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Title: STRATEGIC HUMAN RESOURCE MANAGEMENT
Description: The concept of human resource management (HRM) has attracted a lot of attention from academics and practitioners alike since it first emerged in the mid-1980s. The former often suspect both the practicality and morality of HRM. The latter have often absorbed some if not all of the HRM philosophy and attempted to put it into effect with varying degrees of success for various good and bad reasons
Description: The concept of human resource management (HRM) has attracted a lot of attention from academics and practitioners alike since it first emerged in the mid-1980s. The former often suspect both the practicality and morality of HRM. The latter have often absorbed some if not all of the HRM philosophy and attempted to put it into effect with varying degrees of success for various good and bad reasons
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CHAPTER - 2
STRATEGIC HUMAN RESOURCE MANAGEMENT
2
...
The former often suspect both the practicality and morality of
HRM
...
The overall purpose of HRM is to ensure that the organization is able to
achieve success through people
...
Specifically, HRM aims to:
enable the organization to obtain and retain the skilled, committed and
well-motivated workforce it needs;
enhance and develop the inherent capacities of people - their contributions, potential and employability - by providing learning and continuous development opportunities;
develop high-performance work systems that include 'rigorous
recruitment
and
selection
procedures,
performance-contingent
incentive compensation systems, and management development and
training activities linked to the needs of the business' (Becker et al,
1997) 2;
develop high-commitment management practices that recognize that
employees are valued stakeholders in the organization and help to
develop a climate of cooperation and mutual trust;
create a climate in which productive and harmonious relationships can
be maintained through partnerships between management and
employees;
53
develop an environment in which teamwork and flexibility can flourish;
help the organization to balance and adapt to the needs of its stake
holders (owners, government bodies or trustees, management,
employees, customers, suppliers and the public at large);
ensure that people are valued and rewarded for what they do and
achieve;
manage a diverse workforce, taking into account individual and group
differences in employment needs, work style and aspirations;
ensure that equal opportunities are available to all;
adopt an ethical approach to managing employees that is based on
concern for people, fairness and transparency;
maintain and improve the physical and mental well-being of
employees
...
The
research conducted by Gratton et al (1999)3 found that there was generally a
wide gap between rhetoric and reality
...
This arises because of contextual and process
problems: other business priorities, short-termism, lack of support from line
managers, an inadequate infrastructure of supporting processes, lack of
resources, resistance to change and a climate in which employees do not
trust management, whatever they say
...
54
The full concept of HRM emerged in the mid-1980s against the background of
the popularist writers on management who flourished in that decade
...
These popular 'school of excellence' writers may have exerted
some influence on management thinking about the need for strong cultures
and commitment (two features of the HRM philosophy) but, as Guest (1993) 9
has commented, they were right enough to be dangerously wrong
...
The initial concepts developed by American writers in the 1980s
...
The take-up of these comments by British writers in the late 1980s and
earlier 1990s who were often sceptical about the reality beyond the
rhetoric and dubious about its morality
...
The assimilation of HRM into traditional personnel management
...
The matching model of HRM
One of the first explicit statements of the HRM concept was made by the
Michigan School (Fombrun et al
...
They held that HR systems and the
organization structure should be managed in a way that is congruent with
organizational strategy (hence the name 'matching model')
...
1) which consists of four generic processes or functions
that are performed in all organizations
...
Selection - matching available human resources to jobs
...
Appraisal- (performance management)
...
Rewards - 'the reward system is one of the most under-utilized and
mishandled managerial tools for driving organizational performance'
...
55
4
...
Figure 2
...
The Harvard framework
The other founding fathers of HRM were the Harvard School of Beer et al
(1984)11 who developed what Boxall (1992)12 call the 'Harvard framework'
...
Without either a central philosophy or a strategic vision - which can be
provided only by general managers - HRM is likely to remain a set of
independent activities, each guided by its own practice tradition
...
These pressures have created a need
for 'a longer-term perspective in managing people and consideration of people
as potential assets rather than merely a variable cost'
...
They also stated that: 'Human resource management involves all management decisions and action that affect the nature of the relationship between
the organization and its employees - its human resources'
...
The Harvard framework as modeled by Beer et al is shown in Figure 2
...
57
Figure 2
...
Walton (1985), also of Harvard, expanded the concept by emphasizing the
importance of commitment and mutuality:
The new HRM model is composed of policies that promote mutuality - mutual
goals, mutual influence, mutual respect, mutual rewards, and mutual
responsibility
...
The concept of strategic HRM is based on the important part of the HRM
philosophy that emphasizes the strategic nature of HRM and the need to
integrate HR strategy with the business strategy
...
A distinction has been made by Storey (1989) 13 between the 'hard'
and 'soft' versions of HRM
...
It adopts a business-oriented
philosophy that emphasizes the need to manage people in ways that will
obtain added value from them and thus achieve competitive advantage
...
Fombrun et al (1984) quite explicitly
presented workers as another key resource for managers to exploit
...
based on the business case of a need to respond
to an external threat from increasing competition
...
He also commented that HRM 'reflects a long-standing capitalist tradition in
which the worker is regarded as a commodity'
...
Soft HRM
The soft model of HRM traces its roots to the human relations school,
emphasizing communication, motivation and leadership
...
It therefore views employees, in the words
of Guest (1999), as means rather than objects
...
Attention is also
drawn to the key role of organizational culture
...
It is a therefore a unitarist approach
...
It has, however, been observed by Truss (1999) that 'even if the rhetoric of
HRM is soft, the reality is often hard, with the interests of the organization
prevailing over those of the individual'
...
2
...
Deliverables guarantee outcomes of HR work
...
60
The framework in Figure 2
...
Ulrich devised this framework over the course of his work with dozens
of companies and hundreds of HR professionals; many companies have since
used it as a way to describe the deliverables of their HR work
...
Focus ranges from longterm /strategic to short-term/operational
...
Activities
range from managing processes (HR tools and systems) to managing people
...
To understand each of these roles more fully, we must consider
these three issues: the deliverables that constitute the outcome of the role,
the characteristic metaphor or visual image that accompanies the role and the
activities the HR professional must perform to fulfill the role
...
1
summarizes these issues for each of the roles identified in- Figure 2
...
Figure: 2
...
Management of Firm
Infrastructure
Management of
Transformation and
Change
People
Management of Employee
Contribution
DAY TO DAY / OPERATIONAL FOCUS
Source: Ulrich, D
...
24
Management of Strategic Human Resources
The strategic HR role focuses on aligning HR strategies and practices with
business strategy
...
By
fulfilling this role, HR professionals increase the capacity of a business to
execute its strategies
...
First, the business can adapt- to change because
61
the time from the conception to the execution of a strategy is shortened
...
Third, the business can achieve financial performance through its
more effective execution of strategy
...
1 Definition of HR Roles
Deliverable/
Role/Cell
Metaphor
Outcome
Management of
Strategic Human
Executing strategy
Strategic Partner
Resources
Management of
Firm Infrastructure
Management of
Employee
Contribution
Management of
Transformation
and Chang
Building an
efficient
infrastructure
commitment
Expert
Processes: "Shared services"
and Champion
capability
organization
"Organizational diagnosis"
Reengineering Organization
Employee
Creating a renewed
Aligning HR and business strategy:
Administrative-
Increasing
employee
Activity
Change Agent
Listening and responding to
Employees: "Providing resources to
employees
Managing
transformation
change: "Ensuring capacity or change
Source: ibid page 25
The deliverable from the management of strategic human resources is
strategy execution
...
There
are many examples
...
As Whirlpool sought to gain more global market
share in appliances, HR strategies modified hiring practices and career paths
to ensure multinational competence
...
When Motorola wanted to gain access to Russian markets, it
62
and
offered training and development opportunities to Soviet customers
...
The HR executives
who designed these new practices were strategic partners: They mastered
the skill of organizational diagnosis and aligned HR practices with business
strategies
...
" HR professionals become
strategic partners when they participate in the process of defining business
strategy, when they ask questions that move strategy to action, and when
they design HR practices that align with business strategy
...
In any business setting, whether corporate, functional, business unit, or product line, a strategy exists either
explicitly, in a formal process or document, or implicitly, through a shared
agenda on priorities
...
The process of
identifying these HR priorities is called organizational diagnosis, a process
through which an organization is audited to determine its strengths and
weaknesses
...
But in answering the call to
become "more strategic" and "more involved in the business many - HR
professionals have inappropriately identified this as the only HR role
...
Management of Firm Infrastructure
Creating an organizational infrastructure has been a traditional HR role
...
As a caretaker of the
corporate infrastructure, HR professionals ensure that these organizational
63
processes are designed and delivered efficiently
...
HR professionals create infrastructure by constantly examining and improving
the HR processes
...
HR
professionals accomplish administrative efficiency in two ways
...
For example, through reengineering HR
processes, one firm recently found twenty-four separate registration systems
for training; new efficiency and cost savings were achieved by streamlining
and automating them into a single system
...
A second way in which HR
executives can improve overall business efficiency is by hiring, training, and
rewarding managers who increase productivity and reduce waste
...
At a simplistic level, most HR functions today
(like most other business functions) are being asked to do more with less-and
accomplishing this feat should be the outcome of undertaking this role
...
"
As implied above, HR professionals acting as administrative experts ferret out
unnecessary costs, improve efficiency, and constantly find new ways to do
things better
...
In many firms, this reengineering of HR processes has led to a
new HR organizational form called shared services, through which HR
administrative
services
are
shared
64
across
company
divisions
while
maintaining service quality for their users (line managers, employees, and
executives)
...
In companies in which intellectual capital becomes a critical source of the
firm's value, HR professionals should be active and aggressive in developing
this capital
...
With active
employee champions who understand employees' needs and ensure that
those needs are met, overall employee contribution goes up
...
HR practices should help employees
to contribute through both their competence to do good work and their
commitment to work diligently
...
The metaphor for this HR role as implied above is "employee champion"
...
With employee
champions who understand the needs of employees and ensure that those
needs are met, overall employee contribution goes up
...
When employees are competent and committed, employee intellectual capital
becomes a significant appreciable asset that is reflected in a firm's financial
results
...
As higher and higher demand are placed
on employees, HR professionals and line managers who serve as employee
champions creatively seek and implement the means for employees to voice
opinions and feel ownership in the business; they help to maintain the
psychological contract between the employee and the firm; and they give
employees new tools which to meet ever higher expectations
Management of Transformation and Change
A fourth key role through which HR professionals can add value to a firm is to
manage transformation and change
...
