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The Concepts of Strategic HRM

Formulating &
Implementing
HR Strategies

CHAPTER NO. 4
Strategy Formulation

Strategic planning groups decide on a


strategic direction by defining the
company's mission and goals, its external
opportunities and threats, and its internal
strengths and weaknesses.

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Strategy Formulation

 It Provides direction to the Organization


 Effective firm strategies require to attain Mission
 For Formulation of HR strategy its essential to
underlie the interactive relationship between
business strategy & HRM
 Scanning Environment
 HR strategies not necessarily developed formally &
systematically but Evolve & emerge (Tyson, 1997)
 HR strategy treat as a perspective rather than
rigorous procedure for mapping future
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STRATEGY
FORMULATION

EXTERNAL
ANALYSIS

(Opportunities
& Threats)

STRATEGIC
MISSION GOALS
CHOICE

INTERNAL
ANALYSIS

(Strengths &
Weaknesses
Developing HR Strategies

 Five Fundamental questions that need to be asked


in formulating HR strategies…
 What are the firms strategic objectives?
 How are these translated into Unit Objectives?
 What do unit managers consider are the
Performance Drivers of those objectives?
 How do the skills, motivation and structure of the
firms workforce influence these performance
drivers?
 How does the HR System influence the Skills,
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motivation and structure of the Workforce?
Developing HR Strategies

 The Following HR Strategies proposed by Gratton


(2000)…
 Build the guiding Coalition:- involve people
from all parts of the business
 Image the Future:- Create a shared vision of
areas of strategic importance
 Understand Current Capabilities & identify the
Gap:- Establish where the firm is now and the gap
between aspirations for the future & reality of the
present.
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Developing HR Strategies

 The Following HR Strategies proposed by Gratton


(2000)…
 Create a map of the System:- ensure that the
parts can be built into meaningful whole
 Model the dynamics of the system:- Create a
shared vision of areas of strategic importance
 Bridge into Actions:- Agree the broad themes for
action and the specific issues related to those
themes, develop guiding principles, involve line
managers and create cross-functional teams to
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identify goals and performance indicators
Methodology for Formulating HR
Strategies
A methodology for formulating HR Strategies proposed
by Dyer and Holder (1988)…
Access Feasibility:- From an HR View, it depends on
whether the numbers and types of key people required
to make the proposal succeed can be obtained on
timely basis and at a reasonable cost, and whether
behavioral expectations assumed by the strategy are
realistic.
Determine Desirability:- Examine the implication of
strategy in terms of sacrosanct HR Policies (rapid
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Retrenchment strategy occure in company with full
employment policy)
Methodology for Formulating HR
Strategies
A methodology for formulating HR Strategies proposed
by Dyer and Holder (1988)…
Determine Goals:- These indicate the main issues to
be worked on and they derive primarily from the
content of the business strategy. E.g Lower cost
strategy (HR goals two:- higher performance standards
(contribution) and reduced head-Counts (composition))
Decide means of achieving goals:- Rule indicate the
closer the external & internal fit the better the strategy
 External fit (HR goals & HR Strategy Consistency)
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 Internal Fit (HR Means & HR Goals Coherence)
Achieving Vertical Fit-
Integrating Business And HR
Strategeis
Wright & Snell (1998) suggest that seeking fit requires
Knowledge of the skills and behavior necessary to
implement the strategy, knowledge of the HRM
Practices necessary to elicit those skills and behaviors
and ability to quickly implement desired system of HRM
Practices
Fit may exist at a point in time, but circumstances
will change and fit no longer exists

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Achieving Horizontal Integration

Horizontal fit is achieved when the various HR


Strategies cohere and are mutually supporting.
(Bundling)

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Setting Out the Strategy
There is no standard model of how an HR
strategy should be set out. It all depends on the
circumstances of the firm. But following are the
typical areas that may be covered…
1 – Basic
 Key elements of business Strategy
 Environmental factors & analysis (SWOT
& PESTEL)
 Cultural Factors: Possible helps or
hindrances to implementation
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Setting Out the Strategy
There is no standard model of how an HR
strategy should be set out. It all depends on the
circumstances of the firm. But following are the
typical areas that may be covered…
2 – Content
 Details of the proposed HR Strategy
3 – Rationale
The Business Case for the strategy against the
background of business needs and
environmental/cultural factors.
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Setting Out the Strategy
2 – Implementation Plan
 Action Program
 Responsibility for each stage
 Resources required
 Proposed arrangements for
communication,consultation,involvement
and training
3 – Cost and Benefits Analysis
An assessment of resource implications of the
plan(costs, people and facilities) and the
benefits that will accrue, for firm as a whole, for
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line managers & for individuals.


