Strategic Human Resource Management

Human Resource Management

Human resource management (HRM, or simply HR) is the management process of an organization's workforce or human

resources. It is responsible for the attraction, selection, training, assessment, and rewarding of employees, while also overseeing organizational leadership and culture and ensuring compliance

with employment and labor laws.

Why is HR critical to firm performance?

• Service is delivered by people.

• Low quality HR leads to low quality customer service.

• In the 21st century effective knowledge management translates into competitive advantage and profits.

• Knowledge comes from a firm’s people.

Introduction

A strategy: Indicates what an organization's key executives hope to

accomplish in the long run Is concerned with competition and aligning the resources

of the firm

Good HR strategy results in a fit between organizational strategy and HRM policies and programs Recruitment, selection, outsourcing, telecommuting,

performance evaluation, compensation

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Strategic human resource management

Formulating and executing HR systems that produce the employee competencies and behaviors the company needs to achieve its strategic aims

Taking a strategic HRM approach means: Making human resources management a top priority Integrating HRM with the company’s strategy, mission, and

goals

HRM can make significant contributions if included in the strategic planning process from the outset The strategic management process helps determine:

What must be done to achieve priority objectives How they will be achieved

Strategic HRM: A Key to Success

Strategic HRM planning leads to: Growth Profits Survival

Planning also: Expands awareness of possibilities Identifies strengths and weaknesses Reveals opportunities Points to the need to evaluate the impact of internal and

external forces

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The Strategic Management Process

The process of identifying and executing the organization’s mission by matching its capabilities

with the demands of its environment.

Steps in Strategic Management

1. Define the current Business

2. Perform External and Internal Audits

3. Formulate New Business and Mission Statements

4. Translate the Mission into strategic Goals

5. Formulate Strategies to Achieve the Strategic Goals

6 Implement the Strategies.

7 Evaluate performance.

Types of Strategies

Managers engage in Three Types of Strategic Planning 1. CORPORATE STRATEGY2. COMPETITIVE STRATEGY3. FUNCTIONAL STRATEGY

1. Diversification Strategy implies that the firm will expand by adding new product lines.

2. Vertical Integration Strategy means the firm expands by, perhaps , producing its own raw materials , or selling its products direct.

3. Consolidation Strategy – reducing the company’s size.4. Geographic Expansion Strategy – taking business abroad.

1. Cost Leadership: The enterprise aims to become the low-cost leader in an industry.

2. Differentiation: A firm seeks to be unique in its industry along dimensions that are widely valued by buyers.

3. Focus: Focusers crave out a market niche and compute by providing a product or service customers can get in no other way.

Functional Strategy

Functional Strategy identify the basic courses of action that each department will pursue in order to help the business attain its competitive goals. The firms Functional Strategy should make sense in terms of its business/ competitive strategy.

For Ex:- Dell’s Human Resource Strategies include putting its HR activities on the Web to support Dell’s low-cost competitive strategy.

Strategic Fit

Strategic planning expert Michael Porter emphasizes the “fit” point of view. He says, All of the firm’s activities must be tailored to or fit the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies.

Leverage

“Stretch” in leveraging resources—supplementing what you have and doing more with what you have—can be more important than just fitting the strategic plan to current resources

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Strategic Role for HR– HR becomes a strategic business partner by:

• Focusing on developing HR programs that enhance organizational performance.

• Involving HR in strategic planning at the onset.• Participating in decision making on mergers, acquisitions,

and downsizing.• Redesigning organizations and work processes• Accounting and documenting the financial results of HR

activities.

1•Workplace Safety

Creating a work environment free from unnecessary hazards is a strategic role of every human resources manager. Strategic development for workplace safety entails risk management and mitigating potential losses from on-the-job injuries and fatalities. Workers' compensation insurance is an area in which a strategic plan helps lower company expense for insurance coverage. Reducing accidents through training employees on the proper use of complex machinery and equipment is one of the functional tasks associated with creating a safe work environment

2•Compensation and Benefits

An employer's compensation and benefits structure partly determines the company's business reputation and image. In addition, the decisions that human resources managers make regarding pay scales and employee benefits can impact employee satisfaction, as well as the organization's ability to recruit talented workers. Job evaluation, labor market conditions, workforce shortages and budget constraints are factors that HR managers consider in a strategic plan for pay and benefits. In addition, a strategy includes weighing an employer's choices between satisfying its workforce and pleasing the company's stakeholders. Pursuant to the health care reform law passed in 2010, human resources managers for companies with more than 50 employees must decide between offering group health coverage and paying fines, beginning in 2014

3 •Employee Training

Human resources managers' strategic role with respect to employee training and development prepares the workforce for future positions within the company. Succession planning, promotion-from-within policies and performance evaluation factor into the human resources manager's role. Training and development motivate employees, and in some cases, improve employee retention.

