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Strategic Human ResourceManagement and the HR Scorecard

After studying this chapter,

you should be able to:

1. Outline the steps in the strategic managementprocess.

2. Explain and give examples of each type ofcompanywide and competitive strategy.

3. Explain what a high performance work system is

and why it is important.

4. Illustrate and explain each of the seven steps inthe HR Scorecard approach to creating HR

systems.

2005 Prentice Hall Inc. All rights reserved. 31

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The Strategic Management Process

Strategic management The process of identifying and executing the

organizations mission by matching its capabilitieswith the demands of its environment.

StrategyA strategy is a course of action.

The companys long-tem plan for how it willbalance its internal strengths and weaknesses with

its external opportunities and threats to maintain acompetitive advantage.

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Business Mission and Its Vision

VisionA general statement of its intended direction that

evokes emotional feelings in organizationmembers.

Mission Spells out who the company is, what it does, and

where its headed.

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Strategic Management Process (contd)

Strategic management tasks Step 1: Define the Business and Its Mission

Step 2: Perform External and Internal Audits

Step 3: Translate the Mission into Strategic Goals

Step 4: Formulate a Strategy to Achieve theStrategic Goals

Step 5: Implement the Strategy

Step 6: Evaluate Performance

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Overview of Strategic Management

Figure 31

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A SWOT Chart

Figure 32

SWOT AnalysisThe use of a SWOT chart

to compile and organize

the process of identifying

company

Strengths,

Weaknesses,

Opportunities, and

Threats.

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Strategies in Brief

Figure 33

Company Strategic Principle

Dell Be direct

eBay Focus on t rad ing communi t ies

General Electric Be number one or num ber two in everyindus try in which w e compete, or get out

Southwest Airlines Meet customers short-haul travel needs

at fares compet i tive with the cos t of

automob i le travel

Vanguard Unmatchable value for the investor-ow ner

Wal-Mart Low pr ic es, every day

Source:Arit Gadiesh and James Gilbert, Frontline Action, Harvard Business Review, May 2001, p. 74.

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Types of Strategic Planning

Corporate-level strategy Identifies the portfolio of businesses that, in total,

comprise the company and the ways in whichthese businesses relate to each other.

Diversification strategyimplies that the firm will expandby adding new product lines.

Vertical integration strategymeans the firm expands

by, perhaps, producing its own raw materials, or selling

its products direct.

Consolidation strategyreduces the companys size

Geographic expansion strategytakes the company

abroad.

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Types of Strategic Planning (contd)

Business-level/competitive strategy Identifies how to build and strengthen the

businesss long-term competitive position in themarketplace.

Cost leadership:the enterprise aims to become thelow-cost leader in an industry.

Differentiation:a firm seeks to be unique in its industry

along dimensions that are widely valued by buyers.

Focus:a firm seeks tocarve out a market niche, andcompete by providing a product or service customers

can get in no other way.

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Types of Strategic Planning (contd)

Functional strategies Identify the basic courses of action that each

department will pursue in order to help thebusiness attain its competitive goals.

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Relationships Among Strategiesin Multiple- Business Firms

Figure 34

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Achieving Strategic Fit

Michael Porter Emphasizes the fit point of view that all of the

firms activities must be tailored to or fit itsstrategy, by ensuring that the firms functionalstrategies support its corporate and competitivestrategies.

Gary Hamel and C. K. Prahalad

Argue for stretch in leveraging resources

supplementing what you have and doing morewith what you havecan be more important thanjust fitting the strategic plan to current resources.

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The SouthwestAirlines ActivitySystem

Figure 35Source: Reprinted by permission of Harvard Business Review. From What is Strategy? by Michael E. Porter,

NovemberDecember 1996. Copyright 1996 by the President and Fellows of Harvard College, all rights reserved.

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HR and Competitive Advantage

Competitive advantageAny factors that allow an organization to

differentiate its product or service from those ofits competitors to increase market share.

Superior human resources are an importantsource of competitive advantage

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Strategic Human Resource Management

Strategic Human Resource Management The linking of HRM with strategic goals and

objectives in order to improve businessperformance and develop organizational cultures

that foster innovation and flexibility. Formulating and executing HR systemsHR

policies and activitiesthat produce the employeecompetencies and behaviors the company needs

to achieve its strategic aims.

