HRM Chapter 2

Lect.Naziya Lakhani, TNRCMSLect.Naziya Lakhani, TNRCMS

Module-1Module-1

Chapter-2Chapter-2

The Strategic Role of HRMThe Strategic Role of HRM


Objective of this ChapterObjective of this Chapter

1.1. Outline the steps in the strategic management process.Outline the steps in the strategic management process.

2.2. Explain and give examples of each type of companywide and Explain and give examples of each type of companywide and competitive strategy.competitive strategy.

3.3. Explain what a strategy-oriented human resource Explain what a strategy-oriented human resource management system is and why it is important.management system is and why it is important.

4.4. Illustrate and explain each of the seven steps in the HR Illustrate and explain each of the seven steps in the HR Scorecard approach to creating human resource management Scorecard approach to creating human resource management systems.systems.


The Strategic Management ProcessThe Strategic Management Process

StrategyStrategy A chosen course of action. A well formulated strategy A chosen course of action. A well formulated strategy helps to allocate an org’s resources into a unique manner.helps to allocate an org’s resources into a unique manner.

Strategic planStrategic plan is the company’s plan for how it will match its is the company’s plan for how it will match its internal strengths & weaknesses with external opportunities & internal strengths & weaknesses with external opportunities & threats in order to maintain a competitive advantage.threats in order to maintain a competitive advantage.

Strategic Management Strategic Management The process of identifying and The process of identifying and executing the organization’s mission by matching its capabilities executing the organization’s mission by matching its capabilities with the demands of its environment.with the demands of its environment.


Business Vision and MissionBusiness Vision and Mission

VisionVision– A general statement of an organization’s intended direction A general statement of an organization’s intended direction

that evokes emotional feelings in organization members.that evokes emotional feelings in organization members.– where the organisation wants to go in the futurewhere the organisation wants to go in the future

MissionMission– Spells out who the company is, what it does, and where it’s Spells out who the company is, what it does, and where it’s

headed.headed.– summary of the beliefs of the organisation and where it is summary of the beliefs of the organisation and where it is

nownow

Whereas visions usually lay out in broad terms what the Whereas visions usually lay out in broad terms what the business should be, the mission lays out in broad terms what business should be, the mission lays out in broad terms what our main tasks are nowour main tasks are now..


IBM: IBM:

Vision StatementVision Statement - Solutions for a small planet - Solutions for a small planet

Mission StatementMission Statement - At IBM, we strive to lead in the invention, - At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced development and manufacture of the industry's most advanced information technologies, including computer systems, information technologies, including computer systems, software, storage systems and microelectronics.software, storage systems and microelectronics.

We translate these advanced technologies into value for our We translate these advanced technologies into value for our customers through our professional solutions, services and customers through our professional solutions, services and consulting businesses worldwide.consulting businesses worldwide.


ExampleExample

In 2006, Apollo Tyres, the number one Indian manufacturer of In 2006, Apollo Tyres, the number one Indian manufacturer of automotive tyres was facing heavy competition, rising costs, & automotive tyres was facing heavy competition, rising costs, & high employee Turnover.high employee Turnover.

While its aim was to be one among the world’s five best tyre While its aim was to be one among the world’s five best tyre companies.companies.

They coined the strategy termed “Passion in Motion” which They coined the strategy termed “Passion in Motion” which rested on the three pillars of people, technology & Qualityrested on the three pillars of people, technology & Quality

According to the strategic plan, by 2015, Apollo Tyres aimed to According to the strategic plan, by 2015, Apollo Tyres aimed to be among top five tyre manufacturers globally.be among top five tyre manufacturers globally.


It implied placing a high level of focus onIt implied placing a high level of focus on

– Employee PerformanceEmployee Performance– GrowthGrowth– International AcquisitionInternational Acquisition


The Strategic Management ProcessThe Strategic Management Process

Strategic planning is part of the Strategic Management process. Strategic planning is part of the Strategic Management process.

Strategic Management entails both strategic planning & Strategic Management entails both strategic planning & Implementation & is “the process of identifying & executing the Implementation & is “the process of identifying & executing the organization’s strategic Plan, by matching the companies organization’s strategic Plan, by matching the companies capabilities with the demand of the envt”.capabilities with the demand of the envt”.


