STRATEGIC HUMAN RESOURCE MANAGEMENT

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CHAPTER 2

• STRATEGIC HUMAN RESOURCE MANAGEMENT

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Contents of Chapter 2

• Understanding the business context
• Approaches to the strategy-making process
• The rise of strategic human resource management
• Exploring the relationship between strategic
  management and SHRM
• The configurational approach
• The resource-based view of SHRM
• Best-practice SHRM

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Understanding the business context

• The nature of business strategy
• What is Strategy ? -gt Content
• How is strategy formed? -gt Process

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Approaches to the strategy-making process

• The classical-rational-planning approach
• The evolutionary approach
• The processual approach
• The systemic approach

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The classical or rational-planning approach

• Common elements in successful strategies

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The classical or rational-planning approach

• Three level is viewed in the classical
  perspective
• Corporate level it relates to the overall scope
  of the organization, its structures, financing
  and distribution of key resources
• Business level it relates to its competitive
  positioning in markets/products/services
• Operational level relates to the methods used by
  the various functions marketing, finance,
  production and of course human resources to meet
  the objectives of the higher-level strategies

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The classical or rational-planning approach

• Analysing an organization
• Analyse the external environment
• Political
• Legal
• Technological
• Economic influences on business
• Now categories these into opportunities and
  threats

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The classical or rational-planning approach

• Analyse the internal environment
• Resources
• Structure
• Leadership
• Skills
• Knowledge
• Culture
• Now categories these into strengths and
  weaknesses

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The classical or rational-planning approach

• Conduct a SWOT analysis
• Put your analysis of the external and internal
  environment into a SWOT analysis. You might find
  it useful to prioritize the key strengths and
  weaknesses of the business, and the main threats
  and key opportunities available to the business.
  Remember that it is important to be able to
  justify your decisions. You also need to be clear
  about differentiating between business and HR
  issues, although it is likely that certain HR
  strengths could be a core business
  competence/weakness

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The classical or rational-planning approach

• Strategic choice
• Now consider the organizations strategy, review
  its vision statement, mission statement,
  corporate objectives and values. Does a
  comprehensive analysis of the external and
  internal environment of your organization help
  you to understand the reasoning behind the
  organizations strategy?

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The classical or rational-planning approach

• Implementation
• What changes has the organization made in terms
  of culture, structures, leadership and HR
  practices to deliver its strategy? Have these
  changes been effective? Why? Why not?

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The evolutionary approach

• The evolutionary approach suggests that markets
  are too competitive for expensive strategizing
  and too unpredictable to outguess. They believe
  that sophisticated strategies can deliver only a
  temporary advantage, and some suggest focusing
  instead on efficiency and managing the
  transaction cost

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The processual approach

• This approach recognizes the inherent rivalries
  and conflicting goals present within
  organizations, and the impact this can have on
  strategy implementation.

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The systemic approach

• According to this approach, organizations differ
  according to the social and economic systems in
  which they are embedded

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Approaches to the strategy-making process

• Whittingtons model

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The rise of SHRM

• A good business strategy, one which is likely to
  succeed, is formed by people factors.
• In the majority of organizations people are now
  the biggest asset. The knowledge, skills and
  abilities have to be deployed and used to the
  maximum effect if the organization is to create
  value

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Exploring the relationship between strategic and
SHRM the best-fit school of SHRM

• Best-fit Models of HRM that focus on alignment
  between HRM and business strategy and the
  external context of the firm. Tend to link or
  fit generic type business strategies to generic
  HRM strategies
• Best-fit was therefore explored in relation to
  life-cycle models and competitive advantage
  models, and the associated difficulties of
  matching generic business-type strategies to
  generic HRM strategies were considered,
  particularly in their inherent assumptions of a
  classical approach to the strategy-making process

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Exploring the relationship between strategic and
SHRM the best-fit school of SHRM

• Life-cycle models
• In the start-up phases Flexibility in HR
• In the growth stage Grow size of organization,
  development of more formal HR
  policies and procedures
• In the maturity stage Move to cost control by HR
  strategy
• In the decline stage
• How can HR strategy secure and retain the type of
  HR that are necessary for the organizations
  continued viability, as industries and sectors
  develop?
• Which HR policies and practices are more likely
  to contribute to sustainable competitive
  advantage as organizations go through their
  life-cycle

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Exploring the relationship between strategic and
SHRM the best-fit school of SHRM

• Competitive advantage models
• Three key bases of competitive advantage cost
  leadership, differentiation through quality and
  service, and foucus or niche market -gt to fit
  the generic strategies of cost reduction, quality
  enhancement and innovation
• The cost reduction-led HR strategy is likely to
  focus on the delivery of efficiency through
  mainly hard HR techniques, whereas the quality
  enhancement
• The innovation-led HR strategies focus on the
  delivery of added value through softer HR
  techniques and policies

