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Strategic Human Resource
Management
Ashwini Hiremath
What is Strategy?
 Strategy is a term that comes from the
Greek word strategia, meaning
"generalship."
 In the military, strategy often refers to
manoeuvring troops into position
before the enemy is actually engaged.
 What is Strategy?: The company’s
long term plan for how it will balance
its internal strengths and weaknesses
with its external opportunities and
threats to maintain a competitive
advantage
 What is Strategic Management?: the
process of identifying and executing
the organization’s mission by
matching its capabilities with the
demands of its environment
Strategic Management
Process
 Strategic analysis
◦ Environmental analysis
◦ Establish organizational direction
 Strategy formulation
 Strategy implementation
 Strategic control
Strategic HRM
 Strategic HRM is to ensure that human
resource management is fully integrated
into strategic planning
 The HRM policies cohere (join together)
both across policy areas and across
hierarchies and that HRM policies are
accepted and used by the line managers
as part of their work
 The term HR strategy & Strategic HRM
are often used interchangeably, but a
distinction can be made between them
Strategic HRM HR Strategy
 Strategic HRM can be regarded as
general approach to the strategic
management of human resources in
accordance with the intentions of the
organization on the future direction
 It is concerned with long term people
issues as a part of the strategic
management process of the
organization
 What emerges from this process is a
stream of decision over time that forms
the patterns adopted by the organization
for managing its HR and defines the
areas in which specific HR strategies
need to be developed
 It deals with macro concerns about
structure, values, culture, quality,
commitment, performance, competence
& management development
 It focuses on the specific
intentions of the
organization as to what
needs to be done and
what needs to be
changed
 Strategic HRM & HR strategy can be
compared with the relationship between
strategic management & corporate business
strategies
 Strategic HRM & strategic management are
terms describing an approach that may be
adopted by top management & focuses on
longer term & setting the overall direction
 HR strategies and corporate/business
strategies can be outcome of this approach,
which specify in more detail the intentions of
the org. concerning key issues and particular
functions and activities
 Strategic integration is necessary to
provide congruence between business
and human resource strategy, so that
the latter supports the
accomplishment of the former and
indeed helps to define it
 The aim is to provide strategic fit and
consistency between the policy goals
of HRM & the business
Concept & Meaning of SHRM
 The concept of strategic HRM was first formulated by
Fombrunet who wrote that three core elements are
necessary for firms to function effectively
◦ Mission & strategy
◦ Organization Structure
◦ Human Resource Management
 The success of an organization depends on the people
therein. This means how they are acquired, developed,
motivated & retained in the organization, plays an
important role in the organization success
 This proposes an integral approach towards HR
functions and overall business functions of an
organization
 Thus strategic HRM means a strategic look at HR
functions in line with the business functions of an
organization
Strategic HRM therefore is
concerned with the following;
1. Analyze the opportunities and threats
existing in the external environment
2. Formulate strategies that will match the
organizations (internal) strengths and
weaknesses with the environmental
(External) threats and opportunities. In
other words SWOT analysis of
organization
3. Implement the strategies so formulated
4. Evaluate & control activities to ensure
that organizations objectives are duly
achieved
Aims & Objectives
 To generate strategic capability by
ensuring that the organization has the
skilled, committed and well-motivated
employees – by which it need to achieve
sustained competitive advantage
 To provide a sense of direction in an
often turbulent environment so that the
business needs of the organization and
the individual and collective needs of its
employees can be met by the
development and implementation of
coherent and practical HR policies &
programmes
Significance/Importance of
SHRM
 When a human resource department strategically develops its plans
for recruitment, training, and compensation based on the goals of
the organization, it is ensuring a greater chance of organizational
success
 Ex. - Let's think about this approach in relation to a basketball team.
The whole team wants to win the ball game, and they all may be
phenomenal players on their own, but one great player doesn't
always win the game. That's not how a basketball team wins, and it's
not how an organization wins either. A team wins when its members
support each other and work together for a common goal
 You could also look at strategic HRM as the team captain or coach,
as his or her responsibilities are a little bit different from those of the
other players.
 Human resources departments are charged with analyzing the
changes that need to occur with each 'player' or department and
assisting them in strengthening any weaknesses.
 Strategic human resource management then is the process of
using HR techniques, like training, recruitment, compensation and
employee relations to create a stronger organization
Traditional HR versus Strategic
HR
Some Examples
 Southwest airlines – Ticketless travel
 Albertson – Superior managers shape
their department policies & practices –
so that they make sense in terms of (or
align with ) their companies strategic
aims
 Main purpose of SHRM is to show how
to develop a HR manager that supports
and make sense in terms of your
company’s strategic aims
Way forward in SHRM
 Here we will see how to translate a
companies business strategy into
actionable human resource policies &
practices
 We will see strategic management
process
 How to develop a strategic plan
 The HR managers role in strategic
management process &
 A step by step ‘HR Scorecard approach
to create HR policies & practices that
makes sense in terms of the company’s
strategic aims
 Ford motor company, faced huge loss &
hemorrhaging market share to TOYOTO &
NISSAN, knew it needed a new strategic plan
 Competition was tight, Ford’s cost was too
higher than competitors, Fords unused plant
capacity was draining profits
 Fords manager devised ‘The way forward’ –
this new strategic plan established closing a
dozen plants & terminating 20,000
employees
 This was a strategic plan of how it will match
internal & strength & weakness to external
Opportunities & threats
 The essence of strategic planning is to
ask
 Where are we now as a business?
 Where do we want to be?
 & How should we get there?
 The managers the formulate specific
strategies to take the company from
where it is now to where he or she
wants to be.
SHRM - some more details
 Managers use the term ‘HR Strategy” to refer to the specific
HRM courses of action the company pursues to achieve its
strategic aims
Ex. FedEx strategic aim is to achieve superior levels of
customer service & high profitability through a highly
committed workforce. Preferably in a non union environment
 FedEx HR strategies stem from this aim
 They include using various tools to build two-way
communication
 Screening out potential managers whose values are not
people oriented
 Guaranteeing to the greatest extent possible fair treatment &
employee security for all employees
 & utilizing various promotion from within activities to give
employess every opportunity to fully realize their potential to
give every opportunity to fully realize their potential
Linking Corporate and HR
Strategies
 SHRM means formulating & executing HR policies &
practices that produce the employee competencies &
behaviours the company needs to achieve its strategic
aims
 Ex. Southwest Airlines – Keeps its price low
 Southwest real secret is its HR management strategy
 Southwest aim is to deliver low cost, convinient service
on short haul routes
 How do they do this?
