STRATEGIC HRM Strategy

BITS Pilani Dubai Campus

STRATEGIC HRM

BITS Pilani Dubai Campus

Strategic HRM Presentation

STRATEGIC HRM

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.

Strategic Management : The process of identifying

and executing the organization’s mission by matching

its capabilities with the demands of its environment.

STRATEGIC HRM

Steps in Strategic Management: The entire 7-step

strategic management process follows :

Step 1 : Define the Current Business : Every company

must choose the terrain on which it will compete – in

particular, what products it will sell, where it will sell

them, and how its products or services will differ from its

competitors’.

Ex : Rolex and Seiko; Rolex sells a limited product line

of high priced quality watches.

Seiko sells a wide variety of relatively inexpensive but

innovative specialty watches with features like

compasses and altimeters.

STRATEGIC HRM



Step 2 : Perform External and Internal Audits :

Ideally, managers begin their strategic planning by

methodically analyzing their external and internal

situations. The strategic plan should provide a direction

for the firm that makes sense, in terms of external

opportunities and threats the firm faces and the internal

strengths and weaknesses it possesses.

Ex : SWOT Analysis

STRATEGIC HRM



Step 3 : Formulate New Business and Mission

statements :

Based on the situation analysis, what should our new

business be, in terms of what products it will sell, where

it will sell them, and how its products or services will

differ from its competitors? What is our new mission

and vision?

Ex : Mission and Vision

STRATEGIC HRM

Vision: A general statement of its intended direction that evokes emotional feelings in organization members

Ex : Our vision is to be an internationally top-ranked, research-driven, independent management institution that grooms future leaders for India and the world

Mission : Spells out who the company is, what it does, and where it’s headed.

Ex : To create and disseminate research-based knowledge in management that influences scholarship, practice and policy.

To develop and enhance business leadership through innovative world class programs in management

STRATEGIC HRM



Step 4 : Translate the Mission into Strategic Goals :

Saying the mission is “to make quality job one” is one thing:

operationalizing that mission for your managers is another.

Ex : Citicorp can’t function solely with a mission like, “provide

integrated, comprehensive financial services worldwide,”

To guide managerial action, it needs goals in terms of things

like building shareholder value, maintaining superior rates of

return, building a strong balance sheet, and balancing the

business by customer, product, and geography.

STRATEGIC HRM

Steps in Strategic Management: The entire 7-step strategic

management process follows :

Step 5 : Formulating strategies to achieve the Strategic Goals :

Strategy is a course of action. It shows how the enterprise will

move from the business it is in now to the business it wants to be

in, given the firm’s opportunities, threats, strengths, and

weaknesses.

The best strategies are concise enough for the manager to

express in an easily communicated phrase that resonates with

employees.

Ex : 1) Dell’s strategy is “be direct.”

2) Wal-Mart’s strategy boils down to “low prices, every day,”

STRATEGIC HRM



Step 6 : Implement the strategies :

Strategy implementation means translating the strategies

into actions and results – by actually hiring (or firing) people,

building (or closing) plants, and adding (or eliminating)

products and product lines.

Strategy implementation involves drawing on and applying

all the management functions: planning, organizing, staffing,

leading, and controlling.

STRATEGIC HRM

Steps in Strategic Management: The entire 7-step strategic

management process follows :

Step 7 : Evaluate Performance :

Strategies don’t always succeed.

Ex : Procter & Gamble announced it was selling its remaining

food businesses – Jif, Crisco, and Folger’s coffee – because

management wants to concentrate on household and cosmetic

products.

Managing strategy is an ongoing process. Competitors introduce

new products, technological innovations make production

processes obsolete, and social trends reduce demand for some

products or services while boosting demand for others.

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

STRATEGIC HRM Types of Strategies :

Corporate Strategy :

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

There are several generic possibilities :

• A diversification corporate strategy implies that the firm will expand by adding new product lines (Wipro, Tata, Birla). It can be related or unrelated.

• A vertical integration strategy means the firm expands by, perhaps, producing its own raw materials, or selling its products direct (Grasim Textile – Spinning & Weaving).

• Concentration strategy focuses on its primary line of business and increases number of products offered or markets served (Bose Corporation focuses on developing innovative audio products and has become of the world’s leading manufacturers of speakers for home entertainment, automotive and pro-audio markets).

• Horizontal integration is combining with competitors (L'Oreal acquired Body Shop).