STRATEGY IMPLEMENTATION

The organization follows through on the


strategy that has been chosen. This includes
structuring the organization, allocating
resources, ensuring that the firm has skilled
employees in place, and developing reward
systems that align employee behavior with the
strategic goals.
Getting Strategies Into action is not Easy
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STRATEGY IMPLEMENTATION

Organizational
Structure

Types of Task Design


Information

Product
Market Performance
Strategy Selection,
Reward Training, and
systems Development
of people
Implementing Human Resources
Strategy
The factors identified by Gratton et al that
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;
 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
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perceived differently by them especially in


large, diverse organizations;
Implementing Human Resources Strategy
 It is more difficult to gain acceptance of non-
routine initiatives; employees will be hostile to
initiatives if the initiatives are believed to be in
conflict with the organization’s identity, eg
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
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help to embed the initiative;


 A bureaucratic culture that leads to inertia.
Barriers to the Implementation of
HR Strategies
 Failure to understand the strategic needs to
business
 Inadequate assessment of the environmental
and cultural factors that effect strategies
 Ill-conceived and irrelevant initiative
development
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Overcoming the Barriers

To overcome these barriers it is necessary to


Conduct a rigorous preliminary analysis of
needs and requirements;
• Formulate the strategy
• Enlist support for the strategy
• Assess barriers
• Prepare action plans
• Project manage implementation and
• Follow up and evaluate progress so that
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remedial action can be taken as necessary.


HOW HR Impacts on
Organizational Performance
The assumption underpinning the
practice of HRM is that people are the
firm key resource and firm performance
largely depends on them. An Appropriate
Range of HR policies & Process develop
Substantial impact on firm Performance

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HOW HRM Strategies Makes an
Impact on Organizational
Performance

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HOW Strategic HRM Concepts
Impacts on Practices
HR Practice Areas
 Attracting, developing & retaining high quality People
 Talent Management
 Job & Work Design
 Learning & Development
 Managing Knowledge & Intellectual Capital
 Reward Management
 High-Performance Management
 Increasing engagement, Commitment and motivation
 Managing Knowledge and Intellectual Capital
 Working 23 Environment – Core Values, Leadership, Work-Life
Balance, Managing Diversity, Secure Employment
Strategic Role of HR
Chapter- 5

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Strategic Nature of HR

 Transactional Activities:- It consist of the service


delivery aspects of HR- recruitment, T & D, ER and
legal compliances etc.
 Strategic Activities:- It supports the achievement of
the firms goals and values and involve the
development & implementation of forward looking HR
strategies that are integrated with one another and
aligned to business objectives
 HR specialists working with line managers
 Continuous development & implementation
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 HR strategic contribution.
The Strategic Partner Model

David Ulrich model:- He (1998) argued that HR


professionals carry out the following proactive roles as
champions of competitiveness in creative and
delivering value.
1- Strategic Partner:-helping the business to
successfully implement strategy.
2- Administrative Experts:- improving firm
performance by re-engineering the HR function & other
work processes.
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The Strategic Partner Model

David Ulrich model:- He (1998) argued that HR


professionals carry out the following proactive roles as
champions of competitiveness in creative and
delivering value.
3- Employee Champions:- Maximizing employee
commitment and competency and their overall
responsiveness to change.
4- Change Agents:- Delivering organizational
transformation and culture change.
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1-The Strategic Role of HR
Directors
1- Developing and implementing HR strategies that are
integrated with the business strategy which is coherent and
mutually supportive
2 – Ensuring that a strategic approach is adopted by the HR
function that supports business and adds value.
 Understand the strategic goals of the firm
 Appreciate the business imperatives & performance
drivers relatives to these goals;
 How SCA can be attain through human capital
 Contribute to the development for the business of a clear
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vision & integrated values
1-The Strategic Role of HR
Directors

 Believe in and practice evidence based management


 Understand the kinds of employee behavior required
successfully to execute business strategy
 Ensure that senior management understands the HR
implications of its business strategy
 Think in terms of the bigger and long term picture of
where HR should go and how to get there

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2- The Strategic Role of Heads of
HR Functions

 Understand the strategic goals of the firm as they


affect their function
 Appreciate the business imperatives & performance
drivers relatives to these goals
 Help senior management to understand the
implications of its strategy for the HR Function
 Know how HR practices in the function can
contribute to the achievement of strategic goals
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2- The Strategic Role of HR
Business Partner

 Understand the business & its Competitive advantage


 Understand the goals of their part of the business & its
plans to attain them
 Ensure value-addition toward functions
 Build relationship on trust with line management clients
 Provide support to strategic activities of their colleagues