Change refers to the
ability of an organization to improve the design and implementation of
initiatives and to reduce cycle rime in all organizational activities; HR
professionals help to identify and implement processes for change
...
The deliverable from management of transformation and change is capacity
for change
...
As change agents, HR executives help organizations identify a
process for managing change
...
" As change
agents, HR professionals face the paradox inherent in any organizational
change
...
For the HR professional
serving as change agent, honoring the past means appreciating and
respecting the tradition and history of a business while acting for the future
...
Being change agents is clearly part of the value-added role of HR
professionals as business partners
...
In research on the competencies of HR professionals, my
colleagues I have
found that the domain of competencies related to
managing change was the most important for success as an HR professional
...
IMPLICATIONS OF MULTIPLE ROLES FOR HR PROFESSIONALS
HR professionals may add value to a business in four ways; they can help
execute strategy, build infrastructure, ensure employee contribution, and
manage transformation and change
...
The HR role-assessment survey offers one effective and flexible
means for undertaking this task
...
This assessment,
which can be done 'at the corporate business unit, or plant level, will define
the roles as currently played within a business
...
First, the total score for all four roles (ranging from 40 to 200) constitutes a
general assessment of the overall quality of HR services within a business
...
Total scores below 90 indicate HR
services perceived as being of low quality overall
...
Most
companies that have 'collected these data scored higher in the operational
67
quadrants and lower in the strategic quadrants, a result consistent with
traditional HR roles
...
In general, the management transformation and
change role receives the lowest scores
...
This can be done either by changing the
questions to request perceptions of "past versus present or future" quality for
each role or by repeating the survey over time
...
Focus on employee contribution has also decreased at most
businesses over the past two decades
...
Over the same period, an emphasis
on strategic intent initiatives, such as globalization customer service, and
multi-generational product design, has encouraged HR focus on strategy
execution and fulfillment of the strategic partner role
...
This shift in
emphasis has meant that HR professionals have done less and less in their
role as employee champion to manage employee contribution
...
68
Comparing HR and Line Manager Views of the HR Function
Another use for the HR role-assessment survey in the appendix is to solicit
responses from line managers as well as HR professionals and to compare
the results
...
Examination of the results can
contribute to improved understanding of the HR function and company
expectations in a number of ways
...
Alignment of HR and line expectations may be
good news' since it indicates agreement on the roles and delivery of HR
services
...
In one firm, for example, the
HR and line managers agreed that current delivery of HR services was in the
15 to 20 point range (Out of 40) for each of the four roles
...
' Meeting low expectations implies that
neither HR professionals nor line managers had a stretch vision for HR
...
Mismatched expectations
Mismatched expectations occur when the perceptions of line managers and of
HR professionals differ
...
In these cases, HR professionals perceived their work to
be better than did the clients of that work
...
In a number of firms, client surveys include assessments of HR nor (only by
line managers but also by employees
...
The firm's HR
professionals felt they were designing and delivering excellent services, but
these services were either misunderstood by employees or failed to meet their
needs
...
The HR role-assessment survey thus constitutes a diagnostic tool for
identifying the expectations of line managers and other HR clients
...
HR Function versus Individual HR Professionals
A business may find, in doing the above audits of HR roles, that individual HR
professionals do not have competence in all four roles, but at the same time, it
should find that the function-as an aggregate of individuals-does share a
unified vision and competency
...
As a team, however, this group of talented
individuals was woeful
...
A team of HR experts needs to forge individual talent into leveraged
competencies
...
With focus, time, and commitment, tensions and distrust were
overcome; resources and lessons were shared
...
They began to
70
call on each other and leverage each other's strengths
...
Use of the survey as a diagnostic instrument may thus indicate that although
individuals in a business have unique talents in one of the four roles, the
overall HR function needs to unify these individual talents to gain strength and
efficacy
...
First, HR professionals in a business have unique responsibility and
accountability for ensuring that the deliverables from each role are fulfilled
...
Second, accomplishing the goals and designing the processes for achieving
the
goals
are
different
issues
...
That is, HR professionals must guarantee that a 10 be
achieved for each role, but they don't have to do all the work to make that 10
happen
...
In many cases, responsibility for delivering the four roles is shared, as
indicated by an allocation of points
...
4 indicates one prevailing pattern
of allocation
...
The distinction,
however, between commitment to the outcome (10/10) and delivery of the
outcome (sharing responsibility or dividing the 10 points) remains a
consistently important point for discussion
...
As are the roles themselves, delivery processes and allocations
are subject to change and trends, some of which are discussed below"
Figure 2
...
page 43
Management of employee contribution
The employee contribution HR role has experienced the greatest change in
the recent past
...
Today, many firms are dividing delivery: 2
points for HR, 6 points for line managers, and 2 points for employees
...
Over time, many firms hope the employees in
high performing teams will have even more responsibility for their own
development
...
This shift is
counterintuitive but has its own logic
...
In many modern
organizations, however, promotion to the corporate level means becoming
part of a shared service organization that performs administrative work in
order to remove the administrative burden from the field HR professionals
...
Outsourcing HR
activities has been an experiment at many firms that are trying to find ways to
reduce HR costs while increasing the quality of services
...
Strategic HRM
The responsibility for strategy execution in most firms today is shared
between HR professionals and line managers (5 points each)
...
Together,
they team up to accomplish business goals
...
The low allocation of 3 points
to HR professionals indicates that many of them are not fully comfortable or
competent in the role of change agent
...
In fact, HR work was viewed as
antithetical to change, with HR systems providing impediments to, not impetus
73
for, change
...
External consultants offer disciplined,
objective approaches to transformation, with the competence and confidence
to make the change happen
...
As strategic partners with managers, HR
professionals partner with managers and are seen as part of management
...
Employees at one company that was moving its HR function
into strategic partnership saw the HR professionals, whom they felt provided
the only channel through which their concerns were voiced to management,
participating in more management meetings, becoming active in strategic
planning, and becoming synonymous with management
...
As employee champions in partnership with managers and employees, HR
professionals ensure that the concerns and needs of employees are voiced to
management
...
Resolving this conflict requires that all parties-HR, management, and
employees recognize that HR professionals can both represent employee
needs and implement management agendas, be the voice of the employee
and the voice of management, act as partner to both employees and
managers
...
When union
members challenged Fraiser's new "management" commitment, he retorted
with something like, "How can I better meet your needs than by sitting with
and influencing management?" To be a successful partner to both employees
and management requires that both sides trust the HR professional to achieve
a balance between the needs of these potentially competing stakeholders
...
It is not uncommon, for
example, for merger and acquisition decisions to be made based solely on
financial and product/strategic analyses that demonstrate the value of the
venture; only after the decision is made is HR asked to weave the two
companies together
...
Where HR
professionals are asked to represent employee and organizational concerns
during pre-merger diagnosis, more informed decisions are made about all
costs of merger activities, including the merger of cultures and people
...
This
tension between their roles as change agents and as administrative experts
yields a number of paradoxes that must be managed
...
A business must have stability to ensure
continuity in products, services, and manufacturing
...
On the other hand, businesses that fail to change in the end simply fail
...
A business must honor its
past but also move beyond it
...
Old
cultures should ground new cultures, nor become impediments to change
...
A business
needs to encourage free agency and autonomy in making decisions, sharing
information, and soliciting ideas
...
Businesses must balance efficiency and innovation
...
HR professionals need to
encourage risk and innovation while maintaining efficiency
...
To resolve these and other paradoxes, HR professionals dealing with cultural
change need to be both cultural guardians of the past and architects of the
new cultures
...
On the
other hand, in discussions with those who want to demolish history and
tradition, HR professionals need to be advocates of moderation and respect
for earned wisdom
...
This balancing act requires that new cultures lead to new administrative
practices and that administrative practices support culture change
...
Part of the
role of the HR professional as change agent is to moderate such statements
...
76
2
...
First, what determines whether an
organization adopts a strategic approach to HRM, and how is HR strategy
formulated? Of interest is which organizations are most likely to adopt a
strategic approach to HRM
...
Is it possible to identify a cluster
or 'bundle' of HR practices with different strategic competitive models? Finally,
much research productivity in recent years has been devoted to examining
the relationship between different clusters of HR practices and organizational
performance
...
The word 'strategy', deriving from the Greek noun strategus, meaning
'commander in chief', was first used in the English language in 1656
...
In a management context, the word 'strategy' has
now replaced the more traditional term - 'long-term planning' - to denote a
specific pattern of decisions and actions undertaken by the upper echelon of
the organization in order to accomplish performance goals
...
3)16 define strategic management
...
Hill and Jones (2001, p
...
Strategic management is considered to be a continuous activity that requires
a constant adjustment of three major interdependent poles: the values of
senior management, the environment, and the resources available (Figure
2
...
5: The three traditional poles of a strategic plan
Senior Management
Environment
Resource
Source: Adapted from Aktouf (1996) Traditional manager and beyond Paris:
Morin publication page 91
...
The strategic management process is typically broken down into five
steps:
1
...
Environmental analysis
3
...
Strategy implementation
5
...
78
Figure 2
...
(2001), organization theory and design, Western college
publishing
...
6 illustrates how the five steps interact
...
The first step in the strategic management model begins with senior
managers evaluating their position in relation to the organization's current
mission and goals
...
Goals are the desired ends sought
through the actual operating procedures of the organization and typically
describe short-term measurable outcomes (Daft, 2001) 18
...
The
factors that are most important to the organization's future are referred to as
strategic factors and can be summarized by the acronym SWOT - Strengths,
Weaknesses, Opportunities and Threats
...
Some strategies are formulated at the
corporate, business and specific functional levels
...
The
notion of strategic choice also draws attention to strategic management as a
'political process' whereby decisions and actions on issues are taken by a
'power-dominant' group of managers within the organization
...
In a political model of strategic management, it is necessary to consider the
distribution of power within the organization
...
45)20, we must consider 'where power lies, how it comes
to be there, and how the outcome of competing power plays and coalitions
within senior management are linked to employee relations'
...
Strategy implementation is an area of activity that focuses on the techniques
used by managers to implement their strategies
...
80
Influential management consultants and academics (for example Champy,
1996; Kotter, 1996)21 emphasize that leadership is the most important and
difficult part of the strategic implementation process
Strategy evaluation is an activity that determines to what extent the actual
change and performance match the desired change and performance
...
It is, however, important to note that it is a
normative model, that is, it shows how strategic management should be done
rather than describing what is actually done by senior managers (Wheelen &
Hunger, 1995)
...
Hierarchy of strategy:
Another aspect of strategic management in the multidivisional business
organization concerns the level to which strategic issues apply
...
1
...
Business
3
...
