Strategy Formulation

strategy

• Strategy focuses on the integration of goals, policies, and action sequences into a cohesive whole.

• The strategy deals with providing direction, coordinating and providing a decisional frame work. it also deals with the allocation of resources.

• Strategy is concentration of resources on selected opportunities for competitive advantage

Strategy Formulation• Strategy formulation provides direction to

the organization.• Effective organizational strategies are

required to accomplish organizational mission while being guided by investment perspective.

• After scanning environment and completing SWOT analysis, organization becomes ready for strategy formulation

Importance of HR Strategy• Due to effective role of HRM in providing competitive edge to

the organization the HRM function has become more important.• There is greater recognition that distinctive competencies are

obtained through highly developed employees skills, distinctive organizational culture, management processes and systems.

• Role of HR in controlling labour cost also elevated the role of HRM. Impact of inefficient use of human resources on organizational results is better understood by all stakeholders of the organization.

• Lack of trust, resistance to change , antagonistic labour management relations motivated problems and restrictive work practices to find causes of lower productivity are of prime focus area for managers.

• Strategic HRM management and the sub-process of Human resources planning are inreasingly being seen as means of buffering environmental Uncertainty. And these processes are becoming integrated into the strategy formulation and planning process.

Theoretical foundations• Goal of strategic HRM is effective application of such

resources to meet organization’s strategic requirements and objectives.

• Getting the strategy of the business implemented effectively, getting everybody from top of Human Resources Organization to bottom , doing things which make the businiss successful.

• Strategic Human Resources is largely about integration & adaptation . It’s concern is to ensure that:

• HRM is fully integrated with the strategy and strategic needs of the organization

• HR policies cohere both across policy areas and hierarchies.• HR practices are adjusted, accepted and used by line managers

and employees as part of their every day work.

Formulation Of Strategy• The systematic approach to formulating

strategy:• Define mission.• Set objectives.• Conduct internal & external environment scan to assess

strengths & weaknesses, opportunities & threats ( SWOT).• Analyze existing strategies to determine their relevance to

internal & external appraisal. • Define distinctive capabilities of the organization.• Define key strategy issues.• Determine corporate and functional strategies.• Prepare integrated strategic plan.• Implement the strategies.• Monitor implementation and revise existing strategies as

necessary.

Strategic planning• Strategic planning is also known as Strategy

formulation process.• James Craft’s description of rationale / comprehensive

strategic planning—• “The rationale / comprehensive process , emphasizes purposeful

activity through a logical formulation of goals . Examination of alternatives and delineation of plans prior to actions. It tends to have long term orientation and focuses on measureable forces affecting the organization as well as on quantitative activities and procedure “

• The process of rationale / comprehensive strategic planning is composed of following steps.

• Development of organizational philosophy and mission statement.• Environmental scanning.• SWOT Analysis.• Formulation of strategic objectives.• Generation of alternative strategies for achieving objectives.• Evaluation & selection of strategies.

• Competitive strategy in Business Units.– Relevant to the development of HR strategy.– There are five forces which have some

foundation in the economic reasoning of the economist Alfred Marshall, includes:1. The ease with which new competitors can enter

industry.2. Customer’s bargaining power.3. Supplier’s bargaining power.4. The strength of rivalry among industries competing

firms5. The availability of substitutes for the industry’s goods

and services.

Planning in strategic business units. HR can play a vital role in strategic planning at the level

of the strategic business units, for developing alternatives.

• Human Resources Strategy.– Randall Schuler defines Human Resource Strategy as

“ HR strategies are essentially plans and programs to address and solve fundamental strategic issues related to Human Reources Management.

– HR focuses on alignment of the organizational HR practices, policies and programs with corporate and strategic business units plans.

• HR Planning or Staffing Planning.– Hr planning provides input into higher level strategic

planning process, development of forecosts.– it signals the need for change and serve to guide the

activities within HR management.

• International strategy.– Companies operate in different countries and use

different strategies to produce products and services that enable them to compete at the global marketplace.

• Multinational , Global & Transnational Strategies.

• Multinational or multi-domestic strategies provide a power advantage in dealing with unionized workers because labour difficulties may shut down production and revenue flow from these countries.

• Also the companies have options to shift business operations from one country to another depending upon the conditions of labour relations, cost or required skills level etc.

Strategic Alliances• Alliance with foreign companies to combine distinctive

competencies.• Collaborations may unintentionally open up a firm’s entire

spectrum of core competencies, technologies, and skills to encroachment and learning by it’s partners.

• Alliances can be used as indirect strategic weapon to slowly “de-skill” a partner who does not understand the risk inherent in such arrangement.

• HR Manager need to know how to decrease likelihoods of these undesirable outcome.