 One big way is by getting fast, 15 min turnaround at the
gate, thus keeping planes flying longer hours than rivals
 What employee competencies and skills does
southwest need for these fast turnarounds
Ground crews, gate employees & even pilots who all pitch
in & do whatever it takes to get planes turnaround
 & HR management policies & practices would
produce such employee competence &
behaviors
 HR strategy built on high compensation,
flexible job assignments, cross training &
employee stock ownership
 1)High compensation, flexible work
assignments & so forth lead to 2) motivated
flexible ground crews & employee who do
whatever it takes to 3) turn the planes around
in 15min, so that 4) southwest achieves its
strategic aims of delivering low cost,
convenient service
 Ex Dell – its strategy is always been to be a low cost
leader
 Dells HR Manager use various HR strategies to support
Dells low cost aims
 Ex. Dell delivers most of its HR services, not through
conventional HR dept, but via the Web – i.e a managers
tool on Dell intranet contains about 30 automated web
application
 Instead top management needs the input of HR team in
designing the strategy, since it is the team charged with
Hiring, training & compensating the firms employees
 HR managers will therefore need an IN DEPTH
understanding of the value creating proposition of the
firm (In other words, a basic functional understanding of
the firm makes money)
 What activities & processes are most
critical for value creation as defined by
customers & capital market?
 Who in the firm executes these activities
successfully?
 HR professional needs to understand the
basic business functions such as
Accounting, finance, production & Sales..
So they can take their seat at the table
(HR ADVOCATES) when top
management is crafting the firms
strategic plan
HR’S Strategic Roles
 HR professionals should be part of the firm’s
strategic planning executive team.
◦ Identify the human issues that are vital to business
strategy.
◦ Help establish and execute strategy.
◦ Provide alternative insights.
◦ Are centrally involved in creating responsive and
market-driven organizations.
◦ Conceptualize and execute organizational change.
HR’s Strategy Formulation Role
 HR helps top management formulate strategy in a variety of
ways by.
◦ Supplying competitive intelligence that may be useful in the
strategic planning process.
◦ Supplying information regarding the company’s internal
human strengths and weaknesses.
◦ Build a persuasive case that shows how—in specific and
measurable terms—the firm’s HR activities can and do
contribute to creating value for the company
The Basic Architecture of HR
5P Model of Strategic HRM
 The 5 Ps model of strategic human resource
management (SHRM) is a new model in the area of
study.
 This model is proposed by Randal.
 Schuler this model melds five human resource activities
with strategic highlight just how significant, the strategy
activity link can be.
 The proposed model incorporates the 5 Ps of strategic
human resource management which stand for
 Philosophy of Human resources
 Policies human resources
 Programme of human resources
 Practices of human resources
 Processes of human resources
 1. Philosophy: Expressed in statements defining
business values and culture. It expresses how to treat
and value people.
 2. Policies: Expressed as shared values and
guidelines. Policies establish guidelines for action on
people related business issues and HR programs.
 3. Programs: These coordinate efforts to facilitate
change to address major people related business
issues.
 4. Practices: For leadership managerial and
operational role practices motivate needed role
behaviors.
 5. Processes: For the formulation and implementation
of other activities these define how activities are carried
out.
The Five P’s Model of SHRM
 Successful SHRM efforts begin with
identification of strategic needs
 Employee participation is critical to
linking strategy & HR practices
 Strategic HR depends on systematic &
analytical mindset
 Corporate HR departments can have
impact on organization’s efforts to
launch strategic initiatives
 HUMAN RESOURCES PHILOSOPHY
 This is a statement of how the organization
regards its human resources, what role the
resources play in the overall success of the
business, and how they are to be treated and
managed.
 Instead of using the terms HR philosophy or
HR values to describe how human resources
are regarded, treated, and managed, some
organizations use the term culture.
LEADERSHIP IN PEOPLE
(A statement of culture at PCI)
 We will develop an excellent organization focused on building the
business by:
 Empowering people to drive the business from the closest point to the market
 Developing the right skills to be the best in the business
 Building career opportunities
 Building teamwork:
 With bottlers to ensure that we maintain strong partnerships
 Among area, division, and headquarters staff to ensure that we
coordinate functional strengths to produce the best possible results
 Across markets to ensure that we share the best practices throughout
the enterprise
 Helping people succeed by building an environment with:
 High integrity
 Strong and consistent values
 Continuous improvement
LEADERSHIP IN OUR BRANDS
We will achieve brand superiority by:
 Delivering the best products in the marketplace:
 The highest quality
 The best tasting
 The most consistent
 Communicating these benefits in a high-impact, persuasive and consistent manner
LEADERSHIP IN MARKETING
We will build on our brand platforms by:
 Creating new brand, channel, and package segments that build the business:
 Faster off the mark
 Better ideas
 Quicker to create and take advantage of opportunities
LEADERSHIP IN OPERATIONS
We will build excellence in our own and bottler operations by:
 Being the low-cost producer
 Establishing and maintaining a strong focus on customer services and sales
management. These cornerstones will make us the best sales company
 Standardizing operating systems to:
 Enhance our ability to provide the highest level of customer service
 Develop an ability to measure and manage key parameters of the business in a
consistent fashion
 Provide a common set of practices and disciplines for the organization
HUMAN RESOURCES POLICIES
All of these statements provide guidelines for action on people-related
business issues and for the development of HR programs and practices based
on strategic needs. The term HR Policy, as used here, does not mean HR
Policy Manual.
HR policy can link values with a
particular people-related business need
Values: high standards of personal performance
Need: to develop communication skills that would foster such performance in
a decentralized international environment
HR policy: instant feedback. if you have a problem or an idea about any
aspect of the business, or about an individual's performance, then the
organization demands that you raise the issue appropriately and discuss it
maturely.
HUMAN RESOURCES PROGRAMS
Shaped by HR policies, HR programs represent coordinated HR efforts
specifically intended to initiate, disseminate, and sustain strategic
organizational change efforts necessitated by the strategic business needs.
