A firm’s strategic choices are the options they have available to them when designing its

human resource system. When an organization fits their system with the organizational
strategies, characteristics, capabilities and the outside environment it should lead to
improved firm performance.

The strategies employed by human resources need to fit with organizational strategies.
A few strategies available are noted on this slide.
Some Corporate strategies include evolutionary and steady state. Evolutionary is the
aggressive acquisitions of new businesses, even if unrelated. HR emphasis on flexibility, quick
response, entrepreneurship, risk sharing, and decentralization. Steady state is a strategy to
avoid acquiring firms outside their industry or companies that are very different from them. The
HR emphasis is on efficiency, control, centralization and long-term career development of
employees.
Porter’s Business Unit strategies include cost leadership, differentiation and focus. The
Cost leadership approach gains competitive advantage through lower costs. The HR
emphasis is on efficient, low-cost production, highly structured procedures, and discourages
creativity and innovation. Differentiation works to create a product or service that is perceived as being
unique. HR will emphasize innovation, flexibility, and renewal of the workforce by attracting
new talent from other firms. Focus combines low cost and differentiation to serve narrow target
market better than other firms. HR will need to emphasize a cross between those described for
low-cost producers and differentiators.
Miles and Snow’s business strategies include the defender and prospector approach. The
Defender has conservative business units that prefer to maintain a secure position in relatively
stable product or service areas. With the HR emphasis on control and structure, and policies
designed to foster long-term employee attachment. Prospector approach is interested in growth
and innovation, development of new products, and an eagerness to be the first in new-product or
market areas. The HR emphasis is on policies that foster creativity and adaptability, staffing and
employee separation policies that focus on the external labor market; customized, participative
employee appraisals used for multiple purposes (including employee development);training
strategies targeting broad skills; and a decentralized compensation system that
rewards risk taking and performance.
The human resource strategy needs to not only fit with organizational strategies but the
external environment as well. There are four major dimensions that we can use to
evaluate the environment. They are: degree of uncertainty, magnitude of change,
complexity, and volatility.
If the environment ranks high on these four dimensions an organization will need HR
strategies that promote flexibility, adaptability, quick response, transferability of skills, the ability
to secure external talent when needed, and risk sharing with employees (variable pay).
If the environment ranks low on the four dimensions the organization will need HR strategies
that allow for an orderly, rational, and routine approaches to dealing with a relatively predictable
and stable environment.