Strategic PlanningStrategic Execution

Strategic Evaluation

Step-1:

Define the

Current Business & Mission

Step-2:

Perform External &

Internal Audit

Step-3:

Formulate new

business & mission

Statement

Step-4:

Translate the

mission into goals

Step-5:

Formulate strategies to achieve the

strategic goals

Step-6

Implement the

strategy

Step-7

Evaluate Performance


1.1. Define the Current Business & MissionDefine the Current Business & Mission

Every company must choose the envt., on which it will compete- in Every company must choose the envt., on which it will compete- in particular, particular,

What products it will sellWhat products it will sell

Where it will sell themWhere it will sell them

How its products or service will differ from its competitorsHow its products or service will differ from its competitors

Eg:- Rolex & Seiko are both in the watch business, but Rolex sells a Eg:- Rolex & Seiko are both in the watch business, but Rolex sells a limited product line of high-priced quality watches. Seiko sells a wide limited product line of high-priced quality watches. Seiko sells a wide variety of relatively inexpensive but innovative watches.variety of relatively inexpensive but innovative watches.

Therefore, the most basic strategic decisions managers make involve Therefore, the most basic strategic decisions managers make involve deciding “What business” their firms should be indeciding “What business” their firms should be in

For Instance, in terms of the products or services they will sell, the For Instance, in terms of the products or services they will sell, the geographic locales in which they will sell them & how they will distinguish geographic locales in which they will sell them & how they will distinguish their products or services from competitors.their products or services from competitors.


They have to see Company’s opportunities & threats and its strength & They have to see Company’s opportunities & threats and its strength & weakness.weakness.

Manager then choose strategies – course of action such as buying Manager then choose strategies – course of action such as buying competitors or expanding overseas – to get the company from where it is competitors or expanding overseas – to get the company from where it is today to where it wants to be tomorrowtoday to where it wants to be tomorrow

Managers sometimes use a VISION Statement as a shorthand to Managers sometimes use a VISION Statement as a shorthand to summarize how they see the business down the road.summarize how they see the business down the road.

The Company’s Vision is a general Statement of its intended direction that The Company’s Vision is a general Statement of its intended direction that shows, in broad terms “WHAT WE WANT TO BECOME”shows, in broad terms “WHAT WE WANT TO BECOME”

Eg:- one eye care company says “Our vision is caring for your Vision”Eg:- one eye care company says “Our vision is caring for your Vision”

Visions are usually longer term, broader images; most managers also Visions are usually longer term, broader images; most managers also formulate mission statements to “…. Communicate ‘who we are, what we formulate mission statements to “…. Communicate ‘who we are, what we do, & where we’re headed.’”do, & where we’re headed.’”


Whereas visions usually lay out in broad terms what the business should be, Whereas visions usually lay out in broad terms what the business should be, the mission lays out in broad terms what our main tasks are now.the mission lays out in broad terms what our main tasks are now.

Eg:- In the popular movie Chak De India, the mission of the women’s hockey Eg:- In the popular movie Chak De India, the mission of the women’s hockey team was to win the world cup hockey tournament & prove to the country, team was to win the world cup hockey tournament & prove to the country, the world, & themselves that the Indian women’s team can win the world the world, & themselves that the Indian women’s team can win the world cup.cup.


2.2. Perform External & Internal AuditsPerform External & Internal Audits

Ideally, managers begin their strategic planning by methodically analyzing Ideally, managers begin their strategic planning by methodically analyzing their external & internal situations.their external & internal situations.

The strategic plan should provide a direction for the firm that make sense, The strategic plan should provide a direction for the firm that make sense, in terms of the external opportunities & threats for the firm faces & the in terms of the external opportunities & threats for the firm faces & the internal strengths & weaknesses it possesses.internal strengths & weaknesses it possesses.

To facilitate this strategic external/internal audit, many managers use To facilitate this strategic external/internal audit, many managers use SWOT analysisSWOT analysis


3.3. Formulate New Business & Mission StatementsFormulate New Business & Mission Statements

Based on the situation analysis, what should our new business be, in Based on the situation analysis, what should our new business be, in terms of terms of

– What products it will sellWhat products it will sell– Where it will sell themWhere it will sell them– How its products or services will differ from its competitors ?How its products or services will differ from its competitors ?– What is our new mission & Vision?What is our new mission & Vision?