• Measures that may prevent alliances for working to the eventual disadvantage of the company are:1. Understanding the real aspirations of alliance partner.2. Keeping in mind the original purposes of the alliance so that the

objectives are not redefined to the company’s disadvantage.3. Avoiding a false sense assurance provided by legal control since

the real key is knowledge transfer.4. Keeping alliance interface managers in place over long period of

time so that subtle nuances are understood because the latter is often in opposition to the length of job rotation cycles in management development programs . HR manager needs to lengthen these cycles.

• Sustainable Global Competitive Advantage.• Long term capabilities and focus on the factors that provide

companies with the real and sustainable compitiive advatage in the global economy.

• Avoiding turnover of highly skilled employees to competitors.• Proactive approach towards future developmental needs.

• Globally competent managers.• Recruitment, selection and development of globally competent

managers is very important factor.• Transitionally competent managers have global understanding of

business and broad cultural knowledge.

• Location of production facility.• Regulations applicability)• Investment security and perspective-economy of the country.• Competition and business prospects in the market.

• Human Resources contributions to Strategy .– Environmental scanning and competitive intelligence.– Implication of resource real location decision.– Lead time for dealing with labour shortages and surpluses.

• Strategic driven role behaviours and practices.– Linkage between competitive strategies and

HR practices i.e innovation, quality enhancement, cost reduction etc.

• Strategic HR typology.-– Application of a conceptual typology has two

dimensions.• The extent to which such activities are rationale or

transactional.• High or low strategic value of activities.

•Staffing planning.•Benefits planning.•Retirement planning.•compliance

•Performance enhancement.

•Consulting.

•Employees relations.

•Labour negotiations.

•Executive compensation.

•Employee development.

•Management development.

•Recruitment interviewing.

•Important to executives

•Payroll•Benefits admin.•Retirement admin.•Employee record.•Relocation admin.•Recruitment info.&proc.

•Recruitment info& proc•Employee assistance prog.

High

Strategic value of activity

Low

RelationshipTransactionalTypes of HR Activity

• Classifying HR Types- .• Strategic and industrial differences can be understood through

examining different classification of strategic types.• Principles of enlightened management suggest that companies

should :– Develop their employees .– Strive towards providing job security.– Seek international supply of candidates for future higher

level responsibilities.

– Club- – Club personnel policies emphasize training & development,

career development opportunities & employee retention etc. – when the strategy is to be low cost producer, the focus is

on the cost control.– Companies compete by increasing their efficiency,

controlling cost, maintain quality and providing customer services to their satisfaction.

–Baseball teams-• The baseball team brings in talent at any level

within the organization and does not place much emphasis on development. their approach is to buy talent. development takes place when assignments change.

• Companies in this category peruse an innovation strategy. They design and produce new products and routinely redeploy resources from discontinued products to the development of new one .

• Career paths often involve inter organizational moves as individual takes job with new company—with greater compensation, responsibility, and professional stature.

• Promotion policies are often “Up or Out” as those passed over for promotion are terminated.

– Academy.• Academics are product innovators and competitors

in the long run production roles.• The personnel policies follow focused strategy.• Falls between the two extremes of clubs and

baseball.• Emphasis on development but some outsiders are

hired to fill higher level positions.• The company “makes” and “buy” human resource .

– Fortresses. • Companies in this category are in high competitive

markets and are at the mercy of environment.• By nature of business these companies are

reactive and there are few strategic implications.

Network Organizations & Strategy

• Result of advancement in communication technology.

• these organizations acquire or divest their organizational units on their return on assists and outsource activities that other companies can produce at lower cost and less time.

• These companies retain only those activities in which they have expertise.

• Integration of strategy and HR Planning.– The integration of business strategy, human resource strategy

and planning is important for long term planning efforts.

• Evolution of strategy of HR Planning Integration.– Four stages in the evolution of linkage between busniness

planning and HR management.• Administrative linkage.• Implementation.• Providing input for implementing strategic business plans and input

to strategy formulation.• Integrative linkage

• Determinants Of Integration.• Environmental factors .• Level of diversification.• Role and status of HR in devising policies on compensation ,

reward etc.• HR planning effectiveness and linkage with business plans/

Conditions under which integration may not be appropriate

• Strategic integration is appropriate only when HR management function has progressed through earlier forms of development. The stage of development in HR management should match the stage of development of parent organization.

• Five stages of organizational development are:– Initiation or startup.– Functional growth.– Controlled growth.– Functional integration. – Strategic integration.

HR Manager & Strategic Planning problems

– Isolated planning- Lack of knowledge or feedback of results for prolonged period of time.

– Mis-matches between strategic planning tasks and individual managers skills.

– Lack of top management commitment to the strategic planning process,

• Requirements for Strategic HR Managers.– Information management skills.– Planning skills.– Management skills.– Integration skills.– Change management skills.

THANK YOU