Generic questions help to identify the fundamental
issues for programs
What is the nature of the corporate culture? Is it supportive of the business?
Will the organization be able to cope with future challenges in its current
form?
What kind of people and how many will be required?
Are performance levels high enough to meet demands for increased
profitability, innovation, higher productivity, better quality, and improved
customer service?
What is the level of commitment to the company?
Are there any potential constraints such as skill shortages or HR problems?
HUMAN RESOURCES PRACTICES
LEADERSHIP ROLES
 Establishing direction
 Aligning people
 Motivating and inspiring individuals
 Causing dramatic and useful change
• MANAGERIAL ROLES
Make sure that objectives are clearly understood
 Level with people on what is not negotiable
 Give appropriate orientation to people on new assignments
 Deal effectively with performance problems
 Give people the information they need to be successful
 Give developmental performance feedback in a timely manner
 Give people the freedom they need to do their jobs
 Give co-workers the opportunity to try out their new ideas
 Encourage appropriate collaboration on work assignments
 Encourage people to participate when appropriate
OPERATIONAL ROLES
Content is far more specific than for the other roles
HUMAN RESOURCES PROCESSES
This area deals with "how" all the other HR activities are identified,
formulated, and implemented.
5P Model of SHRM
 The main purpose of SHRM is to show
you how to develop a human resource
management system that supports,
and makes sense in terms of, your
company’s strategic aims;
 Here we show how to translate a
company’s business strategy into
actionable human resource policies &
practices
Strategic Human Resource
Management Tools
 Following are the three important
Human Resource Management Tools;
 STRATEGY MAP
 THE HR SCORECARD
 DIGITAL DASHBOARD
Strategy Map
 The strategy map shows the ‘big picture’ of how each departments
performance contributes to achieving the company’s overall strategic
goals
 It helps the manager understand the role his or her department plays
in helping to execute the company’s strategic plan
 Ex. In case of Southwest Airline – has a low cost leader strategy.
The strategy map for Southwest succinctly (in brief) lays out the
hierarchy of main activities required for Southwest airlines to
succeed
 At the top is achieving company wide strategic financial goals.
 Then the strategy map shows the chain of activities that help
Southwest airlines achieve this goals
 For example: to boost revenues and profitability, Southwest needs to
fly fewer planes (to keep costs down), maintain low prices and
maintain on time flights.
 In turn (further down the strategy map), on-time flights and low
prices require fast turnaround
 And fast turn around requires motivated ground and flight crews
 The strategy map helps each department (including HR) visualize
what it needs to do to support Southwest’s low cost strategy
What overall goals
does Southwest
Airlines want to
achieve?
What must
Southwest do
operationally to
achieve these
goals?
What employee attitudes
and behaviors will produce
these operational outcomes
Improve market
share from 32% to
38%
Maintain profit
growth of 4% per
year
Maintain industry
wide low prices
Fly fewer planes
(Maximize
passenger miles
flown per seat)
Maximize on-time
flights
Turnaround planes
at gates in 20
minutes
Highly committed
employees who are willing
to “go the extra miles” for
southwest Airlines
Strategy Map: Example – Southwest Airlines
The HR Scorecard
 A tool that helps managers measure what matters to a
company.
 Developed by Robert Kaplan and David Norton,
the Balanced Scorecard helps managers define the
performance categories that relate to the company’s strategy.
 The managers then translate those categories into metrics
and track performance on those metrics.
 Besides traditional financial and quality measures, companies
use employee-performance measures to track their
employees’ knowledge, skills, and contributions to the
company.
 The employee-performance aspects of the Balanced
Scorecard analyze employee capabilities, satisfaction,
retention, and productivity.
 Companies also track whether employees are motivated
(e.g., by tracking the number of suggestions made and
implemented by employees) and whether employee
performance goals are aligned with company goals.
 Applying the Balanced Scorecard Method to HRM
 Because the Balanced Scorecard focuses on the
strategy and metrics of the business, Mark Huselid and
his colleagues took this concept a step further and
developed the Workforce Scorecard to provide a
framework specific to HRM.
 According to Huselid, the Workforce
Scorecard identifies and measures the behaviors,
skills, mind-sets, and results required for the workforce
to contribute to the company’s success.
 Specifically, as summarized in the following figure, the
Workforce Scorecard has four key sequential
 Workforce mind-set and culture. Does the workforce
understand the strategy and embrace it? Does the
workforce have the culture needed to support strategy
execution?
 Workforce competencies. Does the workforce,
especially in the strategically important or “A”
positions, have the skills it needs to execute the
strategy? (Remember that “A” positions are
those job categories most vital to the company’s
success.)
 Leadership and workforce behaviors. Are the
leadership team and workforce consistently
behaving in ways that will lead to the attainment
of the company’s key strategic objectives?
 Workforce success. Has the workforce
achieved the key strategic objectives for the
business? (If the organization can answer yes to
the first three elements, then the answer should
be yes here as well.)
 The workforce balanced scorecard
 Implementing the Workforce Scorecard requires
a change in perspective, from seeing people as a
cost to seeing people as the company’s most
important asset to be managed—human capital.
 Human capital is the collective sum of the
attributes, life experiences, knowledge,
inventiveness, energy, and enthusiasm that a
company’s employees choose to invest in their
work.
 Such an asset is difficult to measure because it’s
intangible, and factors like “inventiveness” are
subjective and open to interpretation.
 The challenge for managers, then, is to develop
measurement systems that are more rigorous
and provide a frame of reference.
 The metrics can range from activity-based
(transactional) metrics to strategic ones.
 Transactional metrics are the easiest to measure
and include counting the number of new people
hired, fired, transferred, and promoted.
 The measures associated with these include the
cost of each new hire, the length of time and cost
associated with transferring an employee, and so
forth.
 Typical ratios associated with transactional
metrics include the training cost factor (i.e., the
total training cost divided by the number of
employees trained) and training cost percentage
(i.e., the total training cost divided by the
operating expense)
 But these transactional measures don’t get at the
strategic issues—namely, whether the right
employees are being trained and whether they’re
remembering and using what they learned.
 Measuring training effectiveness requires not
only devising metrics but also changing the
nature of the training.