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2- The Strategic Role of HR
Business Partner

 Align their activities with business requirements


 Believe in and practice evidence-based
management
 Be proactive, anticipating requirments,identifying
problems and producing innovative solutions
 See the broad picture and rise above day-to-day
detail

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Strategies for Improving
Organizational Effectiveness
(HR- Strategies)

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HR Strategies

 Human Capital management strategy


 High Performance Strategy
 Corporate Social responsibility (CSR)
 Organizational Development Strategy
 Employee Engagement Strategy
 Knowledge management Strategy
 Employee Re-sourcing Strategy
 Talent management Strategy
 Learning & Development Strategy
 Reward Strategy
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 Employee Relations Strategy
1- Human Capital Management
Strategy

It is an integrated effort to manage and develop human


capabilities to achieve significantly higher levels of
performance.
OR
HCM is related with obtaining, analyzing, and reporting
on data that inform the direction of value-adding people
management Strategy.

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2- High Performance Strategy

This strategy sets out the intentions of the organization


on how it can achieve competitive advantage by
improving performance through people

High- Performance work systems are composed by


practices that can facilitate employee involvement, skill
enhancement and motivation.

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3- Corporate Social
Responsibility Strategy

This strategy exercise by firms when they conduct their


business in an ethical way, taking account of the social,
environmental and economic impact of how they operate
and going beyond compliance.

CSR refers to the action taken by businesses that further


some social good beyond the interests of the firm and that
which is required by law.

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Impact of business behavior on Society


4- Organizational Development

Organization Development is an effort that is:


 Planned
 Organization-wide
 Managed from the top
 Increase organization effectiveness and health
 Through planned interventions in the organization's
"processes,” using behavioral-science knowledge

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4- Organizational Development

“A planned systematic process in which applied behavioral


science principles and practices are introduced into an
ongoing organization towards the goals of effecting
organizational improvement, greater organizational
competence and greater organizational effectiveness.

The focus is on organizations and their improvement or to


put it another way total systems change. The orientation is
on action achieving desired results as a result of planned
activities.”
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4- Organizational Development

 OD Aims to help people work more effectively together

 Improve firm processes

 Facilitate transformation of the firm

 Management of Change

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OD Strategies

 They are managed or at least strongly supported,


from the top but may make use of third parties or
change agents to diagnose problems and to
manage change by various kinds of planned
activity or intervention.

 The plans for organization development are based


upon a systematic analysis and diagnosis of the
strategies and circumstances of the organization
and the changes and problems affecting it.
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OD Strategies

 They use behavioral science knowledge and aim to


improve the way the organization copes in times of
change through such processes as interaction,
communication, participation, planning and
conflict management.

 They focus on ways of ensuring that business and HR


strategies are implemented and change is managed
effectively.
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Assumptions & Values of OD

 Most individuals are driven by the need for


personal growth and development as long as their
environment is both supportive and challenging.

 The work team especially at the informal level has


great significance for feelings of satisfaction and
the dynamics of such teams have a powerful
effect on the bevaiour of their members.

 OD programs aim to improve the quality of


working life of all members of the organizations.
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Assumptions & Values of OD

 Organizations can be more effective if they lean to


diagnose their own strengths and weaknesses.

 But managers often do not know what is wrong


and need special help in diagnosing problems,
although the outside process consultant ensures
that decision making remains in the hands of the
clients.

 The implementation of strategy involves paying


close attention to the people processes involved
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and the management of change.
Activities INCOPERATED in OD
Strategy

 Action research
 Survey Feedback
 Interventions
 Process Consultation
 Group dynamics
 Inter-group conflict Interventions
 Personal Interventions
 Integrated Strategic Change
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Strategies for organizational
Transformation
Transformation is required when:
 Significant changes occur in the competitive,
technological, social or legal environment .
 Major changes take place to the product life cycle
requiring different product development and marketing
strategies.
 Major changes take place in top management
 A financial crisis or large downturn occurs.
 An acquisition or merger takes place
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Transformational Strategies

Transformation strategies are usually driven by senior


management and line managers with the support of HR
rather than OD specialists. The key roles of management as
defined by Tushman et al (1988) are envisioning, energizing
and enabling.

Transformational strategies plan may involves Radical


changes to the structure, culture and processes of the firm –
the way it looks at the world
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Types of Transformational Strategies

 A change in what drives the organization for example


a change from being production driven to being
market driven would be transformational

 A fundamental change in the relationships between or


among organizational parts for example
decentralization.