Corporate level strategy
Corporate-level strategy describes a corporation's overall direction in terms of
its general philosophy towards the growth and the management of its various
business units
...
This strategy addresses the question, 'What business are we in'?'
Devising a strategy for a multidivisional company involves at least four types
of initiative:
81
establishing investment priorities and steering corporate resources into
the most attractive business units
initiating actions to improve the combined performance of those
business units with which the corporation first became involved
finding ways to improve the synergy between related business units in
order to increase performance
making decisions dealing with diversification
...
This level of strategy addresses
the question, 'How do we compete'?' Although business-level strategy is
guided by 'upstream', corporate-level strategy, business unit management
must craft a strategy that is appropriate for its own operating situation
...
The low- cost strategy attempts to increase the organization's market share by
having the lowest unit cost and price compared with competitors
...
This assumes that
managers distinguish their services and products from those of their
competitors in the same industry by providing distinctive levels of service,
product or high quality such that the customer is prepared to pay a premium
price
...
A market strategy can be narrow or broad, as in the notion of
niche markets being very narrow or focused
...
7)
Figure 2
...
g
...
g
...
g
...
g
...
Defenders are companies
with a limited product line and a management focuses on improving the
efficiency of their existing operations
...
Prospectors are
companies with fairly broad product lines that focus on product innovation and
market opportunities
...
In
this situation, senior managers emphasize efficiency in the stable areas and
innovation in the variable areas
...
In this reactive orientation,
senior management's responses to environmental changes and pressures
thus tend to be piecemeal strategic adjustments
...
The different competitive
strategies influence the 'downstream' functional strategies
...
This strategy level is typically primarily concerned with
maximizing resource productivity and addresses the question, 'How do we
support the business-level competitive strategy?' Consistent with this, at the
functional level, HRM policies and practices support the business strategy
goals
...
In different
corporations, the specific operation of the hierarchy of strategy might vary
between 'top-down' and 'bottom-up' strategic planning
...
The bottom-up approach to strategy making recognizes that individuals
'deep' within the organization might contribute to strategic planning
...
Strategic management literature
emphasizes that the strategies at different levels must be fully integrated
...
The strategy at
corporate level must build upon the strategies at the lower levels in the
hierarchy
...
(EA
...
20)
The need to integrate business strategy and HRM strategy has received much
attention from the HR academic community,
2
...
, 1985; Fombrun et al
...
Interest among academics and
practitioners in linking the strategy concept to HRM can be explained from
both the 'rational choice' and the 'constituency-based' perspective
...
From a 'constituency-based'
perspective, it is argued that HR academics and HR practitioners have
embraced SHRM as a means of securing greater respect for HRM as a field
of study and, in the case of HR managers, of appearing more 'strategic',
thereby enhancing their status within organizations
...
It is unclear,
for example, which one of these two terms relates to an outcome or a process
(Bamberger &
...
Strategic HRM is an outcome: 'as
organizational
systems
designed
to
achieve
sustainable
competitive
advantage through people'
...
89)27
...
6) describe
SHRM as 'the process by which organizations seek to link the human, social,
and intellectual capital of their members to the strategic needs of the firm'
...
190) 'HR strategy' is the outcome: 'the mission,
vision and priorities of the HR function'
...
5) conceptualize HR strategy as an outcome: 'the
pattern of decisions regarding the policies and practices associated with the
HR system'
...
The
espoused HR strategy refers to the pattern of HR-related decisions made but
not necessarily implemented, whereas the emergent HR strategy refers to the
85
pattern of HR-related decisions that have been applied in the workplace
...
Meshoulam, 2000, p
...
A range of business HRM links has been classified in terms of a proactivereactive continuum (Kydd &
...
Phillips 1991)29
...
At the other end of the continuum is the 'reactive' orientation, which sees the
HR function as being fully subservient to corporate and business-level
strategy, and organizational-level strategies as ultimately determining HR
policies and practices
...
This
type of reactive orientation would be depicted in Figure 2
...
In this
sense, a HR strategy is concerned with the challenge of matching the
philosophy, policies, programmes, practices and processes - the 'five Ps' - in a
way that will stimulate and reinforce the different employee role behaviours
appropriate for each competitive strategy (Schuler, 1989, 1992)29
...
Extending strategic management concepts,
Bamberger and Phillips' (1991) model depicts links between three poles: the
environment, human resource strategy and the business strategy (Figure 2
...
In the hierarchy of the strategic decision-making model, the HR strategy is
influenced by contextual variables such as markets, technology, national
government policies, European Union policies and trade unions
...
36)
...
8 Environment as a mediating variable for human resource
management strategies
Human Resource Strategy
Environmental influences
Business Strategy
Source: Bamberger and Phillips (1991) Organizational Environment and
Business Strategy, Human Resource Management, Vol
...
Drawing on the literature on 'strategic choice' in
industrial relations (for example Kochan et al
...
The upstream or 'first-order' strategic decisions are concerned with
the long-term direction of the corporation
...
These are classified as downstream or
'second order', strategic decisions
...
Purcell (1989, p
...
and second-order decisions on the structure of the firm'
...
Case study analysis has, however, highlighted the problematic
nature of strategic choice model building
...
Another part of the strategic HRM debate has focused on the integration or 'fit'
of business strategy with HR strategy
...
's
(1984) model of HRM
...
, 1984, p
...
The concept of integration has three aspects:
the linking of HR policies and practices with the strategic management
process of the organization
the internalization of the importance of HR on the part of line managers
the integration of the workforce into the organization to foster
commitment or an 'identity of interest' with the strategic goals
...
88
The matching model
Early interest in the 'matching' model was evident in Devanna et al
...
37)
...
In the Devanna et al
...
9)
...
9 Devanna et al
...
(1984) Strategic Human Resource Management New
York: John Wiley
...
(1984,)
...
There must be a 'fit between competitive strategy and internal HRM
strategy and a fit among the elements of the HRM strategy' (Beer et al
...
13)
...
The latter is assumed to be the independent
variable (Boxall, 1992; Purcell & Ahlstrand, 1994)
...
66) emphasizes, 'HRM cannot be conceptualized as a standalone corporate issue
...
There is some theorization of the link between product markets and
organizational design, and approaches to people management
...
HRM is therefore seen to be 'strategic by virtue of
its alignment with business strategy and its internal consistency (Boxall,
1996)
...
'Human resource strategies' are here taken to mean the patterns of
decisions regarding HR policies and practices used by management to design
work and select, train and develop, appraise, motivate and control workers
...
To appreciate the significance of 'typologies', it is useful to recall the work of
Max Weber
...
'Weber warned, however, that
these abstractions or ideal types never actually exists in the real world; they
are simply useful fictions to help us understand the more complex and messy
90
realities found in work organizations
...
Since the early 1990s, academics have proposed at least three models to
differentiate between 'ideal types' of HR strategies
...
The second
model, the resource based mode:, is grounded in the nature of the employeremployee exchange and, more specifically, in the set of employee attitudes, in
behaviours and in the quality of the manager-subordinate relationship
...
The control - based model
The first approach to modelling different types of HR strategy is based on the
nature of workplace control and more specifically on managerial behaviour to
direct and monitor employee role performance
...
This focus on monitoring and controlling
employee behaviour as a basis for distinguishing different HR strategies has
its roots in the study of 'labour process' by industrial sociologists
...
Put simply, when organizations hire people, they have only a potential
or capacity to work
...
But workers have divergent interests in terms of
pace of work, rewards and job security, and engage in formal (trade unions)
and informal (restrictions of output or sabotage) behaviours to counteract
management job controls
...
In
91
an insightful review, Thompson and McHugh (2002, p
...
What alternative HR strategies have managers used to render employees and
their behaviour predictable and measurable'? Edwards identified successive
dominant modes of control that reflect changing competitive conditions and
worker resistance
...
Bureaucratic control
includes written rules and procedures covering work
...
Edwards also argued that managers use a 'divide and rule' strategy, using
gender and race, to foster managerial control
...
Another
organizational theorist, Burawoy (1979)38, categorized the development of HR
strategies in terms of the transition from despotic to hegemonic regimes
...
The growth of employment in
new call centers has recently given rise to a renewed focus of interest on the
use of technical control systems: the electronic surveillance of the operator's
role performance (Callaghan & Thompson, 2001)39
The choice of HR strategy is governed by variations in organizational form (for
example size, structure and age), competitive pressures on management and
the stability of labour markets, mediated by the interplay of managersubordinate relations and worker resistance (Thompson & McHugh, 2002)40
...
92
The first is the logic of direct, process-based control, in which the focus is on
efficiency and cost containment (managers needing within this domain to
monitor and control workers' performance carefully), whereas the second is
the logic of indirect outcomes-based control, in which the focus is on actual
results (within this domain, managers needing to engage workers' intellectual
capital, commitment and cooperation)
...
Implicit in this approach to managerial control is that the logic underlying an
HR strategy will tend to be consistent with an organization's competitive
strategy
...
Managers will tend to adopt process-based controls when means-ends
relations are certain (as is typically the case among firms adopting a cost leadership strategy), and outcomes-based controls when means-ends are
uncertain (for example differentiation strategy)
...
It is posited, therefore, that HR strategies contain inherent
contradictions (Hyman, 1987; Storey, 1995; Thompson &: McHugh, 2002)41
...
Superior performance through workers is underscored when
advanced technology and other inanimate resources are readily available to
competing firms
...
The
various perspectives on resource-based HRM models raise questions about
93
the inextricable connection between work related learning, the 'mobilization of
employee consent through learning strategies and competitive advantage
...
The genesis of the resource-based model can be traced back to Selznick
(1957)42, who suggested that work organizations each possess 'distinctive
competence' that enables them to outperform their competitors, and to
Penrose (1959), who conceptualized the firm as a 'collection of productive
resources'
...
Moreover, Penrose emphasized what many
organizational theorists take for granted that organizations are heterogeneous
(Penrose, 1959)43
...
Putting it in terms of a simple SWOT analysis, the resource-based
perspective emphasizes the strategic importance of exploiting internal
'strengths' and neutralizing internal 'weaknesses' (Barney, 1991)
...
An organization's resources can
be divided into tangible (financial, technological
...
To give rise to
a distinctive competency, an organization's resources must be both unique
and valuable
...
According to strategic
management theorists, the distinction between resources and capabilities is
critical to understanding what generates a distinctive competency (see, for
example, Hill & Jones, 2001)
...
This
94
observation may explain why an organization adopts one of the control-based
HR strategies
...