•Retrenchment: short run strategy used for minor performance problems.

•Turnaround: more serious problems, hence drastic action.

Both involve cutting cost and restructuring organizational operations.

STRATEGIC HRM

Types of Strategies :

Competitive Strategy :

A Competitive strategy identifies how to build and strengthen the

business’s long-term competitive position in the market place. We

can define competitive advantage

As any factors that allow a company to differentiate its product or

service from those of its competitors to increase market share.

Ex : Dell – maintains its competitive advantage through its internet

based sales processing and distribution system, and by selling direct.

Volvo – stresses the safety of its cars;

Papa John’s Pizza – stresses fresh ingredients;

Wal-Mart, and Mercedes-Benz emphasizes reliability and quality.

Competitive strategy • Cost Leadership: lowest costs in industry, high

efficiency, low overheads, product is perceived as comparable in quality

• Differentiation: offering unique products/services that is highly valued by customers – high quality, extraordinary service, innovative designs (3M Corporation), technological capability or an unusually positive brand image (Apple)

• Focus: involves a cost advantage or differentiation advantage in a niche segment

STRATEGIC HRM Types of Strategies :

Functional Strategy :

Functional strategies identify the basic courses of action that

each department will pursue in order to help the business attain

its competitive goals.

Ex : Dell’s HR strategies include putting its HR activities on the

web to support Dell’s low cost competitive strategy.

The “When You’re on Your Own” feature illustrates a system you

can use to facilitate your planning efforts.

STRATEGIC HRM HRM’s Role in creating Competitive Advantage

To have an effective competitive strategy, the company must have one or more competitive advantages, “factors that allow an organization to differentiate its product or service.”

Ex : 1) Jet Airways – attained the market-leader status partly through its highly trained and motivated employees who provide better ground and cabin service to the customers.

2) For a pharmaceuticals company, it may be the quality of its research team, and its patents.

3) For a Web site like MySpace, it is a proprietary software system.

4) Toyota’s HR strategies – a full week of employee screening and testing, three weeks per year of training, and team-based rewards that incentivize the assembly teams to self-manage their own performance.

STRATEGIC HRM Strategic HRM

Formulating and executing HR systems – HR policies and

activities – that produce the employee competencies and

behaviors the company needs to achieve its strategic aims.

Ex : One of Fed-Ex’s strategic aims is to achieve superior levels

of customer service and high profitability through a highly

committed workforce, preferably in a non-union environment.

FedEx’s HR strategies stem from this aim. They include : using

various tools to build two-way communications; screening out

potential managers whose values are not people oriented;

guaranteeing to the greatest extent possible fair treatment and

employee security for all employees; and utilizing various

promotion-from-within activities to give employees every

opportunity to fully realize their potential.


Three more examples :

Southwest Airlines :

•Most of the passengers boarding Southwest Airlines’ do not think much about how Southwest keeps its prices low.

•Southwest’s real secret is its HRM strategy. Its basic aim is to deliver low-cost, convenient service on short-haul routes.

•How does it do this? One big way is by getting fast, 15-minute turnarounds at the gate, thus keeping planes flying longer hours than rivals.

•HR Strategy : (a) high compensation, flexible work assignments, and so forth, lead to (b) motivated flexible ground crews and employees, who do whatever it takes to © turn the planes around in 15 minutes, so that (d) Southwest achieves its strategic aims of delivering low-cost, convenient service.



Dell :

•The essence of Dell’s competitive strategy has always been to

be a low-cost leader.

•Dell’s HR Managers use various HR strategies to support Dell’s

low-cost aims.

•Ex : Dell delivers most of its HR services, not through a

conventional HR department, but via the Web. Dell’s intranet

contains about 30 automated web applications (incl. executive

search reports, hiring tools, and automated employee referrals).

•This dramatically reduces the no. of HR people required to

administer these activities, and thus the cost of doing so.

•That in turn supports Dell’s low cost strategy.



HDFC Bank :

•As the leading new generation private bank, HDFC bank, inc. in 1994, has the mission of being a world-class Indian bank.

•Currently recognized as one among the most respectable and performing commercial banks, its business philosophy is based on four core values of “Operational Excellence, Customer Focus, Product Leadership, and People.”

•The race to the top slot in the industry has been supported by strategic HR initiatives. The bank recruits selectively from top business schools, while keeping away from the fresh graduates from IIMs. Hiring is taken seriously with extensive reference checking about performance and integrity. Emphasis is given to employee participation in decision making as well as in celebration of success. These are done to enhance employee engagement so that they provide worldclass customer service,while continuing to work in HDFC.