4.4. Translate the mission into Strategic GoalsTranslate the mission into Strategic Goals

The firm’s managers need strategic goals.The firm’s managers need strategic goals.

What exactly does that mission mean, for each dept, in terms of how we’ll What exactly does that mission mean, for each dept, in terms of how we’ll boost quality?boost quality?

Eg:- Citicorp can’t function solely with a mission like , “to provide Eg:- Citicorp can’t function solely with a mission like , “to provide integrated, comprehensive financial service world wide”integrated, comprehensive financial service world wide”

To guide managerial action, it needs goals in terms of things like building To guide managerial action, it needs goals in terms of things like building shareholder value, maintaining superior rates of return, building a strong shareholder value, maintaining superior rates of return, building a strong balance sheet, & balancing the business by customer, product & balance sheet, & balancing the business by customer, product & geography.geography.


5.5. Formulate strategies to Achieve the Strategic GoalsFormulate strategies to Achieve the Strategic Goals

Again, a strategy is a course of action.Again, a strategy is a course of action.

It shows how the enterprise will move from the business it is now to the It shows how the enterprise will move from the business it is now to the business it wants to be in, given the firm’s opportunities, threat, strength, business it wants to be in, given the firm’s opportunities, threat, strength, & weaknesses& weaknesses

The strategy should be the best to reach the specific goal & it should be The strategy should be the best to reach the specific goal & it should be easily communicate with the emp.easily communicate with the emp.

Eg:- Nokia’s strategy helps to explain how the firm can make thousands of Eg:- Nokia’s strategy helps to explain how the firm can make thousands of decisions each week so easily.decisions each week so easily.


6.6. Implement the strategiesImplement the strategies

Strategy implementation means translating the strategy into actions & Strategy implementation means translating the strategy into actions & results by actuallyresults by actually

Hiring or firing peopleHiring or firing people

Building or closing plantsBuilding or closing plants

Adding or eliminating ProductsAdding or eliminating Products

Strategy Implementation involves drawing on & applying all the Strategy Implementation involves drawing on & applying all the management functionsmanagement functions

PlanningPlanning

OrganizingOrganizing

StaffingStaffing

LeadingLeading

ControllingControlling


7.7. Evaluate PerformanceEvaluate Performance

Strategies don’t always succeed.Strategies don’t always succeed.

Managing strategy is an ongoing process.Managing strategy is an ongoing process.

Strategic control keeps the company’s strategy up to date.Strategic control keeps the company’s strategy up to date.


Types of StrategiesTypes of Strategies

Corporate Strategy

Business 1

Competitive

strategy

Business 2

Competitive

strategy

Business 3

Competitive

strategy

Functional strategies




Manager engage in three types of strategic planningManager engage in three types of strategic planning

At the top, company wide level, many firms consist of several At the top, company wide level, many firms consist of several business.business.

Eg:- PepsiCo runs Pepsi, Frito-Lay, & Pizza Hut.Eg:- PepsiCo runs Pepsi, Frito-Lay, & Pizza Hut.

Therefore PepsiCo needs a corporate level strategy.Therefore PepsiCo needs a corporate level strategy.

A company’s corporate level strategy identifies the portfolio of A company’s corporate level strategy identifies the portfolio of businesses that, in total, comprise the company & the ways in businesses that, in total, comprise the company & the ways in which these businesses relate to each other.which these businesses relate to each other.


Corporate Level StrategiesCorporate Level Strategies

Diversification Strategy

Geographic Expansion Strategy

Vertical Integration Strategy

Corporate-Level Strategies

ConsolidationStrategy


1.1. Diversification Strategy:-Diversification Strategy:- Implies that the firm will expand by Implies that the firm will expand by adding new Product lines.adding new Product lines.

2.2. Vertical Integration Strategy:-Vertical Integration Strategy:- Means the firm expand by, Means the firm expand by, perhaps, producing its own raw materials or selling its perhaps, producing its own raw materials or selling its products direct.products direct.

