BUSINESS STRATEGY & HR

STRATEGY

APPROACHES TO THE DEVELOPMENT OF HR STRATEGIES

Best-

fit approach Best practice approach Bundling approach

BEST- FIT
Linking HR strategy with business strategy. Analysis of business needs of the firm. Development of HR strategies supportive of business initiative. Limitations:

Fails to align employee interest with the organization. Considers HR as reactive rather than proactive.

BEST- PRACTICE
Organizations should adopt the best practice irrespective of the context Superior management practices can be easily identified and transferred across organizations. 7 best practices are Employment security Selective hiring Self-managed teams High- compensation contingent on performance Training Reduction of status differential Sharing information Limitation less consensus on best practices, it is not clear what goals are being served by best practices

BUNDLING/ HR BUNDLES APPROACH

Development

and implementation of several HR practices together so that they are interrelated and internally consistent Internal fit or horizontal integration Integration can take place when HR personnel & Line managers share their view on what & how HR policies can be implemented Example high performance

APPROACHES FOR ACHIEVING STRATEGIC FIT

Approaches
Competitive strategy

Focus

Differentiation
Organizational typology

Cost leadership

Defender

Prospector
Life cycle approach

Analyzer

Start-up

Growth

Maturity

Decline

LINKING BUSINESS STRATEGY (PORTER) AND HR STRATEGY( SCHULER & JACKSON) Cost leadership
Result

Utilization HR Strategy
1.

oriented Short-term focus and quantities (Volumes) Suitable for repetitive & predictable business FMCG, Retailers (Reliance fresh, Big bazaar, Pantaloon) HUL, P&G

2.

3. 4. 5. 6.

Short-term performance measures( result/ outcomes) Efficiency (explicit job description, specialized job assignments) Hierarchical pay, few incentives Narrow career path, limited training Limited employment security Limited participation

Differentiation
Long

Facilitation HR Strategy
External

term focus Firm distinguishes its product from its competitors (unique, extraordinary) Creative job behaviour Moderate/high concern for quality and quantity Apple, Nike, Sony etc.

recruitment & hiring of people who bring in new ideas Broad career paths Extensive training Equal and fair pay, many incentives for creativity Long term performance measures High employee participation Some employment security

Focus
Different segment of market have different needs High concern for quality Moderate concern for quantity Long/medium term focus

Accumulation HR strategy

Hiring employees belonging to the target market Equal and fair pay with many incentives Broad career paths with extensive training High employee participation Some employee security

ORGANIZATION TYPOLOGY( MILES & SNOW) & HR STRATEGY

Defenders
Find change threatening Favour strategies that encourage continuity and security

HR Strategy

Bureaucratic approach Planned and regularly maintained policies to provide for lean HR Build human resources Likely to emphasize training programmes and internal promotion

Prospectors

HR Strategy
Creative

Thrive

on change Favour strategies of product and market development

style Have high quality human resources Emphasize redeployment and flexibility of HR Little opportunity for long term HR Planning Acquire human resources Likely to emphasize recruitment, selection and performance based compensation

and flexible management

Analyzers
Seek to match new ventures with the present business set up Followers ventures are not new to the market, only new to the firm

HR Strategy

Low level of monitoring and coordination Buy as well as make key human resources Emphasize HR planning

STAGES OF ORGANIZATIONAL LIFE & HR PRACTICES

Start-up
Flexible

pattern of work Recruitment of highly motivated and committed employees Competitive pay Little formality No unions
More

Growth

sophisticated recruitment & selection Training and development Performance management processes Reward system Focus on high commitment Developing stable employee relations

Maturity

Attention

to the control of labour costs Focus on increasing productivity Control compensation Strained employee relations
Emphasis

Decline

on rationalization of workforce & downsizing Abandoning some longstanding practices to cut costs Trade unions have a marginalized role Retraining and career consulting services Redeployment