From this perspective, collective learning in the
workplace on the part of managers and non-managers, especially on how to
coordinate workers' diverse knowledge and skills and integrate diverse
information technology, is a strategic asset that rivals find difficult to replicate
...
Amit and Shoemaker (1993, p
...
Figure
2
...
Figure 2
...
Arguing that neither of the
two dichotomous approaches (control- and resource-based models) provides
a framework able to encompass the ebb and flow of the intensity and direction
of HR strategy, they build a model that characterizes the two main dimensions
of HR strategy as involving 'acquisition and development' and the 'locus of
control'
...
In other words, organizations can lean more
towards 'making' their workers (high investment in training) or more towards
'buying' their workers from the external labour market (Rousseau, 1995) 46
...
Locus of control is concerned with the degree to which HR strategy focuses
on monitoring employees' compliance with process-based standards as
opposed to developing a psychological contract that nurtures social
relationships, encourages mutual trust and respect, and controls the focus on
the outcomes (ends) themselves
...
, 2000)47
...
10
shows, these two main dimensions of HR strategy yield four different 'ideal
types' of dominant HR strategy:
Commitment
Collaborative
Paternalistic
Traditional
...
11 Categorizing human resource management strategies
Outcomes
Locus of
Workplace
control
Commitment
Collaborative
HR Strategy
HR Strategy
Paternalistic
Traditional
HR Strategy
HR Strategy
Process
Internal
Acquisition of employees
External
Source: Bamberger and Meshoulam (2000) Human Resource Strategy,
Thousand Oak: sage
The commitment HR strategy is characterized as focusing on the internal
development of employees' competencies and outcome control
...
The collaborative
HR strategy, which parallels Bamberger and Meshoulam's 'free agent' HR
strategy,
involves
the
organization
subcontracting
work
to
external
independent experts (for example consultants or contractors), giving
extensive autonomy and evaluating their performance primarily in terms of the
end results
...
Each HR strategy represents a distinctive HR paradigm,
or set of beliefs, values and assumptions, that guide managers
...
Based upon
emprical evidence, Bamberger and Meshoulam suggest that the HR
strategies in the diagonal quandrants 'commitment' and 'traditional' are likely
to be the most prevalent in (North American) work organizations
...
So, for example, the traditional HR strategy (bottom right
quantrant) is most likely to be adopted by management when there is
certainty over how inputs are transformed into outcomes and/or when
97
employee performance can be closely monitored or appraised
...
Under such
conditions, managers use technology to control the uncertainty inherent in the
labour process and insist only that workers enact the specified core standards
of behaviour required to facilitate undisrupted production
...
60)
...
Case study research on call
centres, workplaces that some organizational theorists label 'post-industrial',
reveal systems of technical and bureaucratic control that closely monitor and
evaluate their operators (Sewell, 1998; Thompson & McHugh, 2002)
...
This typically
refers to 'knowledge work'
...
This HR strategy is
associated with a set of HR practices that aim to develop highly committed
and flexible people, internal markets that reward commitment with promotion
and a degree of job security, and a 'participative' leadership style that forges a
commonality of interest and mobilizes consent to the organization's goals
(Hutchinson et al
...
In addition, as others have noted, workers under
such conditions do not always need to be overtly controlled because they may
effectively 'control themselves' (Thompson, 1989; Thompson &: McHugh,
2002)
...
In addition, such
workplaces 'mobilize' employee consent through culture strategies, including
the popular notion of the 'learning organization'
...
341) 49:
Evaluating strategic human resources management and models of
human resources strategy
A number of limitations to current research on SHRM and HR strategy have
been identified: the focus on strategic decision-making, the absence of
internal strategies and the conceptualization of managerial control
Existing conceptualizations of SHRM are predicated upon the traditional
rational perspective to managerial decision-making - definable acts of linear
planning, choice and action - but critical organizational theorists have
challenged these assumptions, arguing that strategic decisions are not
necessarily based on the output of rational calculation
...
As
such, the notion of consciously aligning business strategy and HR strategy
applies only to the 'classical' approach to strategy
...
Managerial
behaviour is more likely to be uncoordinated, frenetic, ad hoc and fragmented
...
Within
such a management milieu, strategies can signal changes in power
relationships among managers
...
72), among others, argues that 'Strategic decisions are characterized by the
political hurly-burly of organizational life with a high incidence of bargaining
...
'
Alternatively, strategic decision-making may be conceptualized as a
'discourse' or body of language-based communication that operates at
different levels in the organization
...
This perspective reaffirms the importance of conceptualizing
management in terms of functions, contingencies and skills and the leadership competence of managers
...
110)
...
It is argued
that contingency analysis relies exclusively on external marketing strategies
(how the firm competes) and disregards the internal operational strategies
(how the firm is managed) that influence HR practices and performance
(Purcell, 1999)
...
This
was
the
strategy
at
Flowpak
Engineering
...
The technology and manufacturing strategy in this case became
the key intervening variable between overall business strategy and HRM
...
To put it another way, the SHRM
100
approach looks only at the realization of surplus value within product markets
rather than at complex contingent variables that constitute the full
transformation process
...
37) argues, 'we need to be much
more sensitive to processes of organizational change and avoid being trapped
in the logic of rational choice'
...
The basic premise of the typologies
of HR strategy approach is that a dominant HR strategy is strongly related to
a specific competitive strategy
...
This might be true, but the notion
that a commitment HR strategy follows from a real or perceived 'added-value'
competitive strategy is more problematic in practice
...
Reflecting on
this problem, Colling (1995, p
...
Others have gone beyond the 'organizational democracy' rhetoric and
acknowledge that 'It is utopian to think that control can be completely
surrendered' in the 'post modern' work organization (Cloke & Goldsmith, 2002,
p
...
Consistent with our earlier definition of strategy - as a specific pattern of
decisions and actions - managers do act strategically, and strategic patterns
do emerge over a period of time (Thompson & McHugh, 2002; Watson, 1999)
...
In a market downturn or recession, for example, there is a
tendency for corporate management to improve profitability by downsizing
and applying more demanding performance outcomes at the unit level
...
As Purcell
(1989, 1995) points out, an organization pursuing a strategy of acquisition
and downsizing might 'logically' adopt an HR strategy that includes the
compulsory layoff of non-core employees and, for the identifiable core of
employees
with
rare
attributes,
a
compensation
system
based
on
performance results
...
36)
...
Thus, achieving the goal of 'close
fit' of business and HR strategy can contradict the goal of employee
commitment and cooperation
...
The kind of analysis explored
here is nicely summed up by Hyman's pessimistic pronouncement that 'there
is no "one best way" of managing these contradictions, only different routes to
partial failure' (1987, quoted in Thompson & McHugh, 2002, p
...
Dimensions of strategic human resource management
In addition to focusing on the validity of the matching SHRM model and
typologies of HR strategy, researchers have identified a number of important
themes associated with the notion of SHRM
...
During the past decade, demonstrating that there is
indeed positive link between particular sets or 'bundles' of HR practices and
102
business performance has become 'the dominant research issue' (Guest,
1997, p
...
The dominant empirical questions on this topic ask 'What
types of performance data are available to measure the HRM-performance
link?' and 'Do "high-commitment-type" HRM systems produce above-average
results compared with "control-type" systems?' A number of studies have
found that, in spite of the methodological challenges, bundles of HRM
practices are positively associated with superior organization performance
...
As previously discussed, the 'soft' HRM model is concerned with job
designs that encourage the vertical and horizontal compression of tasks and
greater worker autonomy
...
The
literature
emphasizes core features of this approach to organizational design and
management, including a 'flattened' hierarchy, decentralized decision-making
to line managers or work teams, 'enabling' information technology, 'strong'
leadership and a set of HR practices that make workers' behaviour more
congruent with the organization's culture and goals
...
Most definitions of managerial leadership reflect the assumption that it
involves a process whereby an individual exerts influence upon others in an
organizational context
...
Much of the leadership
research and literature tends to be androcentric in nature and rarely
acknowledges the limited representation of ethnic groups and women in
senior leadership positions (Townley, 1994)53
...
Managers are looking
for a style of leadership that will develop the firm's human endowment and,
moreover, cultivate commitment, flexibility, innovation and change
...
It would seem
that a key constraint on the development of a resource-based SHRM model is
leadership competencies
...
107) 55 and the
'engine' that drives organizational change is 'leadership, leadership, and still
more leadership' (Kotter, 1996, p
...
In essence, popular leadership models
extol to followers the need for working beyond the economic contract for the
'common' good
...
To go beyond the rhetoric, however, such popular
leadership models shift the focus away from managerial control processes
and innate power relationships towards the psychological contract and the
individualization of the employment relationship
...
,
1984; Keep, 1989)
...
From a managerial
perspective, formal and informal learning can, it is argued, strengthen an
organization's 'core competencies' and thus act as a lever to sustainable
competitive advantage - having the ability to learn faster than one's
competitors is of the essence here
...
Some of these writers, for
example, emphasize how workplace learning can strengthen 'cultural control'
(Legge, 1995), strengthen the power of those at the 'apex of the organization'
and be a source of conflict when linked to productivity or flexibility bargaining
and job control (Bratton, 2001)
...
In the
prescriptive management literature, the argument is that the collectivist
culture, with its 'them and us' attitude, sits uncomfortably with the HRM goal of
high employee commitment and the individualization of the employment
relationship
...
Critics argue that 'high-commitment' HR strategies are designed to
provide workers with a false sense of job security and to obscure underlying
sources of conflict inherent in capitalist employment relations
...
What is apparent is that this
part of the SHRM debate has been strongly influenced by economic, political
and legal developments in the USA and UK over the past two decades
International and comparative strategic human resource management
The assumption that SHRM is a strategically driven management process
points to its international potentialities
...
Thus, as the world of business is becoming more
globalized, variations in national regulatory systems, labour markets and
institutional and natural contexts are likely to constrain or shape any tendency
towards 'convergence' or a 'universal' model of best HRM practice
...
In doing so, we
make a distinction between international HRM and comparative HRM
...
Comparative HRM, on the
other hand, focuses on providing insights into the nature of, and reasons for,
differences in HR practices across national boundaries
...
A decade ago, it was
suggested that much of this work tended to be descriptive and lacked
analytical rigour but research and scholarship have made considerable
progress over the past 10 years
...
International HRM has been defined as 'HRM issues, functions and policies
and practices that result from the strategic activities of multinational
enterprises and that impact the international concerns and goals of those
enterprises' (Scullion, 1995, p
...
International HRM tends to emphasize
the subordination of national culture and national employment practices to
corporate culture and HRM practices (Boxall, 1995)
...