3.3. Consolidation:- Consolidation:- Reducing the company’s sizeReducing the company’s size

4.4. Geographic Expansion:- Geographic Expansion:- For instance, taking the business For instance, taking the business abroadabroad


2.2. Competitive strategy/business level strategyCompetitive strategy/business level strategy

At the next level down, each of these businesses (Such as At the next level down, each of these businesses (Such as Pizza Hut) needs a business level/ competitive strategy.Pizza Hut) needs a business level/ competitive strategy.

A competitive strategy identifies how to build & strengthen A competitive strategy identifies how to build & strengthen the business’s long term competitive position in the market the business’s long term competitive position in the market placeplace

Eg:- Pizza Hut compete with Papa John’sEg:- Pizza Hut compete with Papa John’s

Companies try to achieve competitive advantages for each Companies try to achieve competitive advantages for each business they are in.business they are in.

Competitive advantage as any factors that allow a company Competitive advantage as any factors that allow a company to differentiate its product or service from those of its to differentiate its product or service from those of its competitors to increase market share.competitors to increase market share.


Business Level StrategiesBusiness Level Strategies

Cost Leadership Focus/Niche

Business-Level/Competitive Strategies

Differentiation


1.1. Cost Leadership:-Cost Leadership:- Means the enterprise aims to become the Means the enterprise aims to become the low-cost leader in an industry.low-cost leader in an industry.

Eg:- Dell . It maintains its competitive advantage through its Internet-Eg:- Dell . It maintains its competitive advantage through its Internet-based sales-processing & distribution system, & by selling direct.based sales-processing & distribution system, & by selling direct.

2.2. Differentiation:-Differentiation:- In a differentiation strategy, a firm seeks In a differentiation strategy, a firm seeks to be unique in its industry along dimension that are widely to be unique in its industry along dimension that are widely valued by buyers.valued by buyers.

Volvo stresses the safetyVolvo stresses the safety

Papa John’s Pizza stresses fresh ingredientsPapa John’s Pizza stresses fresh ingredients

3.3. Focusers:- Focusers:- Carve out a Market nicheCarve out a Market niche

Ferrari can compete by providing a product or service customers can Ferrari can compete by providing a product or service customers can get in no other wayget in no other way


3.3. Functional Strategy:-Functional Strategy:-

Finally, each individual business is composed of depts. such Finally, each individual business is composed of depts. such as manufacturing, sales & HRM.as manufacturing, sales & HRM.

Functional strategies identify the basic courses of action that Functional strategies identify the basic courses of action that each dept. will pursue in order to help the business attain its each dept. will pursue in order to help the business attain its competitive goals.competitive goals.

Eg:- Dell’s hr strategies include putting its HR activities on the Eg:- Dell’s hr strategies include putting its HR activities on the Web to support Dell’s low-cost competitive advantage.Web to support Dell’s low-cost competitive advantage.


HRM’S Role in Creating Competitive AdvantageHRM’S Role in Creating Competitive Advantage

To have an effective competitive strategy, the company must have one or To have an effective competitive strategy, the company must have one or more competitive advantagemore competitive advantage

““factors that allow an org to differentiate its product or service”factors that allow an org to differentiate its product or service”

Eg:- Jet Airways, India’s largest full-service private airline attained the Eg:- Jet Airways, India’s largest full-service private airline attained the market-leader status partly through its highly trained & motivated emps who market-leader status partly through its highly trained & motivated emps who provide better service to the customers.provide better service to the customers.

Today, most companies have easy access to the same technologies, so Today, most companies have easy access to the same technologies, so technology it-self is rarely enough to set a firm apart.technology it-self is rarely enough to set a firm apart.

Eg:- Toyota doesn’t have manufacturing equipment that’s unavailable to Eg:- Toyota doesn’t have manufacturing equipment that’s unavailable to Ford. Why then is Toyota so much more efficient, & its cars of such high Ford. Why then is Toyota so much more efficient, & its cars of such high quality?quality?


Strategic Human Resource ManagementStrategic Human Resource Management

– The linking of HRM with strategic goals and objectives in The linking of HRM with strategic goals and objectives in order to improve business performance and develop order to improve business performance and develop organizational cultures that foster innovation and flexibility.organizational cultures that foster innovation and flexibility.