 The Balanced Scorecard, when applied to HRM,
helps managers align all HRM activities with the
company’s strategic goals. Assigning metrics to
the HRM activities lets managers track progress
on goals and ensure that they’re working toward
strategic objectives. It adds rigor and lets
managers quickly identify gaps.
 Companies that measure intangibles
such as employee performance,
innovation, and change perform better
financially than companies that don’t
use such metrics.
 Rather than investing equally in
training for all jobs, a company should
invest disproportionately more in
developing the people in the key
strategic (“A”) jobs on which the
company’s success is most
dependent.
Digital Dashboard
 The saying “a picture is worth a thousand words”
explains the purpose of the digital dashboard
 A dashboard presents the managers with desktop
graphs and charts, and so a computerized picture of
where the company stands on all those metrics from the
HR scorecard process
 As in the illustration just below, a top manager’s
dashboard for southwest airlines might display on the
PC screen real-time trends for strategy map activities
such as fast turnaround, attracting and keeping
customers and on-time flights
 This gives the manager time to take corrective action
 For example: if ground crews are turning planes around
slower today, financial results tomorrow may decline the
manager takes action
 A digital dashboard is an electronic
interface used to acquire and consolidate
data across an organization.
 A digital dashboard provides in-depth
business analysis, while providing a real-
time snapshot of department productivity,
trends and activities and key
performance indicators, etc.
 A digital dashboard is also known as a
dashboard, traffic dashboard and traffic
dash
Translating strategy into human
resource policies & practices
 Strategic human resource management means formulating
and executing human resource policies & practices that
produce employee competencies and behaviors the company
needs to achieve its strategic aims
 The HR manager therefore needs a practical way to translate
the company’s strategy into required employee competencies
and behaviors, and to translate these required employee
competencies into specific human resource policies &
practices that will produce them
 Management formulates a strategic plan. That strategic plan
implies certain workforce requirements, in terms of employee
skills, attributes and behaviors that HR must deliver to enable
the business to achieve its strategic goals (ex. For improving
customer service we need more of computer literate to run
the machines)
 Given these workforce requirements, HRM formulates HR
strategies, policies & practices it believes will produce the
desired workforce, skills, attributes & behaviors (these may
take the form of new selection, training and compensation
policies and practices for instance)
 Finally human resource manager identifies scorecard
measures (metrics) he or she can use to measure the extent
to which its new policies & practices are actually producing
the required employee competencies and skills, and thus
supporting managements strategic goals
 Example : Albertsons (is an American Grocery company)
 How could Albertsons Human resource team help the
company control costs and hire customer focused
employees?
 At Albertsons, reducing personnel-related costs and
improving performance meant hiring employees who had a
customer focused approach and reducing turnover, improving
retention, and eliminating time-consuming manual processes
and procedures for store managers
 Working with its information technology department,
Albertsons human resource management team chose a
system from Unicru of Portland. The system collects and
analyses the information entered by the applicants online
and at kiosks
 It ranks applicants based on the extent to which
they exhibit the customer-focused traits that
predict success in retail jobs, helps track
candidates throughout the screening process,
and does other things, such as track reason for
departure once applicants are hired
 Human resource managers were able to present
a compelling business case to indicate the new
systems return on investment
 Working as a partner in ‘Albertsons’ strategy
design and implementation process , the human
resource team helped Albertsons achieve its
strategic goals, by helping to control costs & hire
customer-focused employees
Translating strategy into HR
Policies & Practices
Formulate
business
strategy
Identify
workforce
measurement
Formulate
HR strategic
policies and
activities
Develop
detailed HR
scorecard
measures
Translating strategy into human
resource policies & practices: An
example
 An organizational change effort at the Albert Einstein
healthcare network (Einsten Medical) illustrates how
companies translate strategic plans into human
resource policies and practices
 In the 1990, it was apparent to einsten’s new CEO that
intense competition, scientific technological changes,
the growth of managed care, and significant cuts in
Medicare and medicaid meant that his company
needed a new strategic plan
 At the time, Einsten medical was a single acute care
hospital, treating the seriously ill
 New strategy: the essence of the CEO’s new strategy
was to change Einsten into a comprehensive health
care network of facilities providing full range of high
quality services in various local markets
 He knew that achieving this change in strategy would
require numerous changes in Einstein Medical’s
organization and employee behaviours,.
 In particular, given the highly dynamic and uncertain
health care environment , the new einsten medical
would require a much more flexible, adaptable and
professional approach to delivering services
 Based on that, he decided to summarize the strategic
goals of his change program in three words: “INITIATE”,
“ADAPT”, AND “DELIVER”
 To achieve Einstein Medicals strategic aims, its HR and
other strategies would have to help the medical centre
and its employees to produce new services (Initiate),
capitalize on opportunities (Adapt) and offer
consistently high quality services (Deliver)
 New employee competencies and behaviors: the
CEO’s next question was, “what sorts of employees
competencies, skills and behaviors would Einsten
Medical need to produce these three outcomes?”
 Working with the Head of HR the ceo chose four
employee skills & behviors: Einsten employees would
need to be “dedicated, accountable, generative and
resilient” they would have to be dedicated to einstens
focus on INITIATE, ADAPT and DELIVER
 They would have to take personnel accountability for
their results
 They would have to be generative, which means able
and willing to apply new knowledge and skills in a
constant search for innovative solutions.
 And they would have to be resilient for instance, in
terms of moving from job to job as the company ‘s need
changed
 New Human Resource Policies & practices:
 Given these desired employee competencies and
behaviors, Einstein medical’s Human resource
managers could ask, “ what specific HR policies and
practices would help Einstein create a dedicated,
accountable, generative and resilient workforce and
thereby help it achieve its strategic goals?
 The answer was to implement several new human
resource programs:
◦ New training and communication programs aimed at
assuring that employees clearly understood the company’s
new vision and what it would require of all employees
◦ Enriching work involved providing employees with more
challenge and responsibility through flexible assignments
and team based work
◦ New training & benefits programs promoted personal
growth, which meant helping employees take personal
responsibility for their own improvement & personal
development
◦ Providing commensurate returns involved tying employees’
rewards to organization wide results and providing nonmonetary
rewards (such as more challenging job)
◦ Improved selection, orientation and dismissal procedures also
helped Einstein build a more dedicated, resilient, accountable and
generative workforce
 In sum, Einstein managers translated the new strategy into
specific human resource policies & practices. They knew they
could not execute their new strategy without new employee
competencies and behaviors.