Early 21st century
capitalism, when developing international business strategy, faces the
perennial difficulty of organizing the employment relationship to reduce the
indeterminacy resulting from the unspecified nature of the employment
contract (Townley, 1994)
...
For example, it
behoves researchers to examine whether managers and workers in Mexico,
Chile, India, Pakistan, South Africa and elsewhere will accept the underlying
ideology and embrace the HRM paradigm
...
Of considerable interest to HR academics
and practitioners is the question of the extent to which an HR strategy that
works effectively in one country and culture can be transplanted to others
...
, 2001; Scullion, 2001)
...
On this
basis, comparative HRM should involve activities that seek to explain the
patterns and variations encountered in cross-national HRM rather than being
simply a description of HRM institutions and HR practices in selected
countries
...
ii), lacks
academic rigour
...
In terms of critical research, comparative HRM is
relatively underdeveloped
...
They may lead to a greater understanding of the
contingencies and processes that determine different, approaches to
managing people at work
...
Comparative HRM studies can provide the basis
for reforms in a country's domestic public policy by offering 'lessons' from
offshore experience
...
The potential benefits of studying
comparative and international HRM have been recognized by both academics
and HR practitioners and thus 'can no longer be considered a marginal area
of interest'
...
Drawing upon the data from a 3-year survey of 14
European countries, Brewster puts forward the notion of a new 'European
HRM model' that recognizes State and trade union involvement in the
regulation of the employment relationship
...
Adopting a 'systemic
view' of European national work systems, Clark and Pugh (2000)58 have
argued that, despite economic and political pressures towards convergence,
differences in cultural and institutional contexts continue to produce divergent
employment relationships
...
96)
...
Despite the economic and political
pressures from globalization, as it is loosely called, the national diversity of
HRM systems remains and is particularly sharp between the developed and
the developing world
...
5
FORMULATING AND IMPLEMENTING HR STRATEGY
The primary role of strategic HRM may be to promote a fit with the demands
of a dynamic and competitive environment, but it is not easy
...
However, although there are many difficulties, a strategic approach is
desirable in order to give a sense of direction and purpose and as a basis for
the development of relevant and coherent HR policies and practices
...
The formulation and implementation of HRM strategies is discussed under the
following headings:
fundamental process considerations - approaches to the development
of HR strategies;
strategic frameworks - the overriding strategic thrusts that will influence
particular strategies;
models for the development of HR strategies;
approaches to addressing key business issues concerning fit, flexibility
and the achievement of coherence;
implementing HR strategies
...
They
emphasize the limits of excessively rationalistic models of strategic and HR
planning
...
Since actions provoke reactions
109
(acceptance, confrontation, negotiation, etc) these reactions are also part of
the strategy process
...
It is also necessary to stress that coherent and integrated HR strategies are
only likely to be developed if the top team understand and act upon the
strategic imperatives associated with the employment, development and
motivation of people
...
A
further consideration is that the effective implementation of HR strategies
110
depends on the involvement, commitment and cooperation of line managers
and staff generally
...
Good intentions can too easily be subverted by the harsh realities
of organizational life
...
Many different routes may be followed when formulating HR strategies there
is no one right way
...
In strategic HRM, process may be as important as content
...
It was argued that by working through
strategic issues and highlighting points of tension, new ideas emerged and a
consensus over goals was found
...
HR strategy can
influence as well as be influenced by business strategy
...
But there is still
room for HR to make a useful, even essential contribution at the stage when
business strategies are conceived, for example, by focusing on resource
issues
...
A distinction is made by Purcell (1989) and Purcell and Ahlstrand (1994)
between:
'upstream' first-order decisions which are concerned with the long-term
direction of the enterprise or the scope of its activities;
'downstream' second-order decisions which are concerned with internal
operating procedures and how the firm is organized to achieve its
goals;
'downstream' third-order decisions which are concerned with choices
on human resource structures and approaches and are strategic in the
sense that they establish the basic parameters of employee relations
management in the firm
...
Observations made by Armstrong and Long (1994) during research into
the strategy formulation processes of 10 large UK organizations suggested
that there were only two levels of strategy formulation
...
Second, there
are specific strategies within the corporate strategy concerning productmarket development, acquisitions and divestments, human resources,
finance, new technology, organization, and such overall aspects of
management as quality, flexibility, productivity, innovation and cost reduction
...
These choices should,
so far as possible:
relate to but also anticipate the needs of the business;
be congruent with the present or desired culture of the organization;
have the capacity to change the character and direction of the
business;
equip the organization to deal effectively with the external pressures
and demands affecting it
focus on areas of critical need;
answer fundamental questions such as: 'What is constraining us?',
'What is stopping us from delivering business results?';'
be founded on detailed analysis and study, not just wishful thinking;
incorporate the experienced and collective judgment of top management;
take account of the needs of line managers and employees generally
as well as those of the organization and its other stakeholders;
anticipate the problems of implementation that may arise if line
managers are not committed to the strategy and/or lack the skills and
time to play their part;
anticipate any problems that may arise because of the hostility or indifference of employees or trade unions;
ensure that the organization has the resources required to implement
the strategy;
provide for the acquisition and development of people with the skills
needed to manage and sustain the organization in the future to meet
organizational objectives;
consist of components that fit with and support each other;
be capable of being turned into actionable programmes
...
These can then serve as the framework within
which specific strategies can evolve
...
Resource capability
The resource capability approach regards the firm as a bundle of tangible and
intangible resources and capabilities required for product/market competition
(Kamoche, 1996)63
...
As expressed by Kamoche, the basis of this approach to HR strategy is the
acknowledgement of the 'stock of know-how' in the firm
...
Within this framework, firms attempt to gain competitive advantage using
human resources through developing distinctive capabilities (competencies)
that arise from the nature of the firm's relationships with its suppliers,
customers and employees
...
A resource capability approach is concerned with the acquisition, development and retention of human or intellectual capital
...
This is in
accord with the fundamental principle of economics that wealth is created
when assets are moved from lower-value to higher-value uses
...
Instead, they should be given broader
responsibilities, encouraged to contribute and helped to achieve satisfaction in
their work
...
It is concerned with
communication and involvement
...
This establishes mutual understanding of what is to be
achieved and a framework for managing and developing people to ensure that
it will be achieved
...
High-performance management practices
involve the development of resourcing, employee development, performance
management and reward processes that focus on the delivery of added value
...
Most commentators agree that best fit is more
important than best practice, but when formulating HR strategies, many
115
people continue to seek the 'holy grail' of a range of ideal approaches to
HRM
...
2
Table 2
...
(2003), A hand book of strategic human resource
Management New Delhi, Crest publishing house pp
...
Where are we now?
2
...
How are we going to get there?
But it is more complicated than that and the process could be modeled as
shown in Figure 2
...
116
Figure 2
...
80
A systematic approach
There is much to be said for adopting a systematic approach to formulating
HR strategies that considers all the relevant business and environmental
issues, and a methodology for this purpose was developed by Dyer and
Holder (1988) as follows:
1
...
g
...
2
...
g
...
117
3
...
For
example, a strategy to become a lower-cost producer would require the
reduction of labour costs
...
4
...
External fit refers to the degree of
consistency between HR goals on the one hand and the exigencies of
the underlying business strategy and relevant environmental conditions
on the other
...
In addition, the HR strategist should take pains to understand the levels at
which business strategies are formed and the style adopted by the company
in creating strategies and monitoring their implementation
...
The sequence of the HR strategy is as shown in figure 2
...
13 The sequence of HR strategy formulation
Analyse;
what's happening?
what's good and not so good about It?
what are the issues?
what are the problems?
what's the business need?
Diagnose
why do these Issues exist?
what are the causes of the problems?
what factors are influencing the situation (competition, environmental
political, etc)?
Conclusions and recommendations
What are our conclusions from the analysis / diagnosis
what alternative strategies are available?
which alternative is recommended and why?
Action planning:
what actions do we need to take to implement the proposals?
what problems may we meet and how will we overcome them?
who takes the action and when?
Resource planning:
what resources will we need (money, people time)?
how will we obtain these resources:
how do we convince management that these resources are required?
Benefits:
what are the benefits to the organization of Implementing these
proposals?
how do they benefit Individual employees?
how do they satisfy business needs?
119
The sequence of strategy formulation
A sequence of questions for formulating strategy is illustrated in Figure 2
...
In reality, of course, the process of developing HR strategies does not follow
this sequence so neatly
...
The diagnosis may be superficial in the face of rapidly
evolving factors that are difficult to pin down
...
Action plans
may look good on paper but are hard to put into practice, and it may be
difficult to estimate costs and the need for other resources
...
General issues affecting the formulation of HR strategies
Although systematic approaches such as those described above are
desirable, it should be remembered that strategic HRM is more of an attitude
of mind than a step-by-step process that takes you inexorably from a mission
statement to implementation
...
This is entirely understandable if it is borne in mind that strategic
HRM is as much about the management of change in conditions of
uncertainty as about the rigorous development and implementation of a
logical plan
...
It is also desirable to follow Mintzberg's analysis and treat HR strategy
as a perspective rather than a rigorous procedure for mapping the future
...
As Mintzberg sees them, all strategies exist in the
minds of those people they make an impact upon
...
This is what Mintzberg calls the 'collective
mind', and reading that mind is essential if we are 'to understand how
intentions
...
No one else has made this point so well as Mintzberg and what the research
conducted by Armstrong and Long (1994) revealed is that strategic HRM is
being practiced in the Mintzbergian sense in the organizations they visited
...
In each case the
shared intentions emerged as a result of strong leadership from the chief
executive, with the other members of the top team acting jointly in pursuit of
well-defined goals
...
Against this background the specific issues that have to be addressed
comprise:
1)
The business issues facing the organization,
2)
Achieving integration vertical fit,
3)
Approaches to achieving horizontal integration or fit - ie coherence
through 'bundling', and
4)
Achieving flexibility
...
Business strategies in these areas may be influenced by HR factors
although not excessively so HR strategies are, after all, about making
business strategies work
...
Business strategy sets the agenda for HR strategy in the following areas:
HR mission;
values, culture and style;
organizational philosophy and approach to the management of people;
top management as a corporate resource;
resourcing;
skills acquisition and development;
high-commitment management;
high-performance management
...
Culture integration
HR strategies need to be congruent with the existing culture of the organization or designed to produce cultural change in specified directions
...
In effect, if what is proposed is in line with 'the way
we do things around here' then it will be more readily accepted
...
122
It is therefore necessary to analyse the existing culture to provide information
on how HR strategies will need to be shaped
...
Humanistic-helpful - organizations managed in a participative and
person-centred way
...