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Types of Transformational Strategies

 A major change in the ways of doing work for


example the introduction of new technology such as
computer integrated manufacturing.

 A basic cultural change in norms, values or research


systems for example developing a customer focused
culture.

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Transformation through
Leadership

 Transformation through Leadership


 Transactional leaders

 Transformational Leaders

 Managing the Transition

 Transformational Program

 Transformation Capability
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Transformation Program

 Establishing a sense of urgency


 Forming a powerful guiding coalition
 Creating a vision
 Communicating the vision
 Empowering others to act on the vision
 Planning for and creating short-term wins
 Consolidating Improvements & producing still more change
 Institutionalizing new Approaches
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Transformational Programs

 Establishing a sense of urgency


 Examining market & competitive realities
 Identifying & discussing crises, potential crises or
major opportunities
 Forming a powerful guiding coalition
 Group assemble with enough power to lead change
effort
 Work as team
 Creating a vision
 Vision creation to help direct change effort
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 Developing strategies for achieving that vision


Transformational Programs
 Communicating the vision
 Using any vehicle to communicate the new vision
 Teaching new behavior by the helps of guiding
coalition
 Empowering others to act on the vision
 Getting rid of obstacles to change
 Changing systems or structures
 Encouraging risk taking, non-traditional ideas,
activities and actions
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Transformational Programs
 Planning for and creating short-term wins
 Planning for visible performance improvements
 Creating those improvements
 Recognizing & rewarding employees involve in the
improvements
 Consolidating Improvements & producing still
more change
 Change systems that did not fit the vision
 Hiring, promoting employees who can implement
vision
 54
Change agents
Transformational Programs

 Institutionalizing new Approaches


 Articulating the connection between new behaviors
and corporate success
 Developing the means to leadership development and
succession

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Transformational Capability

It depends on the ability to create and embed processes


which link business strategy to the behaviors and
performance of individuals and teams
• Vertically (to create alignment with short-term
business needs)
• Horizontally (To create Cohesion)
• Temporarily (To transform to meet future business
needs)
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5- Employee Engagement
Strategy
Employee engagement refers to the extent to which
employees put discretionary effort into their work,
beyond the minimum to get job done in terms of extra
time, brainpower or energy (Tower, 2007)
OR
A heightened connection that an employee feels for his
or her organization.

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Significance of Engagement

Watkin (2002) found that there were significant


differences in value-added discrepancy performance
between superior and standard performers.
Diagram

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Engaged Employee

Someone who is aware of business context and works closely


with colleagues to improve performance within job for the
benefit of the firm
 Positive about the job
 Works actively to make things better
 Treats other with respect & help colleagues
 Goes beyond job requirements
 See bigger pictures even at personal costs
 Keeps up to date with development in their fields
 Looks for and is given opportunities to improve firm
performance
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Factors Influencing Engagement
Rational aspect:- employee role understanding where it fits
in the firm and how it align with business objectives
Emotional Aspect:- how people feel about the firm,
managers & environment

 The Work Itself


 Work Environment
 Leadership
 Opportunities for Personal growth
 Opportunities to contribute

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Strategies for Enhancing
Engagement

 The Work Itself


 Feedback
 Use of abilities
 Self-control(autonomy)
 Work Environment
 Leadership
 Opportunities for Personal growth
 Opportunities to contribute

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THOUGHT OF THE DAY

“If an HR person is trying to choose


people for an organization, knowing their
values is very important-if they are not
consistent with the organization’s values
they are not likely to stay very long.”
Professor, Roger Collins.
Strategic Concepts & Definitions

 Goal of SHRM is the effective application of such


resources to meet organizational requirements and
Objectives
 First, Resource-Based View:- explains practices &
provides CA by allocating unique resources, firm
culture & distinctive competencies.
 Second, Behavioral View:- explains practices
designed to control and influence attitudes &
behaviors
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Strategic Concepts & Definitions

 Resource Dependence & Power Theories:-


explains practices caused by power and political
influences such as legislation, unionization, control of
resources & expectation of social responsibility.
 Institutional Theory:- Explains that practices, such
as the use of inappropriate performance evaluation
dimensions, may exist because of organizational
inertia rather than conscious or rational decision
making.
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Strategic Concepts & Definitions

 Third, Cybernetic View:- explains the adoption or


abandonment of practices resulting feedback on
contribution to strategy. Training programs adopted to
pursue strategies & updated as per feedback

 Fourth, Agency/Transactional Cost View:- explains


why firms use control systems, such as performance
evaluation and reward system
 Resource Dependence & Power Theories:-
explains practices caused by power and political
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influences such as legislation, unionization, control of
resources & expectation of social responsibility.

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