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Linking Corporate and HR Strategies

Figure 36Source: 2003, Gary Dessler, Ph.D.

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HRS Strategic Roles

HR professionals should be part of the firmsstrategic planning executive team.

Identify the human issues that are vital tobusiness strategy.

Help establish and execute strategy.

Provide alternative insights.

Are centrally involved in creating responsive andmarket-driven organizations.

Conceptualize and execute organizational change.

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HR Involvement in Mergers

Figure 37Source: Jeffrey Schmidt, The Correct Spelling of M & A Begins with HR, HR Magazine, June 2001, p. 105.

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HRs Strategy Execution Role

The HR departments strategies, policies, andactivities must make sense in terms of the

companys corporate and competitive

strategies, and they must support those

strategies.

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HRs Strategy Formulation Role

HR helps top management formulate strategyin a variety of ways by.

Supplying competitive intelligence that may beuseful in the strategic planning process.

Supplying information regarding the companysinternal human strengths and weaknesses.

Build a persuasive case that shows howinspecific and measurable termsthe firms HR

activities can and do contribute to creating valuefor the company.

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Creating a Strategy-oriented HR System

Components of the HR process HR professionals who have strategic and other

skills

HR policies and activities that comprise the HR

system itself Employee behaviors and competencies that the

companys strategy requires.

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The Basic Architecture of HR

Figure 38Source:Adapted from Brian Becker et al., The HR Scorecard: Linking People,

Strategy, and Performance (Boston: Harvard Business School Press, 2001), p. 12.

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The High-Performance Work System

High-performance work system (HPWS)practices.

High-involvement employee practices (such as jobenrichment and team-based organizations),

High commitment work practices (such asimproved employee development,communications, and disciplinary practices)

Flexible work assignments.

Other practices include those that foster skilledworkforces and expanded opportunities to usethose skills.

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Basic Model ofHow to AlignHR Strategyand Actions

with BusinessStrategy

Figure 39

Source:Adapted from Garrett Walker and J. Randal MacDonald,

Designing and Implementing an HR Scorecard, Human

Resources Management 40, no. 4 (2001), p. 370.

TranslatingStrategy into

HR Policyand Practice

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Strategic HR Relationships

Figure 310

HR

Activities

Emergent

Employee

Behaviors

Strategically

Relevant

OrganizationalOutcomes

Organizational

Performance

Achieve

Strategic

Goals

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The HRScorecardApproach

toFormulatingHR Policies,Activities,and

Strategies

Figure 311Source: Copyright Gary Dessler, Ph.D.

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Using the HR Scorecard Approach

Step 1: Define the Business Strategy

Step 2: Outline the Companys Value Chain

Step 3: Identify the Strategically Required

Organizational Outcomes

Step 4: Identify the Required WorkforceCompetencies and Behaviors

Step 5: Identify the Strategically Relevant HR

System Policies and Activities

Step 6: Design the HR Scorecard MeasurementSystem

Step 7: Periodically Evaluate the Measurement

System

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Outlining the Companys Value Chain

Value chain analysisA tool for identifying, isolating, visualizing, and

analyzing the firms most important activities andstrategic costs.

Identifying the primary and crucial activities thatcreate value for customers and the related supportactivities.

Each activity is part of the process of designing,

producing, marketing, and delivering the companys

product or service.

Shows the chain of essential activities.

Prompts future questions.

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Figure 312

Source: Copyright Gary Dessler, Ph.D.

SimpleValue

Chain forthe HotelParis

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HR Scorecard forthe Hotel ParisInternational

Corporation*

Figure 313

Note:*(An abbreviated example showing

selected HR practices and outcomes aimed at

implementing the competitive strategy, To use

superior guest services to differentiate the

Hotel Paris properties and thus increase the

length of stays and the return rate of guests,

and thus boost revenues and profitability).

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2005 Prentice Hall Inc All rights reserved 3 33

Key Terms

competitive advantage

HR Scorecard

leveraging

metrics

mission strategic control

strategic human resource

manager

strategic management

strategic plan

strategy

SWOT analysis

value chain analysis

vision

HRM10 - Chap 2

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