Affiliative - organizations that place a high priority on constructive
relationships
...
Approval - organizations in which conflicts are avoided and interpersonal relationships are pleasant, at least superficially
...
Conventional - conservative, traditional and bureaucratically controlled
organizations
...
Dependent
-
hierarchically
controlled
and
non-participative
organizations
...
Avoidance - organizations that fail to reward success but punish
mistakes
...
Oppositional - organizations in which confrontation prevails and
negativism is rewarded
...
Power - organizations structured on the basis of the authority inherent
in members' positions
...
Competitive - a culture in which winning is valued and members are
rewarded for out-performing one another
...
Competence / perfectionist - organizations in which perfectionism,
persistence and hard work are valued
...
Achievement - organizations that do things well and value members
who set and accomplish challenging but realistic goals
...
Self-actualization - organizations that value creativity, quality over
quantity, and both task accomplishment and individual growth
...
It is also necessary to note
that in establishing these links, account must be taken of the fact that
strategies for change have also to be integrated with changes in the external
and internal environments
...
An excessive pursuit of 'fit' with the status
quo will inhibit the flexibility of approach that is essential in turbulent
conditions
...
An additional factor that will make the achievement of good vertical
fit difficult is that the business strategy may not be clearly defined - it could be
in an emergent or evolutionary state
...
Making the link
However, an attempt can be made to understand the direction in which the
organization is going, even if this is not expressed in a formal strategic plan
...
The ideal of achieving a link in rigorous
terms may be difficult to attain
...
But it is highly unlikely that this approach would be practicable
...
Conceptually, the approach would be to develop a matrix as illustrated in
Table 2
...
124
Table 2
...
87
...
An alternative framework for linking business and HR strategies is the
competitive strategy approach
...
An illustration of how this might be expressed is given in Table 2
...
knowledge of the skills and behaviour necessary to implement the
strategy;
knowledge of the HRM practices necessary to elicit those skills and
behaviours;
the ability to quickly implement the desired system of HRM practices
...
4
125
Table 2
...
88
126
competitive
Achieving horizontal fit and coherence
Horizontal fit is achieved when the various HR strategies cohere and are
mutually supporting
...
Bundling implies the adoption of an holistic approach to the development of
HR strategies and practices
...
The links between one area and other complementary
areas need to be established so that the ways in which they can provide
mutual support to the achievement of the overall strategy can be ascertained
...
Thus, a job family pay structure can be associated with competence
frameworks and profiles and the definition of career paths as a basis for
identifying and meeting development needs
...
How to bundle
The process of bundling is driven by the needs of the business
...
An analysis of what the needs of the business are
...
An assessment of how HR strategy can help to meet them
...
The identification of the capabilities and behaviours required of employees if they are to make a full contribution to the achievement of
strategic goals
...
A review of appropriate HR practices, followed by the grouping
together (bundling) of them in ways that are likely to ensure that people
with the required capabilities are attracted to and developed by the
organization and which will encourage appropriate behaviours
...
An analysis of how the items in the bundle can be linked together so
that they become mutually reinforcing and therefore coherent
...
6
...
Approaches to selecting the right bundle, the use of integrative processes and
the development of complementary practices are discussed below
...
A good example is the list of seven practices of successful
organizations produced by Pfeffer (1994)67: employment security, selective
hiring, self managed teams, high performance-contingent pay, training,
reduction of status differentials and sharing information
...
Delaney and Huselid (1996) 68 failed to find any
positive impact for specific combinations of practices as opposed to the total
number of HR practices
...
These high-performance practices as defined by the US
Department of Labor (1993) include:
careful and extensive systems for recruitment, selection and training;
formal systems for sharing information with the individuals who work in
the organization;
clear job design;
high-level participation processes;
monitoring of attitudes;
performance appraisals;
properly functioning grievance procedures;
128
promotion and compensation schemes that provide for the recognition
and reward of high-performing members of the workforce
...
2) will depend upon
its business needs and strategy and its culture
...
And whatever combination of practices is adopted it is still
necessary to consider how to achieve coherence and mutual support by the
use of integrative processes and by linking different practices together
...
The ways in which they can provide the 'glue' between
different HR practices are illustrated in Figures 2
...
15
Figures 2
...
15 Use of competencies as an integrating force
Source: ibid, pp 91
Linking HR practices
Bundling is not just a pick-and-mix process
...
The overriding areas of HR practice will be concerned with organization
development, the management of change, creating a positive employment
relationship, developing mutual commitment policies, communicating with
employees, and giving employees a voice (involvement and participation)
...
It is necessary to take
specific steps in the latter areas to achieve coherence
...
5
...
Fit is concerned with aligning business and HR strategy
...
Table 2
...
performance
management
personal
Provide
competence
Skills-based pay
skills
Use
Develop
Reward
and
development
competency plans as basis for defining
for frameworks and profiles; and
and identify competence levels
potential
meeting
learning
needs; establish broad
career
and
through career development bands
development
performance management
for
processes
development
mapping
lateral
paths;
identify career ladders in
job families defined in
competence terms
131
Develop broad-banded or
job
family
defined
in
structures
competence
terms and which clearly
indicate
'aiming
points'
(competence requirements
in different roles within or
outside job family; institute
systems
of
career
development pay for lateral
progression through bands
Overall HR
Strategy
HR Strategy
HR
Development
Resourcing
Develop
a
positive
psychological
contract
based on an undertaking
Provide for
employability
to identify and develop
transferable skills; provide
scope for job enlargement/
enrichment
and
opportunities to move into
Reward
Identify skills development
Develop broad- banded/job
needs through personal
family
development planning;
identify competence levels
structures
that
institute programmes for for roles or job families and
developing
transferable provide
skills
a
basis
for
identifying learning needs
new roles
Analyse characteristics
On the basis of the
of committed employees; analysis
...
But getting
strategies into action is not easy
...
It must be emphasized that HR
strategies are not just programmes, policies, or plans concerning HR issues
that the HR department happens to feel are important
...
The problem with strategic HRM as noted by Gratton et al (1999) is that too
often there is a gap between the rhetoric of the strategy and the reality of what
happens to it
...
The factors identified by Gratton et al which contribute to creating this gap
included:
the tendency of employees in diverse organizations only to accept
initiatives they perceive to be relevant to their own areas;
133
the tendency of long-serving employees to cling to the status quo;
complex or ambiguous initiatives may not be understood by employees
or will be perceived differently by them, especially in large, diverse
organizations;
it is more difficult to gain acceptance of non-routine initiatives;
employees will be hostile to initiatives if they are believed to be in
conflict with the organization's identity, e
...
downsizing in a culture of
'job-for-life' ;
the initiative is seen as a threat;
inconsistencies between corporate strategies and values;
the extent to which senior management is trusted;
the perceived fairness of the initiative;
the extent to which existing processes could help to embed the
initiative;
a bureaucratic culture that leads to inertia
...
Other major barriers that can be met by HR
strategists when attempting to implement strategic initiatives are:
failure to understand the strategic needs of the business with the result
that HR strategic initiatives are seen as irrelevant, even counterproductive;
inadequate assessment of the environmental and cultural factors that
affect the content of the strategies;
the development of ill-conceived and irrelevant initiatives, possibly
because they are current fads or because there has been an illdigested analysis of best practice that does not fit the organization's
requirements;
the selection of one initiative in isolation without considering its implications on other areas of HR practice or trying to ensure that a coherent,
holistic approach is adopted;
134
failure to appreciate the practical problems of getting the initiative
accepted by all concerned and of embedding it as part of the normal
routines of the organization;
inability to persuade top management actively to support the initiative;
inability to achieve ownership among line managers;
inability to gain the understanding and acceptance of employees;
failure to take into account the need to have established supporting
processes for the initiative (e
...
performance management to support
performance pay);
failure to recognize that the initiative will make new demands on the
commitment and skills of the line managers who may have to play a
major part in implementing it (for example, skills in setting objectives,
providing feedback and helping to prepare and implement personal
development plans in performance management processes);
failure to ensure that the resources (finance, people and time) required
to implement the initiative will be available; these include the HR
resources needed to provide support to line managers, conduct training
programmes and communicate with and involve employees;
failure to monitor and evaluate the implementation of the strategy and
to take swift remedial action if things are not going according to plan
...
Conduct analysis - the initial analysis should cover business needs,
corporate culture and internal and external environmental factors
...
The
checklist at the end of this chapter sets out a number of questions that
should be answered at the analysis stage
...
Formulate strategy - the formulation should set out the rationale for
the strategy and spell out its aims, cost and benefits
...
Gain support - particular care needs to be taken to obtain the support
of top managers (for whom a business case must be prepared), line
managers, employees generally and trade unions
...
4
...
Unless and until a
confident declaration can be made that the initiative will receive a
reasonable degree of support (it could be too much to expect universal
acclamation) and that the resources in terms of money, people, time
and supporting processes will be available, it is better not to plunge too
quickly into implementation
...
Prepare action plans - these should spell out what is to be done, who
does it and when it should be completed
...
The
action plan should indicate the consultation, involvement, communication and training programmes that will be required
...
6
...
7
...
It is
essential to follow up and evaluate the results of the initiative
...
The evaluation should point the way to action in the
form of amendments to the original proposals, the provision of
supporting processes, additional support to line managers, intensified
communication and training, or getting more resources
...
Basis
business needs in terms of the key elements of the business
strategy;
environmental factors and analysis (SWOT/PESTLE);
cultural factors - possible helps or hindrances to implementation
...
Content - details of the proposed HR strategy
...
Rationale - the business case for the strategy against the background
of business needs and environmental/ cultural factors
...
Implementation plan
action programme;
responsibility for each stage;
resources required;
proposed
arrangements
for
communication,
consultation,
involvement and training;
5
...
Costs and benefits analysis - an assessment of the resource
implications of the plan (costs, people and facilities) and the benefits
that will accrue, for the organization as a whole, for line managers and
for individual employees
...
)
137
However, there is no standard model; it all depends on the
circumstances of the organization
...
H R Strategic Review
A major strategic review has taken place and a new Chief Executive and other
members of the senior management team have been appointed within the last
two years
...
HR issues emerging from the strategic review
The key HR issues emerging from the strategic review are that:
Effectively, it declares an intention to transform the organization
...
A significant change in the regional organization and the roles of the
management team and regional controllers/managers is taking place;
this means that new skills will have to be used, which some existing
managers may not possess
...
Difficult decisions may have to be made on retaining some existing
managers in their posts who have not been successful in applying for
new regional posts or who lack the required skills, and there may be a
requirement to reduce staff numbers in the future
...