STRATEGIC HRM Strategic HR challenges

Today’s HR managers face three basic strategic challenges :

• One (as at Dell) is the need to support corporate productivity and performance improvement efforts. With the globalization of the world economy, competition has soared, and with it the need to continually improve organizational performance.

• Second, employees play an expanded role in employers’ performance improvement efforts. In fact, all the organizations like Toyota’s – such as high-tech team-based production – are largely useless without extraordinarily high levels of employee competence and commitment.

• Third, (stemming from the first two) is that employers see that their HR units must be more involved in designing – not just executing – the company’s strategic plan.

Top Mgmt. needs inputs from HR team in designing the strategy, since it is the team charged with hiring, training, and compensating the firm’s employees. HR managers will therefore need “an in-depth understanding of the value creating proposition of the firm”.

STRATEGIC HRM HRM’s Strategic Roles

HR managers can play two basic strategic planning roles, in Strategy formulation and in strategy execution.

Strategy formulation : HR supports strategy formulation strategy in many ways.

Ex : Formulating a strategic plan requires identifying, analyzing, and balancing the company’s external opportunities, and threats, on the one hand, and its internal strengths and weaknesses, on the other.

Opportunities and threats : HR Manager is in a unique position to supply competitive intelligence that may be useful in the strategic planning process. Details regarding competitors’ incentive plans, opinion survey data from employees that elicit info about customer complaints, and info about pending legislation such as labor laws etc. are some examples.


Strategy execution : Top mgmt. formulates the company’s

corporate and competitive strategies. Then, the HR manager

designs strategies, policies, and practices that make sense in

terms of the company’s corporate and competitive strategies.

Ex : 1) Dell’s HR strategies – the Web based help desk, its

centralized intranet service bureau – help the firm better

execute Dell’s low-cost strategy.

2) HRM administers most firms’ downsizing and restructuring

efforts, outplacing employees, etc. (ex : AV Birla Group)


Strengths and Weaknesses : HRM also supports strategy formulation by providing input on the company’s internal human strengths and weaknesses.

Some firms even build new strategies around HR strengths.

Ex : 1) In the process of automating its factories, farm equpt manufacturer John Deere developed a workforce that was exceptionally expert in factory automation. This in turn prompted the firm to establish a new-tech division to offer automation services to other companies.

• 2) In India, Bharti Airtel, the telecommunications company, leveraged its internal expertise in training employees, specifically in customer management, and formed a separate company. Bharti Connect, to offer training solutions to other Indian companies.

STRATEGIC HRM Translating Strategy into HR Policy and Practice

As noted earlier, Strategic HRM means formulating and executing HR policies and practices that produce the 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 and behaviors into the specific HR policies and practices that will produce them.

Ex : In 1990s, it was apparent to Albert Einstein Healthcare Network’s new CEO that intense competition, scientific tech. changes, the growth of managed care and significant cuts in Medicare and medicaid means that his Co. needed a new strategic plan.

New strategy : The essence of the CEO’s new strategy was to change Einstein into a comprehensive health care network of facilities providing a full range of high-quality services in various local markets. To achieve Einstein Medical’s strategic aims, its HR and other strategies would have to help the medical center 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 employee competencies, skills, and behaviors would Einstein Medical need to produce these three outcomes?” Working with the Head of HR the CEO chose four employee skills and behaviors :

Einstein employees would need to be “dedicated, accountable, generative, and resilient.”

They would have to be dedicated to Einstein’s focus on initiate, adapt and deliver. They would have to take personal accountability for their results. The 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 needs changed.


New HR Policies and Practices :

Given these desired employee competencies and behaviors, Einstein Medical’s HR managers could ask, “What specific HR policies and practices would help Einstein create a dedicated, accountable, generative, and resilient workforce, and thereby help it to achieve its strategic goals?

• New training and communication programs aimed at assuring that employees clearly understand 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 and benefits programs promoted personal growth, which meant helping employees take personal responsibility for their own improvement and personal development.

• Providing commensurate returns involved tying employee’s rewards to organization-wide results and providing nonmonetary rewards (such as more challenging jobs).

• Improved selection, orientation, and dismissal procedures also helped Einstein build a more dedicated, resilient, accountable, and generative workforce.

STRATEGIC HRM Strategy

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