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Exploring the relationship between strategic and
SHRM the best-fit school of SHRM

• Best-fit approach to strategic HRM explored the
  close relationship between strategic management
  and HRM, by considering the influence and nature
  of vertical integration. Vertical integration,
  where leverage is gained through the close link
  of HR policies and practices to the business
  objectives and therefore the external context of
  the firm, is considered to be a key theme of
  strategic HRM

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Exploring the relationship between strategic and
SHRM the best-fit school of SHRM

• Limitations of best-fit models of SHRM
• The reliance on the classical rational-planning
  approach to strategy-making, its reliance on
  determinism and the resulting lack of
  sophistication in their description of generic
  competitive strategies.
• Best-fit models tend to ignore employee interests
  in the pursuit of enhanced economic performance.
• Lack of emphasis on the internal context of
  individual businesses within the same sector, and
  the unique characteristics and practices that
  might provide its main source of sustainable
  competitive advantage.

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Exploring the relationship between strategic and
SHRM the best-fit school of SHRM

• Configurational approach An approach that
  identified the benefits of identifying a set of
  horizontally integrated HR practices that were
  aligned to the business strategy, thus fitting
  the internal and external context of the
  business.
• HR practices are defenders
• HR practices are prospectors

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The resouce-based view of SHRM

• Resource-based view Strategy creation built
  around the further exploitation of core
  competencies and strategic capabilities.
• Core competences Distinctive skills and
  knowledge, related to product, service or
  technology, that can be used to gain competitive
  advantage.
• The VRIO framework
• Value
• Rarity
• Inimitability
• Organization

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The resouce-based view of SHRM

• The VRIO framework
• Value
• Rarity
• Inimitability
• Organization

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The resouce-based view of SHRM

• The VRIO framework
• Value
• How the HR function can create value to reduce
  cost, such as reduction in headcount and the
  introduction of flexible working practices .
• How they might increase revenue, as the business
  as effiency, also as customer selection, customer
  retention and customer referral, means through
  enhanced customer service and customer added
  value.
• Which HR contribute the most to suitainable
  competitive advantage

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The resouce-based view of SHRM

• The VRIO framework
• Rarity
• The HR Executive needs to consider how to develop
  and exploit rare characteristics of a firms
  human resources to gain competitive advantage

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The resouce-based view of SHRM

• The VRIO framework
• Inimitability
• If an organizations human resources add value
  and are rare, they can provide competitive
  advantage in the short-term, but if other firms
  can imitate these characteristics, then over time
  competitive advantage may be lost and replaced
  with competitive parity.

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The resouce-based view of SHRM

• The VRIO framework
• Organization
• To ensure that the HR function can provide
  sustainable competitive advantage, the VRIO
  framework suggests that organizations need to
  ensure that they are organized so that they can
  capitalize on the above, adding value, rarity and
  inimitability.

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The resouce-based view of SHRM

• Applying the resource-based view of SHRM
• The resource-based view of SHRM has recognized
  that both human capital and organizational
  processes can add value to an organization
  however, they are likely to be more powerful when
  they mutually reinforce and support one another.

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The resouce-based view of SHRM

• Limitations of the resource-based view
• The resource-based view represents a paradigm
  shift in strategic HRM thinking by focusing on
  the internal resources of the firm as a key
  source of sustainable competitive advantage,
  rather than focusing on the relationship between
  the firm and the external business context
• Human resources, as scarce, valuable,
  organization-specific and difficult to imitate
  resources, therefore become key strategic assets.

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Best-practice SHRMhigh-commitment models

• Best practice
• A set' or number of human resource practices
  that have the potential to enhance organizational
  performance when implemented. Usually categorized
  as high commitment', high involvement' or high
  performance'.

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Best-practice SHRMhigh-commitment models

• The best-practice approach highlights the
  relationship between sets of good HR practices
  and organizational performance, mostly defined in
  terms of employee commitment and satisfaction.
  These sets of best practice can take many forms
  some have advocated a universal set of practices
  that would enhance the performance of all
  organizations to which they were applied others
  have focused on integrating the practices to the
  specific business context (high-performance work
  practices). A key element of best practice is
  horizontal integration and congruence between
  policies.

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Best-practice SHRMhigh-commitment models

• Difficulties arise here, as best-practice models
  vary significantly in their constitution and in
  their relationship to organizational performance,
  which makes generalizations from research and
  empirical data difficult

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Summary to Chapter 2