TYPE AND NUMBER OF PRODUCTS

Single

product strategy- Functional structure

Subjective

selection criteria Less systematic appraisal Rewards are distributed in paternalistic way Growth strategy
Acquisition

of unrelated

businesses Different selection criteria for different businesses Performance appraisal & rewards are impersonal Development is cross functional & cross business

ITC
It is not a pure-play FMCG company, since cigarettes is its primary business. Other products are foods, personal care, paper products, lifestyle, hotels & Agri business . Business strategy

Cost leadership- FMCG sector

HR strategy- utilization strategy Focus on short-term performance measures Efficiency being a sought after virtue Narrow career paths & limited training Compensation of employees at the junior /workmen level in this sector is marginalized

Diffentiation - Hotel & lifestyle

HR

strategy Facilitation

Extensive

training, external recruitment, high employee participation, long term performance measures

Focus- Cigarettes business maintain highest standards of quality owing to the growing business needs for export & catering to the luxury category after imposition of bans & heavy taxes.
HR

strategy-

hiring

is done from the target market( young engineers from the premier institute of the market) career path with extensive training of employee empowerment & decision making power.

Broad Lot

HSBC
Strategic goal is to diversify into new markets world-wide. HR at HSBC honour diversity within the organization by building an inclusive work environment. It recruits and maintains a unique blend of people who come from different heritages and experiences, with a wide range of cultures, perspectives and talents.

MC KINSEY
It offers premium management consulting services to clients internationally. Business strategy- differentiator People are the key differentiator Highly selective of their hires Up or out policy Emphasis on high performance level, feedback, mentoring , credibility & integrity Many assignments come through its alumni network.

NOKIA
It caters to two segments of the market, one being the classes and masses too. Business strategy cost leadership, differentiator, prospector A flat, networked organization with speed & flexibility in decision-making HR practices Emphasis on innovation Long term performance measures Extensive training Professional & personal growth Open & effective communication

PANTALOON
The

Cost leadership strategy-providing best quality at the lowest price possible within the market. HR strategy

Short-term performance measures- the salary structure of the company is more based on the incentive oriented system. High rigidity of the job description

HOW JAPANESE MANUFACTURING FIRMS ALIGN THEIR HUMAN RESOURCE POLICIES WITH BUSINESS STRATEGIES: TESTING A CONTINGENCY PERFORMANCE PREDICTION IN A JAPANESE CONTEXT. AUTHORS: TAKEUCHI, NORIHIKO1 SOURCE: INTERNATIONAL JOURNAL OF HUMAN RESOURCE MANAGEMENT; JAN2009, VOL. 20 ISSUE 1, P34-56, 23P DOCUMENT TYPE: ARTICLE

This study examines the interaction effects of business-level strategy and HRM policies upon performance among Japanese manufacturers, in response to the current debate around the contingency fit proposition in the field of strategic human resource management (SHRM). Specifically, it was hypothesized that the three generic strategic types -cost reduction, differentiation (innovation), and quality enhancement would moderate the relationship between particular HRM policies and the performance of Japanese manufacturing firms. The results, based on a sample of 312 Japanese manufacturers operating in the domestic environment, reveal the existence of links between appropriate strategy and HRM policies in predicting performance, providing strong support for the proposition of contingency fit from SHRM theory. The findings are used to discuss how Japanese manufacturers can align their HRM policies with business strategies to increase manufacturing performance.

BARRIERS TO STRATEGIC HR
Short-term mentality/focus on current performance Inability of HR to think strategically Lack of appreciation for what HR can contribute Difficulty in quantifying many HR outcomes Failure to understand line managers role as an HR manager Perception of human assets as higher-risk investments Incentives for changes that might arise

SOME OTHER ISSUES

HR

practices are difficult to change and transfer It is easier for firms to find a new business strategy to go with the existing HR practices and competencies than to develop new HR practices and competencies to match new business strategies.