 In turn, promoting these competencies and behaviors
required implementing new human resource policies &
practices
 They could then choose measures (such as “hours of training
per employee per year”) to monitor the new strategies actual
progress
 Einstein medicals managers used a simple, logical and
subjective process to translate strategy into required human
resource policies & practices and activities.
 This is perfectly acceptable. Increasingly, however many

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Unit i shrm

  • 2. What is Strategy?  Strategy is a term that comes from the Greek word strategia, meaning "generalship."  In the military, strategy often refers to manoeuvring troops into position before the enemy is actually engaged.
  • 3.  What is Strategy?: The company’s long term plan for how it will balance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage  What is Strategic Management?: the process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment
  • 4. Strategic Management Process  Strategic analysis ◦ Environmental analysis ◦ Establish organizational direction  Strategy formulation  Strategy implementation  Strategic control
  • 5. Strategic HRM  Strategic HRM is to ensure that human resource management is fully integrated into strategic planning  The HRM policies cohere (join together) both across policy areas and across hierarchies and that HRM policies are accepted and used by the line managers as part of their work  The term HR strategy & Strategic HRM are often used interchangeably, but a distinction can be made between them
  • 6. Strategic HRM HR Strategy  Strategic HRM can be regarded as general approach to the strategic management of human resources in accordance with the intentions of the organization on the future direction  It is concerned with long term people issues as a part of the strategic management process of the organization  What emerges from this process is a stream of decision over time that forms the patterns adopted by the organization for managing its HR and defines the areas in which specific HR strategies need to be developed  It deals with macro concerns about structure, values, culture, quality, commitment, performance, competence & management development  It focuses on the specific intentions of the organization as to what needs to be done and what needs to be changed
  • 7.  Strategic HRM & HR strategy can be compared with the relationship between strategic management & corporate business strategies  Strategic HRM & strategic management are terms describing an approach that may be adopted by top management & focuses on longer term & setting the overall direction  HR strategies and corporate/business strategies can be outcome of this approach, which specify in more detail the intentions of the org. concerning key issues and particular functions and activities
  • 8.  Strategic integration is necessary to provide congruence between business and human resource strategy, so that the latter supports the accomplishment of the former and indeed helps to define it  The aim is to provide strategic fit and consistency between the policy goals of HRM & the business
  • 9. Concept & Meaning of SHRM  The concept of strategic HRM was first formulated by Fombrunet who wrote that three core elements are necessary for firms to function effectively ◦ Mission & strategy ◦ Organization Structure ◦ Human Resource Management  The success of an organization depends on the people therein. This means how they are acquired, developed, motivated & retained in the organization, plays an important role in the organization success  This proposes an integral approach towards HR functions and overall business functions of an organization  Thus strategic HRM means a strategic look at HR functions in line with the business functions of an organization
  • 10. Strategic HRM therefore is concerned with the following; 1. Analyze the opportunities and threats existing in the external environment 2. Formulate strategies that will match the organizations (internal) strengths and weaknesses with the environmental (External) threats and opportunities. In other words SWOT analysis of organization 3. Implement the strategies so formulated 4. Evaluate & control activities to ensure that organizations objectives are duly achieved
  • 11. Aims & Objectives  To generate strategic capability by ensuring that the organization has the skilled, committed and well-motivated employees – by which it need to achieve sustained competitive advantage  To provide a sense of direction in an often turbulent environment so that the business needs of the organization and the individual and collective needs of its employees can be met by the development and implementation of coherent and practical HR policies & programmes
  • 12. Significance/Importance of SHRM  When a human resource department strategically develops its plans for recruitment, training, and compensation based on the goals of the organization, it is ensuring a greater chance of organizational success  Ex. - Let's think about this approach in relation to a basketball team. The whole team wants to win the ball game, and they all may be phenomenal players on their own, but one great player doesn't always win the game. That's not how a basketball team wins, and it's not how an organization wins either. A team wins when its members support each other and work together for a common goal  You could also look at strategic HRM as the team captain or coach, as his or her responsibilities are a little bit different from those of the other players.  Human resources departments are charged with analyzing the changes that need to occur with each 'player' or department and assisting them in strengthening any weaknesses.  Strategic human resource management then is the process of using HR techniques, like training, recruitment, compensation and employee relations to create a stronger organization
  • 13. Traditional HR versus Strategic HR
  • 14. Some Examples  Southwest airlines – Ticketless travel  Albertson – Superior managers shape their department policies & practices – so that they make sense in terms of (or align with ) their companies strategic aims  Main purpose of SHRM is to show how to develop a HR manager that supports and make sense in terms of your company’s strategic aims
  • 15. Way forward in SHRM  Here we will see how to translate a companies business strategy into actionable human resource policies & practices  We will see strategic management process  How to develop a strategic plan  The HR managers role in strategic management process &  A step by step ‘HR Scorecard approach to create HR policies & practices that makes sense in terms of the company’s strategic aims
  • 16.  Ford motor company, faced huge loss & hemorrhaging market share to TOYOTO & NISSAN, knew it needed a new strategic plan  Competition was tight, Ford’s cost was too higher than competitors, Fords unused plant capacity was draining profits  Fords manager devised ‘The way forward’ – this new strategic plan established closing a dozen plants & terminating 20,000 employees  This was a strategic plan of how it will match internal & strength & weakness to external Opportunities & threats
  • 17.  The essence of strategic planning is to ask  Where are we now as a business?  Where do we want to be?  & How should we get there?  The managers the formulate specific strategies to take the company from where it is now to where he or she wants to be.