The provision of the core HR services such as recruitment and training is not
an issue
...
e
...
Future strategy
Against this background, it is necessary to build on the steps already taken
by:
adopting a systematic approach to the achievement of culture change,
bearing in mind that this can be a long haul because it involves
changing behaviour and attitudes at all levels and is difficult if not
impossible to attain simply by managerial dictation;
developing an HR strategy which, as a declaration of intent, will provide
a framework for the development of HR processes and procedures that
address the issues referred to above; this involves:
o
strategic integration, matching HR policies and practices to the
business strategy,
o
a coherent approach to the development of these processes so
that HR activities are interrelated and mutually reinforcing,
o
a planned approach, but one that is not bureaucratic,
o
an emphasis on the needs to achieve flexibility, quality and costeffectiveness in the delivery of HR services;
focusing on the activities that will not only deal with the HR issues but
will also help to achieve culture change, namely:
resourcing: deciding what sort of people are required and ensuring that
they are available,
human resource development: identifying the skills required, auditing
the skills available, taking' steps to match skills to present and future
business
requirements
and
initiating
processes
for
enhancing
organizational and individual learning related to business needs,
reward: using reward processes to ensure that people are valued
according to their contribution and to convey messages about the
behaviour, capabilities and results expected of them,
140
employee relations: building on the steps already taken to communicate to employees and to involve them in decision-making processes
on matters that concern them
...
Because the thrust of the
strategic review initially makes most impact on managers, the priority may
well be given to people at this level but without neglecting the needs of the
rest of the staff
...
16
Figure 2
...
What are the key components of the business strategy?
2
...
What are the strengths and weaknesses of the organization and the
opportunities and threats it faces?
4
...
To what extent is the organization in a stable or dynamic (turbulent)
environment and how will this affect our strategies?
6
...
What needs to be done to define or redefine our values in such areas
as quality, customer service, innovation, team working and the
responsibility of the organization for its employees?
8
...
To what extent do we need to pursue a strategy of high-performance or
high-commitment management, and what would be the main features
of such a strategy?
10
...
To what extent do existing HR practices meet future business needs?
What needs to be done about any gaps or inadequacies?
12
...
How can we best 'bundle' together the various HR practices?
14
...
How can we achieve the flexibility required to cope with change?
16
...
Are performance levels high enough to meet demands for increased
profitability, higher productivity, better quality and improved customer
service?
142
18
...
Are we making the best use of the skills and capabilities of our
employees?
20
...
Are there any potential constraints in the form of skills shortages or
employee relations problems?
22
...
Is there likely to be any need for de-layering or downsizing?
The answers to these and similar questions define the areas in which HR
strategies need to be developed
...
2
...
One writer says
HR professionals' input is crucial: They identify problems that are critical to
their companies' business strategy, and forecast potential obstacles to
success
...
It included GM's chief financial officer, chief information officer, and vice
president of global human resources
...
She has demonstrated a
tremendous capacity to think and act strategically, which is essential to our
HR function and what we want to achieve in making GM a globally
competitive business
...
These professionals identify the human issues that are vital
to business strategy and help establish and execute strategy
...
They conceptualize and execute organizational change
...
Mergers in which top management
asked HR to apply its expertise consistently outperformed those in which HR
was less involved
...
A survey by the University of Southern California
found that about one-fourth of large U
...
businesses appointed managers
with no HR experience as top HR executives
...
They may also sometimes be better equipped to integrate the firm's HR efforts
with the rest of the business
...
As HR managers do assume more strategic planning responsibilities, they will
have to acquire new HR skills
...
HR managers will need "an in-depth
understanding of the value creating proposition of the firm
...
Strategy execution is traditionally the
heart of the HR manager's strategic planning job
...
Then, it
formulates broad functional strategies and policies
...
The company's HR (or other functional) strategies
should thus derive directly from its company wide and competitive strategies
...
Dell's human
resource strategies-the Web-based help desk, its centralized intranet HR
service bureau-help the firm better execute Dell's low-cost strategy
...
HR management supports strategic implementation in other ways
...
When Wells
Fargo acquired First Interstate Bancorp a few years ago, HR played a
strategic role in implementing the merger-in merging two "wildly divergent"
cultures and in dealing with the uncertainty and initial shock that rippled
through the organizations when the merger was announced
...
In recent years, HR's traditional role in executing strategy
has expanded to include working with top management to formulate the
company's strategic plans
...
) This expanded strategy formulation role
reflects the reality most firms face today', Globalization means more
competition, more competition means more performance, and most firms are
gaining that improved performance in whole or part by boosting the
competence and commitment levels of their employees
...
145
HR helps top management formulate strategy in a variety of ways
...
Hopefully, the resulting strategic plans capitalize on the firm's strengths and
opportunities, and minimize or neutralize its threats and weaknesses
...
Details regarding
competitors' incentive plans, opinion survey data from employees that elicit
information about customer complaints and information about pending
legislation such as labor laws and mandatory health insurance are some
examples
...
For example, IBM's decision in the 1990s to buy Lotus Software
was prompted in part by the conclusion that its own human resources were
insufficient to enable the firm to reposition itself as an industry leader in
networking systems, or at least to do so fast enough
...
For
example, in the process of automating its factories, farm equipment
manufacturer John Deere developed a workforce that was exceptionally
talented and expert in factory automation
...
But, for a growing number of employers, HR is even more extensively
involved in the strategy formulation process
...
A big part building that case is to create a strategy - oriented
HR system
...
There are the HR professionals who have the strategic and other skills
required to build a strategy-oriented HR system
...
Some HR experts refer to these three elements (the
HR professionals, the HR system, and the resulting employee behaviors) as a
company's basic HR architecture (see Figure 2
...
17 : The Basic Architecture of HR
The HR function
The HR system
Employee behaviours
HR
professionals
High performance work system
Employee
with
strategic
(HPWS)
values,
consisting
of
aligned
HR
management
strategically
competencies
policies, practices and activities
competencies,
motivation
and
behavior required by the
company’s strategic plan
Source: Brian Becker et al, (2001), The HR scorecard, Boston: Harvard Business School press pp
...
It obviously does little good to design,
say, training practices that produce a workforce incapable of using the
company's new computerized machines
...
They must have the competencies required to create HR
systems that produce strategically relevant employee behaviors
...
They must be adept at
identifying the workforce implications and requirements of the new strategy
147
and at crafting HR policies and practices that produce those workforce
requirements
...
The HR professional has to understand how businesses operate
...
The High-Performance Work system
In today’s competitive environment, the manager can't leave the nature of the
HR system the actual HR policies and practices-to chance
...
The HPWS is a set of
HR policies and practices that maximize the competencies, commitment, and
abilities of the firm's employees
...
For example, review Table 2
...
And, how much
more extensively high-performing firms hire employees based on selection
tests, and provides training to new employees
...
Based on an ongoing
research program with over 2,800 corporations, firms that use HPWS policies
and practices do perform at a significantly higher level than those that do not
...
"
148
Table 2
...
Low-Performance
High-Performance
Company HR System
Company HR System
Bottom 10% (42 firms)
Top 10% (43 firms)
Sample HR System HR Practices
Number of qualified applicants per position
(Recruiting)
Percentage hired based on a validated selection
test
Percentage of jobs filled from within
Percentage in a formal HR plan including
recruitment, development and succession
Number of hours of training for new employees
(less than 1 year)
Number of hours of training for experienced
employees
Percentage of employees receiving a regular
performance appraisal
Percentage of workforce whose merit increase or
incentive pay is tied to performance
Percentage
of
workforce
who
received
performance feedback from multiple sources (360)
Target percentile for total compensation
(market rate = 50%)
Percentage of the workforce eligible for incentive
pay
Percentage of difference in incentive pay between
a low-performing and high-performing employee
Percentage of the workforce routinely working in a
self-managed, cross-functional, or project team
Percentage of HR budget spent on outsourced
activities (e
...
, recruiting, benefits
...
24
36
...
26
29
...
90
61
...
79
46
...
02
116
...
40
72
...
31
95
...
36
87
...
90
51
...
03
58
...
83
83
...
62
6
...
64
42
...
46
26
...
88
139
...
00
8
...
09
20
...
64
11
...
"
Source: ibid pp16-17
Table 2
...
The high-performing firms
generally emphasize placing employees in self-managing, cross-functional
teams
...
The need for HPWS became apparent as global competition intensified in the
1990s
...
In the early
1990s, the U
...
Department of Labor identified several characteristics of highperformance work organizations: multiskilled work teams; empowered frontline workers; more training; labor management cooperation; commitment to
quality; and customer satisfaction
...
6
foster these characteristics
...
The basic process, as outlined
in Figure 2
...
Management formulates a strategic plan
...
(For example, must our employees
dramatically improve the level of customer service? Do we need more
computer-literate employees to run our new machines?) Given these
workforce requirements, HR management formulates HR strategies, policies,
and practices aimed at achieving the desired workforce skills, attributes, and
behaviors
...
) Ideally, HR management
then identifies "Scorecard" metrics it can use to measure the extent to which
its new HR initiatives are supporting management's strategic goals
...
18 Basic Model of how to align HR strategy and actions with
business strategies
Formulate Business Strategy
"What are the strategic goals of the business?
Identify Workforce Requirements
"What employee competemcies and behaviors must HR deliver
to enable the business to reach its goals?
Formulate HR Strategic Policies and Activities
"Which HR strategies and practices will enable HR to produce
these employee companies and behaviours?
Develop Detailed HR Scorecard Measures
"How can HR measure whether it is executing well for the
business in terms of producing the required workforce
competencies and behavior
Source: Garrett Walker et
...
Designing and implementing and HR
Score card, Human Resources Management Vol
...
370
151
Given this, Einstein Medicals HR managers could ask, "What specific HR policies and practices would help Einstein create a dedicated, accountable,
generative, and resilient workforce, and thereby help it to achieve its strategic
goals?" The answer was to implement several new HR programs and
practices
...
Enriching work was another key HR initiative,
and involved providing employees with more challenge and responsibility
through flexible assignments and team-based work
...
Providing commensurate returns was another key HR
strategy initiative; it involved tying employees' rewards to organization wide
results and providing non monetary rewards (such as more challenging jobs)
...
THE HR SCORECARD APPROACH
Management ultimately judges the HR function based on whether it creates
value for the company, where "value creation" means contributing in a
measurable way to achieving the company's strategic goals
...
Managers often use an HR Scorecard
to measure the HR function's effectiveness and efficiency in producing these
employee behaviors and thus in achieving the company's strategic goals
...
