HR Strategy The Basic Process

Improving HRM Effectiveness

1. Restructuring a. centres for expertise

b. field generalists

c. service centre

2. Outsourcing: practice of having another company provide services.

Process Redesign and New Technologies

Reengineering: Review and redesign of work processes to make them more efficient and improve the quality of the end product or service.

New Technologies: Current applications of knowledge, procedures and equipment that have not been previously used. Usually involves replacing human labour with equipment, information processing or some combination of the two.

Self Service: Giving employees online access to HR information.

Building an HR Strategy Evaluating HRM Effectiveness

1. Audit approach: type of assessment of HRM effectiveness that involves review of customer satisfaction or key indicators (such as turnover rate or average days to fill a position) related to an HRM functional are (such as recruitment or training).

2. Analytic approach: type of assessment of HRM effectiveness that involves determining the impact of, or the financial cost and benefits of, a program or practice.

Summary 1. Strategic HRM proactively provides a competitive advantage through its human resources.

2. HRM function needs to be involved in the formulation of strategy to identify people-related issues.

3. HRM develops and aligns HRM practices that ensure that the company has motivated employees with the necessary skills.

4. Emerging strategic role of HRM requires HR professionals to develop business, professional-technical, change management and integration competencies.

5. HR must involve line executives.

6. HR must measure its effectiveness using audit or analytic approaches.

7. Continuous improvement of HRM using methods such as restructuring, process redesign, outsourcing and use of technologies.

8. Critical component is the role of the chief human resource officer.

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