  • 18. SHRM - some more details  Managers use the term ‘HR Strategy” to refer to the specific HRM courses of action the company pursues to achieve its strategic aims Ex. FedEx strategic aim is to achieve superior levels of customer service & high profitability through a highly committed workforce. Preferably in a non union environment  FedEx HR strategies stem from this aim  They include using various tools to build two-way communication  Screening out potential managers whose values are not people oriented  Guaranteeing to the greatest extent possible fair treatment & employee security for all employees  & utilizing various promotion from within activities to give employess every opportunity to fully realize their potential to give every opportunity to fully realize their potential
  • 19. Linking Corporate and HR Strategies
  • 20.  SHRM means formulating & executing HR policies & practices that produce the employee competencies & behaviours the company needs to achieve its strategic aims  Ex. Southwest Airlines – Keeps its price low  Southwest real secret is its HR management strategy  Southwest aim is to deliver low cost, convinient service on short haul routes  How do they do this?  One big way is by getting fast, 15 min turnaround at the gate, thus keeping planes flying longer hours than rivals  What employee competencies and skills does southwest need for these fast turnarounds Ground crews, gate employees & even pilots who all pitch in & do whatever it takes to get planes turnaround
  • 21.  & HR management policies & practices would produce such employee competence & behaviors  HR strategy built on high compensation, flexible job assignments, cross training & employee stock ownership  1)High compensation, flexible work assignments & so forth lead to 2) motivated flexible ground crews & employee who do whatever it takes to 3) turn the planes around in 15min, so that 4) southwest achieves its strategic aims of delivering low cost, convenient service
  • 22.  Ex Dell – its strategy is always been to be a low cost leader  Dells HR Manager use various HR strategies to support Dells low cost aims  Ex. Dell delivers most of its HR services, not through conventional HR dept, but via the Web – i.e a managers tool on Dell intranet contains about 30 automated web application  Instead top management needs the input of HR team in designing the strategy, since it is the team charged with Hiring, training & compensating the firms employees  HR managers will therefore need an IN DEPTH understanding of the value creating proposition of the firm (In other words, a basic functional understanding of the firm makes money)
  • 23.  What activities & processes are most critical for value creation as defined by customers & capital market?  Who in the firm executes these activities successfully?  HR professional needs to understand the basic business functions such as Accounting, finance, production & Sales.. So they can take their seat at the table (HR ADVOCATES) when top management is crafting the firms strategic plan
  • 24.
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  • 26. HR’S Strategic Roles  HR professionals should be part of the firm’s strategic planning executive team. ◦ Identify the human issues that are vital to business strategy. ◦ Help establish and execute strategy. ◦ Provide alternative insights. ◦ Are centrally involved in creating responsive and market-driven organizations. ◦ Conceptualize and execute organizational change.
  • 27. HR’s Strategy Formulation Role  HR helps top management formulate strategy in a variety of ways by. ◦ Supplying competitive intelligence that may be useful in the strategic planning process. ◦ Supplying information regarding the company’s internal human strengths and weaknesses. ◦ Build a persuasive case that shows how—in specific and measurable terms—the firm’s HR activities can and do contribute to creating value for the company
  • 28.
  • 30. 5P Model of Strategic HRM  The 5 Ps model of strategic human resource management (SHRM) is a new model in the area of study.  This model is proposed by Randal.  Schuler this model melds five human resource activities with strategic highlight just how significant, the strategy activity link can be.  The proposed model incorporates the 5 Ps of strategic human resource management which stand for  Philosophy of Human resources  Policies human resources  Programme of human resources  Practices of human resources  Processes of human resources
  • 31.  1. Philosophy: Expressed in statements defining business values and culture. It expresses how to treat and value people.  2. Policies: Expressed as shared values and guidelines. Policies establish guidelines for action on people related business issues and HR programs.  3. Programs: These coordinate efforts to facilitate change to address major people related business issues.  4. Practices: For leadership managerial and operational role practices motivate needed role behaviors.  5. Processes: For the formulation and implementation of other activities these define how activities are carried out.
  • 32. The Five P’s Model of SHRM  Successful SHRM efforts begin with identification of strategic needs  Employee participation is critical to linking strategy & HR practices  Strategic HR depends on systematic & analytical mindset  Corporate HR departments can have impact on organization’s efforts to launch strategic initiatives
  • 33.  HUMAN RESOURCES PHILOSOPHY  This is a statement of how the organization regards its human resources, what role the resources play in the overall success of the business, and how they are to be treated and managed.  Instead of using the terms HR philosophy or HR values to describe how human resources are regarded, treated, and managed, some organizations use the term culture.
  • 34. LEADERSHIP IN PEOPLE (A statement of culture at PCI)  We will develop an excellent organization focused on building the business by:  Empowering people to drive the business from the closest point to the market  Developing the right skills to be the best in the business  Building career opportunities  Building teamwork:  With bottlers to ensure that we maintain strong partnerships  Among area, division, and headquarters staff to ensure that we coordinate functional strengths to produce the best possible results  Across markets to ensure that we share the best practices throughout the enterprise  Helping people succeed by building an environment with:  High integrity  Strong and consistent values  Continuous improvement
  • 35. LEADERSHIP IN OUR BRANDS We will achieve brand superiority by:  Delivering the best products in the marketplace:  The highest quality  The best tasting  The most consistent  Communicating these benefits in a high-impact, persuasive and consistent manner LEADERSHIP IN MARKETING We will build on our brand platforms by:  Creating new brand, channel, and package segments that build the business:  Faster off the mark  Better ideas  Quicker to create and take advantage of opportunities
  • 36. LEADERSHIP IN OPERATIONS We will build excellence in our own and bottler operations by:  Being the low-cost producer  Establishing and maintaining a strong focus on customer services and sales management. These cornerstones will make us the best sales company  Standardizing operating systems to:  Enhance our ability to provide the highest level of customer service  Develop an ability to measure and manage key parameters of the business in a consistent fashion  Provide a common set of practices and disciplines for the organization
  • 37. HUMAN RESOURCES POLICIES All of these statements provide guidelines for action on people-related business issues and for the development of HR programs and practices based on strategic needs. The term HR Policy, as used here, does not mean HR Policy Manual.
  • 38. HR policy can link values with a particular people-related business need Values: high standards of personal performance Need: to develop communication skills that would foster such performance in a decentralized international environment HR policy: instant feedback. if you have a problem or an idea about any aspect of the business, or about an individual's performance, then the organization demands that you raise the issue appropriately and discuss it maturely.
  • 39. HUMAN RESOURCES PROGRAMS Shaped by HR policies, HR programs represent coordinated HR efforts specifically intended to initiate, disseminate, and sustain strategic organizational change efforts necessitated by the strategic business needs.