It shows the quantitative
standards or "metrics" the firm uses to measure HR activities, and to measure
the employee behaviors resulting from these activities, and to measure the
strategically relevant organizational outcomes of those employee behaviors
...
and the
resulting firm wide strategic outcomes and performance
...
To design such a
measurement system, HR managers must adopt a dramatically different
perspective, one that focuses on how human resources can play a central role
in implementing the firm's strategy
...
Information for Creating an HR Scorecard
To create an HR Scorecard, the manager needs three types information
...
Second, the manager must understand the
causal links between the HR activities, the employee behaviors, the
organizational outcomes, and the organization's performance
...
19
summarizes the basic relationships involved
...
Figure 2
...
(2007), Human Resource Management, Singapore
...
88
153
Using the HR Scorecard Approach
There are seven steps in using HR Scorecard approach to create a strategic
results oriented HR system
...
Ideally, senior HR leaders'
insights regarding the human resources in their own company and
in those of the competition provide valuable planning input
...
Toward the end of this stage,
management translates its broad strategic plans into specific,
actionable strategic goals
...
20 : The Seven Steps in the HR Scorecard Approach to
Formulating HR Policies, Activities, and Strategies
Formulate Business Strategies
1 Define the business strategy
2
...
Identify the strategically required organizational outcome
Identify Work force
4
...
Identify the strategically relevant HR system policies and
activities such as new training and grievances system
6
...
Periodically reevaluate the measurement system
Source: ibid pp
...
For example, Einstein Medical must devise and introduce
new medical services
...
Each such activity requires certain employee behaviors
...
The point is this: any
manager who wants to understand what employee behaviors are
essential for his or her firm's success must first understand what
the firm's required activities are
...
The company's value
chain "identifies the primary activities that create value for
customers and the related support activities
...
Each activity
is part of the process of designing, producing, marketing, and
delivering the company's product or service
...
Outlining the company's
value chain shows the chain of essential activities
...
In other words, it is a tool for identifying, isolating,
visualizing, and analyzing the firm's most important activities and
strategic costs
...
It prompts questions such as: "How do
our costs for this activity compare with our competitors?" "Is there
some way we can gain a competitive advantage with this activity?"
"Is there a more efficient way for us to deliver these services?"
And, "Do we have to perform these services in-house?" Outlining
155
and analyzing the company's value chain can also help the HR
manager create an HR system that makes sense in terms of the
firm’s strategy
...
(For example, at Einstein Medical,
delivering new services was so critical to what they had to
accomplish, it was obvious it had to be a core value chain activity
...
Consider another example
...
The critical nature
of this activity would be apparent from any outlining of Dell's value
chain
...
Step 3:
Identify the Strategically Required Organizational Outcomes:
Every company must produce critical, strategically relevant
outcomes if it is to achieve its strategic goals
...
At Dell, receiving quick, competent, and courteous
technical advice by phone is one such outcome
...
156
Step 4:
Identify
the
Required
Workforce
Competencies
and
Behaviors: The question here is, "What employee competencies
and behaviors must our employees exhibit if our company is to
produce the strategically relevant organizational outcomes, and
thereby achieve its strategic goals?" At Einstein Medical,
employees had to take personal accountability for their results, and
be willing to work pro actively (be "generative") to find new and
novel solutions
...
Competencies and
behaviors such as personal accountability, working pro actively,
motivation, courteous behavior, and com TIitment produce
strategically relevant organizational outcomes, and thereby drive
organizational performance
...
At Einstein
Medical, a new service delivered was one strategically relevant
organizational outcome
...
The question in step five is, What HR
system policies and activities will enable us to produce those
workforce competencies and behaviors?" For Einstein Medical, the
answer included special training programs and changing the
compensation plan
...
It is not enough to
say, "We need new training programs, or disciplinary processes
...
For example, all high-performing
companies tend to use incentive pay
...
Step 6:
Design the HR Scorecard Measurement System: After choosing
strategically required organizational outcomes, and employee
competencies and behaviors, and specific HR system policies and
activities, the question is, how shall we measure them all? For
example, if we decide to "improve the disciplinary system," how
precisely will the company measure such improvement? Perhaps
in terms of number of grievances
...
Deciding on the proper measures or metrics requires considerable
thought
...
The HR Scorecard is crucial in this measurement process
...
It
highlights, in a concise but comprehensive way, the causal links
between the HR activities, and the emergent employee behaviors,
and the resulting firm wide strategic outcomes and performance
...
Several consulting firms provide Web-based services that make it
easier to create HR Scorecards, based on metrics from bestpractice, world-class firms
...
Perhaps
reducing grievances is not having the assumed effect on raising
morale
...
Perhaps the measures the HR manager chose (such as
number of grievances) are proving too hard to quantify
...
159
2
...
This reflects how many human resources functions are perceived
to be out of step with the needs of business
Research suggests, time and again, that organizational change fails as often
as it succeeds
...
Why? Too often, emphasizing the
business and economic rationale of a project obscures the fact that value, in
all of its forms, is actually created by the application of human talent
...
This has placed an increasing responsibility on HR
function's to source the scarce human talent which can create the highest
value for organizations
...
So how are human resources professionals able to enhance the value
creation process? experience suggests that:
there is no single best way - a 'silver bullet' - of doing things as far as
organizational success and productivity is concerned;
the HR organization, processes and technology need to be integrated
and aligned with business strategy to maximize their impact as value
creating opportunities;
engaged employees create more value for the organization; and
there are many legitimate HR metrics which can measure the
contribution that HR makes to value creation in a business
...
These various initiatives have often been accompanied by a hunt for new
organizational forms - flatter hierarchies, project-based and virtual structures,
network teams, 'no boundary' systems and so on
...
There is no one single 'best way' of doing things as far as organizational
success and productivity is concerned
...
The key to maximizing value
from HR is aligning HR strategy and programmes to an organization’s
business strategy
...
Different business drivers will suggest different approaches
to HR strategy and organizational design
...
When studying business strategies, however, most
observers agree that these thousands of discrete strategies can be classified
into three or four categories
...
He suggested that companies could
compete in one of three ways:
Cost leadership - being the low-cost producer;
Differentiation - having a unique product or service; or
Focus - concentrating special services or products on a specific
market niche
...
This
allows the company to erect barriers to entry
...
Michael Treacy
and Fred Wiersema studied successful companies in different sectors and
came to similar conclusions as Porter
...
Applying Treacy and Wiersema's concepts of strategic styles to an
organization’s people requirements we can see how these different strategic
styles demand different competencies from employees and thus, different
strategies from HR
...
as shown in Table 2
...
7 Implications of strategic style for HR management
Strategic style
Work environment
Employee
Lead HR systems
competencies
operational
Stable, measurable cost - Process
excellence
conscious,
team-based teamwork
continuous improvement
...
attention to detail
...
organization,
emphasis on training and
fast-paced, resource rich, creativity, breakthrough development,
speed to market
...
oriental
...
dynamic, Relationship-building,
informal, collegial
...
leadership,
rapid balanced
between short -term and
long term rewards
Source: Gubmal E
...
(1998), The Talent solution New York: McGraw Hill
...
Traditional measures of employee satisfaction
and commitment fail to link strongly with developments in business results
and often leave the HR professional as a poor cousin when business metrics
are used to monitor business performance
...
Using a specialist employee survey tool it is possible to measure the employee behaviours which impact on business performance and
identify the key drivers of business performance improvement within a
business
...
Figure 2
...
163
Figure 2
...
Osgood, p (2003), "Do Human Resource really add
value to a business", Management Quarterly ,May 03 pp
...
US research showed that engaged employees':
produce $3
...
600 more market value; and
deliver $27
...
Measuring degrees of employee engagement provides data which enables
actions to be taken at the point of business performance
...
Employee engagement measures can also help HR professionals to look at
which areas of activity have a greater influence on retention
...
Measuring degrees of engagement in staff can help line managers to focus on
the areas which will produce the greatest improvement in business
performance
...
Research has shown that engaged
sales employees tend to stay longer with organizations, for instance, and tend
to be responsible for larger amounts of sales, thus increasing profits per
employee and revenues across a business
...
A due diligence or risk assessment process for
example that only has a financial orientation or where HR questions are asked
only about contracts of employment, misses out a whole range of human
capital measures
...
In the last decade, on the back of increased use of
IT solutions, more and more HR teams now have their own process controls
and performance metrics
...
Of
those with measures in place, 44% used balanced scorecards as their
organizing framework
...
Instead, they
suggest companies use a balanced portfolio of measures to measure their
165
progress
...
Many companies have
adapted this approach
...
The balanced approach to HR measurement answers how HR is adding value
from four different perspectives:
what is our return on our investment in people?
is our service delivery effective and efficient?
are our human assets aligned with future needs? and
are we serving the needs of our customers?
Among those companies in our study that are already using HR
measurement, their primary purposes in doing so are to:
build a common language among HR professionals for communicating
HR strategy and results;
be proactive in identifying workforce trends and offering solutions; and
strengthen relationships with the lines of business
...
It also offers a means to
translate ideas about business strategy into behaviours and actions that
support the company's future direction by creating culture and implementing
talent management practices
...
They go on to suggest that companies considering adoption of the
types of HRM strategies and measurement processes used by the firms they
studied may not have much downside risk, and if their competitors are using
these practices, they may even find themselves at a disadvantage
...
In our view, the HR function has often tried in
vain to convince others of the value inherent in delivering HR support by
reference to esoteric HR centric models
...
The HR function has a key role to play in helping organizations to understand
their sources of value (strategic style) and in blending the work environment,
employee competencies and the lead HR systems which support the
organization
...
Measures such as employee engagement deliver a much closer picture of the
link between the people in a business and the overall business performance
...
HR performance metrics are measuring value creation within businesses
...
For HR professionals the challenge is not so much how quickly they can
embrace and deploy these value drivers but more whether they can retain
ownership of them before other disciplines claim them for their own
...
167
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Title: STRATEGIC HUMAN RESOURCE MANAGEMENT
Description: The concept of human resource management (HRM) has attracted a lot of attention from academics and practitioners alike since it first emerged in the mid-1980s. The former often suspect both the practicality and morality of HRM. The latter have often absorbed some if not all of the HRM philosophy and attempted to put it into effect with varying degrees of success for various good and bad reasons
Description: The concept of human resource management (HRM) has attracted a lot of attention from academics and practitioners alike since it first emerged in the mid-1980s. The former often suspect both the practicality and morality of HRM. The latter have often absorbed some if not all of the HRM philosophy and attempted to put it into effect with varying degrees of success for various good and bad reasons