Involves formulating and executing HR systems—HR Involves formulating and executing HR systems—HR policies and activities—that produce the employee policies and activities—that produce the employee competencies and behaviors that the company needs competencies and behaviors that the company needs to achieve its strategic aims. to achieve its strategic aims.


ExampleExample

Dell :- The essence of Dell’s competitive strategy has always been to be a Dell :- The essence of Dell’s competitive strategy has always been to be a low-cost leader.low-cost leader.

Dell’s hr managers use various HR strategies to support Dell’s low-cost Dell’s hr managers use various HR strategies to support Dell’s low-cost aimsaims

Dell delivers most of its hr services, not through a conventional HR dept., Dell delivers most of its hr services, not through a conventional HR dept., but via the Web.but via the Web.


Strategic Human Resource Strategic Human Resource ChallengesChallenges

Corporate productivity and

performance improvement

efforts

Increased HR team involvement

in design of strategic plans

Basic Strategic Challenges

Expanded role of employees in the

organization’s performance

efforts


Human Resource Management’s Human Resource Management’s Strategic RolesStrategic Roles

Strategy Execution

Role

Strategic Planning

Roles

Strategy Formulation

Role


1.1. The Strategy Execution Role:-The Strategy Execution Role:-

Strategy execution is traditionally the heart of the hr manager’s strategic Strategy execution is traditionally the heart of the hr manager’s strategic job.job.

Top Management formulates the company’s corporate & competitive Top Management formulates the company’s corporate & competitive strategies.strategies.

Then the hr manager designs strategies, policies & practices that make Then the hr manager designs strategies, policies & practices that make sense in terms of the company’s corporate & competitive strategies.sense in terms of the company’s corporate & competitive strategies.

Eg:- Dell’s hr strategies – the Web-Based help desk, its centralized Eg:- Dell’s hr strategies – the Web-Based help desk, its centralized internet service. internet service.


2.2. The Strategy Formulation Role The Strategy Formulation Role

HRM’s traditional role in executing strategy has expanded to include HRM’s traditional role in executing strategy has expanded to include working with top management to formulate the company’s strategic plan.working with top management to formulate the company’s strategic plan.

Again this expanded strategy formulation role reflects the reality Again this expanded strategy formulation role reflects the reality employers face today.employers face today.

Globalization means more competition, more competition means more Globalization means more competition, more competition means more performance & most employers are pursuing improved performance by performance & most employers are pursuing improved performance by boosting the competence & commitment levels of the employees.boosting the competence & commitment levels of the employees.

For that they require the SWOT analysis of the emp & their org. For that they require the SWOT analysis of the emp & their org.


Creating the Strategic Human ResourceCreating the Strategic Human ResourceManagement SystemManagement System

Human Resource Professionals

Employee Behaviors and Competencies

Components of a Strategic HRM System

Human Resource Policies and

Practices


What is an HR Scorecard?What is an HR Scorecard?

Strategic Importance of HRMStrategic Importance of HRM

Investment in human assetsCost centersAccountability

Developing peopleFollowing the rulesMajor emphasis

Open, participative, empowerment

Bureaucratic, top-down, centralization

Culture

Flexible, based on human resources

Rules, policies, position powerControl

Short, intermediate, long termShort-term resultsTime focus

Lead, inspire, understandRespond to needsRole of HRM area

Improved understanding and use of human assets

Better performanceObjective

Line managersSpecialistsResponsibility for human resources

Strategic HRMTraditional HRMItem


QuestionsQuestions

1.1. What is the difference between a strategy, a vision, & a What is the difference between a strategy, a vision, & a mission? Give one example of eachmission? Give one example of each

2.2. Explain the types of strategies with suitable examples.Explain the types of strategies with suitable examples.

3.3. Explain how hrm can be instrumental in helping a company Explain how hrm can be instrumental in helping a company create a competitive advantage.create a competitive advantage.

4.4. Define what an HR Scorecard is & briefly explain the steps Define what an HR Scorecard is & briefly explain the steps with suitable e.g..with suitable e.g..

5.5. Explain the steps of strategic management processExplain the steps of strategic management process

6.6. Explain the HR strategies for any company of your choice.Explain the HR strategies for any company of your choice.

HRM Chapter 2

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