  • 40. Generic questions help to identify the fundamental issues for programs What is the nature of the corporate culture? Is it supportive of the business? Will the organization be able to cope with future challenges in its current form? What kind of people and how many will be required? Are performance levels high enough to meet demands for increased profitability, innovation, higher productivity, better quality, and improved customer service? What is the level of commitment to the company? Are there any potential constraints such as skill shortages or HR problems?
  • 41. HUMAN RESOURCES PRACTICES LEADERSHIP ROLES  Establishing direction  Aligning people  Motivating and inspiring individuals  Causing dramatic and useful change
  • 42. • MANAGERIAL ROLES Make sure that objectives are clearly understood  Level with people on what is not negotiable  Give appropriate orientation to people on new assignments  Deal effectively with performance problems  Give people the information they need to be successful  Give developmental performance feedback in a timely manner  Give people the freedom they need to do their jobs  Give co-workers the opportunity to try out their new ideas  Encourage appropriate collaboration on work assignments  Encourage people to participate when appropriate OPERATIONAL ROLES Content is far more specific than for the other roles
  • 43. HUMAN RESOURCES PROCESSES This area deals with "how" all the other HR activities are identified, formulated, and implemented.
  • 44. 5P Model of SHRM
  • 45.  The main purpose of SHRM is to show you how to develop a human resource management system that supports, and makes sense in terms of, your company’s strategic aims;  Here we show how to translate a company’s business strategy into actionable human resource policies & practices
  • 46. Strategic Human Resource Management Tools  Following are the three important Human Resource Management Tools;  STRATEGY MAP  THE HR SCORECARD  DIGITAL DASHBOARD
  • 47.
  • 48. Strategy Map  The strategy map shows the ‘big picture’ of how each departments performance contributes to achieving the company’s overall strategic goals  It helps the manager understand the role his or her department plays in helping to execute the company’s strategic plan  Ex. In case of Southwest Airline – has a low cost leader strategy. The strategy map for Southwest succinctly (in brief) lays out the hierarchy of main activities required for Southwest airlines to succeed  At the top is achieving company wide strategic financial goals.  Then the strategy map shows the chain of activities that help Southwest airlines achieve this goals  For example: to boost revenues and profitability, Southwest needs to fly fewer planes (to keep costs down), maintain low prices and maintain on time flights.  In turn (further down the strategy map), on-time flights and low prices require fast turnaround  And fast turn around requires motivated ground and flight crews  The strategy map helps each department (including HR) visualize what it needs to do to support Southwest’s low cost strategy
  • 49. What overall goals does Southwest Airlines want to achieve? What must Southwest do operationally to achieve these goals? What employee attitudes and behaviors will produce these operational outcomes Improve market share from 32% to 38% Maintain profit growth of 4% per year Maintain industry wide low prices Fly fewer planes (Maximize passenger miles flown per seat) Maximize on-time flights Turnaround planes at gates in 20 minutes Highly committed employees who are willing to “go the extra miles” for southwest Airlines Strategy Map: Example – Southwest Airlines
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  • 51.
  • 52. The HR Scorecard  A tool that helps managers measure what matters to a company.  Developed by Robert Kaplan and David Norton, the Balanced Scorecard helps managers define the performance categories that relate to the company’s strategy.  The managers then translate those categories into metrics and track performance on those metrics.  Besides traditional financial and quality measures, companies use employee-performance measures to track their employees’ knowledge, skills, and contributions to the company.  The employee-performance aspects of the Balanced Scorecard analyze employee capabilities, satisfaction, retention, and productivity.  Companies also track whether employees are motivated (e.g., by tracking the number of suggestions made and implemented by employees) and whether employee performance goals are aligned with company goals.
  • 53.  Applying the Balanced Scorecard Method to HRM  Because the Balanced Scorecard focuses on the strategy and metrics of the business, Mark Huselid and his colleagues took this concept a step further and developed the Workforce Scorecard to provide a framework specific to HRM.  According to Huselid, the Workforce Scorecard identifies and measures the behaviors, skills, mind-sets, and results required for the workforce to contribute to the company’s success.  Specifically, as summarized in the following figure, the Workforce Scorecard has four key sequential  Workforce mind-set and culture. Does the workforce understand the strategy and embrace it? Does the workforce have the culture needed to support strategy execution?
  • 54.  Workforce competencies. Does the workforce, especially in the strategically important or “A” positions, have the skills it needs to execute the strategy? (Remember that “A” positions are those job categories most vital to the company’s success.)  Leadership and workforce behaviors. Are the leadership team and workforce consistently behaving in ways that will lead to the attainment of the company’s key strategic objectives?  Workforce success. Has the workforce achieved the key strategic objectives for the business? (If the organization can answer yes to the first three elements, then the answer should be yes here as well.)
  • 55.  The workforce balanced scorecard
  • 56.  Implementing the Workforce Scorecard requires a change in perspective, from seeing people as a cost to seeing people as the company’s most important asset to be managed—human capital.  Human capital is the collective sum of the attributes, life experiences, knowledge, inventiveness, energy, and enthusiasm that a company’s employees choose to invest in their work.  Such an asset is difficult to measure because it’s intangible, and factors like “inventiveness” are subjective and open to interpretation.  The challenge for managers, then, is to develop measurement systems that are more rigorous and provide a frame of reference.
  • 57.  The metrics can range from activity-based (transactional) metrics to strategic ones.  Transactional metrics are the easiest to measure and include counting the number of new people hired, fired, transferred, and promoted.  The measures associated with these include the cost of each new hire, the length of time and cost associated with transferring an employee, and so forth.  Typical ratios associated with transactional metrics include the training cost factor (i.e., the total training cost divided by the number of employees trained) and training cost percentage (i.e., the total training cost divided by the operating expense)
  • 58.  But these transactional measures don’t get at the strategic issues—namely, whether the right employees are being trained and whether they’re remembering and using what they learned.  Measuring training effectiveness requires not only devising metrics but also changing the nature of the training.  The Balanced Scorecard, when applied to HRM, helps managers align all HRM activities with the company’s strategic goals. Assigning metrics to the HRM activities lets managers track progress on goals and ensure that they’re working toward strategic objectives. It adds rigor and lets managers quickly identify gaps.