4•Recruitment and Selection

Employee recruitment and selection is as much a part of employee relations as it is a separate discipline unto itself. Therefore, a human resources manager's strategic role is to combine elements of employee relations into the employer's recruitment and selection strategy. Integrating employee recognition programs into promotion-from-within policies is an effective form of employee motivation that combines the employee relations and recruitment and selection areas of human resources.

5• Employee Relations

Some human resources managers believe that strengthening the employer-employee relationship rests solely in the employee relations areas of the HR department. This isn't true. Nevertheless, employee relations is such a large part of every discipline -- including salaries, benefits, safety, training and employee development -- that sustaining an employee relations program is an important element of human resources strategy. Implementing a workplace investigation process and enforcing fair employment practices are two components of an employee relations program. The strategic role of a human resources manager is to determine how to identify and resolve workplace issues, as well as how best to attract a diverse pool of applicants through effective recruitment and selection processes.

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Changing Roles of HR Management

Note: Example percentages are based on various surveys.

Traditional HR vs. Strategic HR

Point of distinction

Focus

Role of HR

Initiatives

Time horizon

Control

Job design

Key investmentsAccountabilityResponsibility for HR

Traditional HR

Employee Relations

Transactional change follower and respondent

Slow, reactive, fragmented

Short-term

Bureaucratic-roles, policies, procedures

Tight division of labor; independence, specialization

Capital, products

Cost centre

Staff specialists

Strategic HR

Partnerships with internal and external customers Transformational change leader and initiatorFast, proactive and integratedShort, medium and long (as required)Organic-flexible, whatever is necessary to succeedBroad, flexible, cross-training teams

People, knowledgeInvestment centreLine managers

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Shifts in HR management in India

Emerging HR practice

Strategic role

Proactive

Key part of organizational

mission

Service focus

Process-based organization

Cross-functional teams,

teamwork most important

People as key investments/assets

Traditional HR practice

Administrative role

Reactive

Separate, isolated from

company mission

Production focus

Functional organization

Individuals encouraged,

singled out for praise,

rewards

People as expenses

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Strategic Role for HR– HR becomes a strategic business partner by:

• Focusing on developing HR programs that enhance organizational performance.

• Involving HR in strategic planning at the onset.• Participating in decision making on mergers, acquisitions,

and downsizing.• Redesigning organizations and work processes• Accounting and documenting the financial results of HR

activities.

Strategic Human Resource Management Tools

These tools help to translate the company’s broad strategic goals into specific human resource management policies and activities.

1 Strategy Map: The strategy map shows the “ big picture” of how each department ‘s performance contributes to achieving the overall strategic goals .We have a example of southwest airline which has a cost leadership strategy. The strategy map of south west airline succinctly lays out the hierarchy of main activities required for southwest airline to succeed. At the top is achieving company wide , strategic financial goals. Then the strategy map shows the chain of activities that help southwest airlines to achieve these goals. For example as we saw earlier in this chapter to boost revenues and profitability southwest needs to fly fewer planes (to keep cost down ), maintain low prices, and maintain on time flights. In turn (further down the map ) on time flights and low prices require fast turnaround. And fast turnarounds require motivated ground and flight crews.

The HR Scorecard: The HR scorecard is not a score card. It is process for assigning financial and non financial goals or metrics to the human resource management related chain of activities required for achieving company strategic aims and for monitoring results.

Digital Dashboards: The saying “ a picture is worth a thousand words”. A digital Dashboard presents the manager with desktop graphs and charts , and so a computerised picture of where the company stands on all those metrics from the HR Scorecard process. As in the illustration a top manager dashboard for for southwest airline might display on the PC screen real time trends fpr strategy map activities such as fast turnaround, attracting and keeping customers and on time flights . This gives the manager time to take corrective action.

Copyright © 2005 South-Western. All rights reserved.

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Benefits of a Strategic Approach to HR

• Facilitates development of high-quality workforce through focus on types of people & skills needed

• Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest cost

• Facilitates planning & assessment of environmental uncertainty & adaptation of organization to external forces

Shanghai Portman HotelOver several years ago, the Ritz Carlton company took over managing the Portman Hotel in Shanghai. The new Management decided

Questions1 what are steps of strategic management ?

2 What are different types of strategies?

3 what is strategic role of HRM?

4 What are strategic tools of HRM?

5 Traditional HRM v/s Strategic HRM?