HUMAN RESOURCE MANAGEMENT CHAPTER 3 : STRATEGIC HUMAN RESOURCE MANAGEMENT Gary Dessler

1. HUMAN RESOURCE MANAGEMENT CHAPTER 3: STRATEGIC HUMAN RESOURCE MANAGEMENT Gary Dessler

2. WHERE WE ARE NOW…

3. LEARNING OUTCOMES Outline the basic steps in the management planning process. Explain and give examples each of companywide and competitive strategy. Explain what a strategy-oriented human resource management system is and why it is important.

4. The Strategic Management Process • Strategy • A course of action the organization intends to pursue to achieve its strategic aims. • Strategic Plan • How an organization intends to match its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage over the long term. • Strategic Management • The process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment.

5. Business Vision and Mission • Leveraging • Capitalizing on a firm’s unique competitive strength while underplaying its weaknesses. • Vision • A general statement of an organization’s intended direction that evokes emotional feelings in organization members. • Mission • Spells out who the firm is, what it does, and where it’s headed.

6. FIGURE 3–5 The Strategic Management Process

7. The Strategic Management Process • Step 1: Define the Current Business • Every company must choose the terrain on which it will compete –in particular, what products it will sell, where it will sell them, and how its products and services will differ from its competitors. • Rolex and Seiko • Managers sometimes use vision and mission statements. • Whereas visions usually lay out in very broad terms what the business should be, the mission lays out in broad terms what our main tasks are now. • ‘Saving Private Ryan’

8. The Strategic Management Process • Step 2: Perform External and Internal Audits • Ideally, managers begin their strategic planning by methodologically analyzing their external and internal situations. • To facilitate this strategic external/internal audit, many managers use SWOT analysis. • This involves a SWOT chart to compile and organize the process of identifying company Strengths, Weaknesses, Opportunities and Threats.

9. FIGURE 3–7 SWOT Matrix, with Generic Examples

10. The Strategic Management Process • Step 3: Formulate New Business and Mission Statements • Based on the situation analysis, what should our new business be? • What is our new mission and vision? • Step 4: Translate the Mission into Strategic Goals • Saying the mission is “to make quality job one thing; operationalizing that mission for your managers is another. • Step 5: Formulate Strategies to Achieve the Strategic Goals • The strategies bridge where the company is now, with where it wants to be tomorrow. • The best strategies are concise enough for the manager to express in an easily communicated phrase that resonates with employees.

11. The Strategic Management Process

12. The Strategic Management Process • Step 6: Implement Strategies • Strategy implementation means translating strategies into actions and results –by actually hiring (or firing) people, building (or closing) plants, and adding (or eliminating) products and product lines. • Step 7: Evaluate Performance • Strategies do not always succeed. • Managing strategy is an ongoing process. • Strategic evaluation addresses several important questions: • For example: Are all the resources of our firm contributing as planned to achieving our strategic goals? • What is reason for any discrepancies? • Do changes in our situation suggest that we should revise our strategic plan?

13. FIGURE 3–8 Type of Strategy at Each Company Level

14. Corporate Strategy Possibilities Diversification Concentration Consolidation Vertical integration Geographic expansion Types of Corporate Strategies

15. Types of Corporate Strategies • A company’s corporate level strategy identifies the portfolio of businesses that, in total, comprise the company and the ways in which these businesses relate to each other • Concentration (single business) • The firm offers one product or product line, usually in one market. • Diversification • The firm will expand by adding new product lines. • Related and unrelated (conglomerate)

16. Types of Corporate Strategies • Vertical Integration • The firm expands by, perhaps, producing its own raw materials, or selling its products direct. • Consolidation • Reducing a firm’s size. • Geographic Expansion • Taking business abroad

17. Business-LevelCompetitive Strategies Differentiation Cost leadership Focus/Niche Types of Competitive Strategies

18. Types of Competitive Strategies • A competitive strategy identifies how to build and strengthen the business’s long term competitive position in the marketplace. • Cost leadership • A firm is seeking to become the overall low-cost leader in an industry. • Dell • Differentiation • The firm seeks to be unique in their industry along competitive dimensions that are widely valued by buyers. • Volvo (safety), Mercedes- Benz (reliability and quality) • Focus • The firms that attempt to compete in a narrow market segment (niche) through the provision of a product or service that specify customers can get in no other way. (Ferrari)

19. Functional Strategy • A functional strategies identify the basic courses of action that each department will pursue in order to help the business attain its competitive goals. • Dell’s human resource strategies

20. Achieving Strategic Fit • The “Fit” Point of View (Porter) • All of the firm’s activities must be tailored to or fit the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies. • Southwest Airlines’ a low-cost leader strategy • Leveraging (Hamel and Prahalad) • “Stretch” in leveraging resources—supplementing what you have and doing more with what you have—can be more important than just fitting the strategic plan to current resources.

21. FIGURE 3–9 Southwest Airlines’ Activity System

22. HRM’s Role in Creating Competitive Advantage • Competitive advantages are “factors that allow an organization to differentiate its product or service”. • To have an effective competitive strategy, the company must have one or more competitive advantages. • Southwest Airlines achieves a low-cost leader status partly through employment policies. • The competitive advantage can take many forms. • For a pharmaceuticals company, it may be the quality of its research team, and its patents. • Ford and Toyota (same technology) • Toyota’s HR strategies: • A full week of employee screening testing • Three weeks per year of training • Team-based rewards

23. Strategic Human Resource Management • Strategic Human Resource Management • The linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. • Involves formulating and executing HR systems—HR policies and activities—that produce the employee competencies and behaviors that the company needs to achieve its strategic aims. • FedEx’s strategic aims is to achieve superior levels of customer service and high profitability through • A highly committed workforce, preferably in a nonunion environment.

24. FIGURE 3–10 Linking Company-Wide and HR Strategies

25. FIGURE 3–13 Strategy Map for Southwest Airlines

26. HRM’s Strategic Roles • HR Managers can play two basic strategic planning roles, in strategy execution and in strategy formulation. • The Strategy Execution Role • Strategy execution is traditionally the heart of the Hr managers’ strategic job. • Top management formulates the company’s corporate and competitive strategies. • Then, hr manager designs strategies, policies, and practices that make sense in terms of company’s corporate and competitive strategies. • Dell’s ‘Web-based help desk’ help the firm better execute its low-cost strategy

27. HRM’s Strategic Roles • The Strategy Formulation Role • HRM’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 employers face today. • Globalization means more competition, more competition means more performance and most employers are pursuing improved performance • By boosting the competence and commitment levels of their employees. • ‘How can we boost employee productivity?’ is crucial to the strategy formulation process.

28. Creating the Strategic HRM System

29. Building A High-Performance Work System • High-Performance Work System (HPWS) • A set of human resource management policies and practices that promote organizational effectiveness. • High-Performance Human Resource Policies and Practices • Emphasize the use of relevant HR metrics. • Set out the things that HR systems must do to become an HPWS. • Foster practices that encourage employee self-management. • Practice benchmarking to set goals and measure the notable performance differences required of an HPWS.

30. TABLE 3–1 Comparison of Selected Human Resource Practices in High-Performance and Low-Performance Companies

31. K E Y T E R M S strategic plan strategy strategic management vision statement mission statement corporate-level strategy competitive strategy competitive advantage functional strategies Off shoring strategic human resource management strategy map high-performance work system human resource metric value chain HR audit