  • 59.  Companies that measure intangibles such as employee performance, innovation, and change perform better financially than companies that don’t use such metrics.  Rather than investing equally in training for all jobs, a company should invest disproportionately more in developing the people in the key strategic (“A”) jobs on which the company’s success is most dependent.
  • 60.
  • 61. Digital Dashboard  The saying “a picture is worth a thousand words” explains the purpose of the digital dashboard  A dashboard presents the managers with desktop graphs and charts, and so a computerized picture of where the company stands on all those metrics from the HR scorecard process  As in the illustration just below, a top manager’s dashboard for southwest airlines might display on the PC screen real-time trends for strategy map activities such as fast turnaround, attracting and keeping customers and on-time flights  This gives the manager time to take corrective action  For example: if ground crews are turning planes around slower today, financial results tomorrow may decline the manager takes action
  • 62.  A digital dashboard is an electronic interface used to acquire and consolidate data across an organization.  A digital dashboard provides in-depth business analysis, while providing a real- time snapshot of department productivity, trends and activities and key performance indicators, etc.  A digital dashboard is also known as a dashboard, traffic dashboard and traffic dash
  • 63. Translating strategy into human resource policies & practices  Strategic human resource management means formulating and executing human resource policies & practices that produce employee competencies and behaviors the company needs to achieve its strategic aims  The HR manager therefore needs a practical way to translate the company’s strategy into required employee competencies and behaviors, and to translate these required employee competencies into specific human resource policies & practices that will produce them  Management formulates a strategic plan. That strategic plan implies certain workforce requirements, in terms of employee skills, attributes and behaviors that HR must deliver to enable the business to achieve its strategic goals (ex. For improving customer service we need more of computer literate to run the machines)  Given these workforce requirements, HRM formulates HR strategies, policies & practices it believes will produce the desired workforce, skills, attributes & behaviors (these may take the form of new selection, training and compensation policies and practices for instance)
  • 64.  Finally human resource manager identifies scorecard measures (metrics) he or she can use to measure the extent to which its new policies & practices are actually producing the required employee competencies and skills, and thus supporting managements strategic goals  Example : Albertsons (is an American Grocery company)  How could Albertsons Human resource team help the company control costs and hire customer focused employees?  At Albertsons, reducing personnel-related costs and improving performance meant hiring employees who had a customer focused approach and reducing turnover, improving retention, and eliminating time-consuming manual processes and procedures for store managers  Working with its information technology department, Albertsons human resource management team chose a system from Unicru of Portland. The system collects and analyses the information entered by the applicants online and at kiosks
  • 65.  It ranks applicants based on the extent to which they exhibit the customer-focused traits that predict success in retail jobs, helps track candidates throughout the screening process, and does other things, such as track reason for departure once applicants are hired  Human resource managers were able to present a compelling business case to indicate the new systems return on investment  Working as a partner in ‘Albertsons’ strategy design and implementation process , the human resource team helped Albertsons achieve its strategic goals, by helping to control costs & hire customer-focused employees
  • 66. Translating strategy into HR Policies & Practices Formulate business strategy Identify workforce measurement Formulate HR strategic policies and activities Develop detailed HR scorecard measures
  • 67.
  • 68. Translating strategy into human resource policies & practices: An example  An organizational change effort at the Albert Einstein healthcare network (Einsten Medical) illustrates how companies translate strategic plans into human resource policies and practices  In the 1990, it was apparent to einsten’s new CEO that intense competition, scientific technological changes, the growth of managed care, and significant cuts in Medicare and medicaid meant that his company needed a new strategic plan  At the time, Einsten medical was a single acute care hospital, treating the seriously ill  New strategy: the essence of the CEO’s new strategy was to change Einsten into a comprehensive health care network of facilities providing full range of high quality services in various local markets
  • 69.  He knew that achieving this change in strategy would require numerous changes in Einstein Medical’s organization and employee behaviours,.  In particular, given the highly dynamic and uncertain health care environment , the new einsten medical would require a much more flexible, adaptable and professional approach to delivering services  Based on that, he decided to summarize the strategic goals of his change program in three words: “INITIATE”, “ADAPT”, AND “DELIVER”  To achieve Einstein Medicals strategic aims, its HR and other strategies would have to help the medical centre and its employees to produce new services (Initiate), capitalize on opportunities (Adapt) and offer consistently high quality services (Deliver)
  • 70.  New employee competencies and behaviors: the CEO’s next question was, “what sorts of employees competencies, skills and behaviors would Einsten Medical need to produce these three outcomes?”  Working with the Head of HR the ceo chose four employee skills & behviors: Einsten employees would need to be “dedicated, accountable, generative and resilient” they would have to be dedicated to einstens focus on INITIATE, ADAPT and DELIVER  They would have to take personnel accountability for their results  They would have to be generative, which means able and willing to apply new knowledge and skills in a constant search for innovative solutions.  And they would have to be resilient for instance, in terms of moving from job to job as the company ‘s need changed
  • 71.  New Human Resource Policies & practices:  Given these desired employee competencies and behaviors, Einstein medical’s Human resource managers could ask, “ what specific HR policies and practices would help Einstein create a dedicated, accountable, generative and resilient workforce and thereby help it achieve its strategic goals?  The answer was to implement several new human resource programs: ◦ New training and communication programs aimed at assuring that employees clearly understood the company’s new vision and what it would require of all employees ◦ Enriching work involved providing employees with more challenge and responsibility through flexible assignments and team based work ◦ New training & benefits programs promoted personal growth, which meant helping employees take personal responsibility for their own improvement & personal development
  • 72. ◦ Providing commensurate returns involved tying employees’ rewards to organization wide results and providing nonmonetary rewards (such as more challenging job) ◦ Improved selection, orientation and dismissal procedures also helped Einstein build a more dedicated, resilient, accountable and generative workforce  In sum, Einstein managers translated the new strategy into specific human resource policies & practices. They knew they could not execute their new strategy without new employee competencies and behaviors.  In turn, promoting these competencies and behaviors required implementing new human resource policies & practices  They could then choose measures (such as “hours of training per employee per year”) to monitor the new strategies actual progress  Einstein medicals managers used a simple, logical and subjective process to translate strategy into required human resource policies & practices and activities.  This is perfectly acceptable. Increasingly, however many