Transcript CHAPTER 2

CHAPTER 2
STRATEGIC HUMAN RESOURCE
MANAGEMENT
Contents of Chapter 2
Understanding the business context
Approaches to the strategy-making process
The rise of strategic human resource management
Exploring the relationship between strategic management and
SHRM
The configurational approach
The resource-based view of SHRM
Understanding the business context
The nature of business strategy
 What is Strategy ? -> Content
 How is strategy formed? -> Process
Approaches to the strategy-making
process
The classical-rational-planning approach
The evolutionary approach
The processual approach
The systemic approach
The classical or rational-planning
approach
Common elements in successful strategies
Successful
strategy
Effective implementation
Long-term,
simple, and
agreed
objectives
Profound
understanding of
the competitive
environment
Objective
appraisal of
resources
The classical or rational-planning
approach
Three level is viewed in the classical perspective
 Corporate level: it relates to the overall scope of the
organization, its structures, financing and distribution of key
resources
 Business level: it relates to its competitive positioning in
markets/products/services
 Operational level: relates to the methods used by the various
functions: marketing, finance, production and of course human
resources to meet the objectives of the higher-level strategies
The classical or rational-planning
approach
Analysing an organization
– Analyse the external environment
Political
Legal
Technological
Economic influences on business
Now categories these into opportunities and threats
The classical or rational-planning
approach
– Analyse the internal environment
Resources
Structure
Leadership
Skills
Knowledge
Culture
Now categories these into strengths and weaknesses
The classical or rational-planning
approach
– Conduct a SWOT analysis
Put your analysis of the external and internal environment into a
SWOT analysis. You might find it useful to prioritize the key
strengths and weaknesses of the business, and the main threats
and key opportunities available to the business. Remember that it
is important to be able to justify your decisions. You also need to
be clear about differentiating between business and HR issues,
although it is likely that certain HR strengths could be a core
business competence/weakness
The classical or rational-planning
approach
– Strategic choice
Now consider the organization’s strategy, review its
vision statement, mission statement, corporate
objectives and values. Does a comprehensive
analysis of the external and internal environment of
your organization help you to understand the
reasoning behind the organization’s strategy?
The classical or rational-planning
approach
– Implementation
What changes has the organization made in terms of
culture, structures, leadership and HR practices to
deliver its strategy? Have these changes been
effective? Why? Why not?
The evolutionary approach
The evolutionary approach suggests that markets are too
competitive for ‘expensive strategizing and too
unpredictable to outguess’. They believe that sophisticated
strategies can deliver only a temporary advantage, and
some suggest focusing instead on efficiency and managing
the ‘transaction cost’
The processual approach
This approach recognizes the inherent rivalries and
conflicting goals present within organizations, and the
impact this can have on strategy implementation.
The systemic approach
According to this approach, organizations differ according to
the social and economic systems in which they are
embedded
Approaches to the strategy-making
process
Whittington’s model
Outcomes
Profit-maximising
Classical
Evolutionary
Processes
Emergent
Deliberate
Processual
Systemic
Plural
The rise of SHRM
A good business strategy, one which is likely to succeed, is
formed by people factors.
In the majority of organizations people are now the biggest
asset. The knowledge, skills and abilities have to be
deployed and used to the maximum effect if the
organization is to create value
Exploring the relationship between strategic
and SHRM: the best-fit school of SHRM
Best-fit: Models of HRM that focus on alignment between HRM
and business strategy and the external context of the firm.
Tend to link or ‘fit’ generic type business strategies to generic
HRM strategies
Best-fit was therefore explored in relation to life-cycle models
and competitive advantage models, and the associated
difficulties of matching generic business-type strategies to
generic HRM strategies were considered, particularly in their
inherent assumptions of a classical approach to the strategymaking process
Exploring the relationship between strategic
and SHRM: the best-fit school of SHRM
Life-cycle models
 In the start-up phases: Flexibility in HR
 In the growth stage: Grow size of organization, development of
more formal HR policies and procedures
 In the maturity stage: Move to cost control by HR strategy
 In the decline stage:
 How can HR strategy secure and retain the type of HR that
are necessary for the organization’s continued viability, as
industries and sectors develop?
 Which HR policies and practices are more likely to contribute
to sustainable competitive advantage as organizations go
through their life-cycle
Exploring the relationship between strategic
and SHRM: the best-fit school of SHRM
Competitive advantage models
 Three key bases of competitive advantage: cost leadership,
differentiation through quality and service, and foucus or
‘niche’ market -> to ‘fit’ the generic strategies of cost
reduction, quality enhancement and innovation
 The ‘cost reduction’-led HR strategy is likely to focus on the
delivery of efficiency through mainly ‘hard’ HR techniques,
whereas the ‘quality enhancement’
 The ‘innovation’-led HR strategies focus on the delivery of
added value through ‘softer’ HR techniques and policies
Exploring the relationship between strategic
and SHRM: the best-fit school of SHRM
Best-fit approach to strategic HRM explored the close
relationship between strategic management and HRM, by
considering the influence and nature of vertical integration.
Vertical integration, where leverage is gained through the close
link of HR policies and practices to the business objectives and
therefore the external context of the firm, is considered to be a
key theme of strategic HRM
Exploring the relationship between strategic
and SHRM: the best-fit school of SHRM
Limitations of best-fit models of SHRM
 The reliance on the classical rational-planning approach to
strategy-making, its reliance on determinism and the resulting
lack of sophistication in their description of generic competitive
strategies.
 Best-fit models tend to ignore employee interests in the pursuit
of enhanced economic performance.
 Lack of emphasis on the internal context of individual businesses
within the same sector, and the unique characteristics and
practices that might provide its main source of sustainable
competitive advantage.
Exploring the relationship between strategic
and SHRM: the best-fit school of SHRM
Configurational approach An approach that identified the
benefits of identifying a set of horizontally integrated HR
practices that were aligned to the business strategy, thus fitting
the internal and external context of the business.
 HR practices are defenders
 HR practices are prospectors
The resouce-based view of SHRM
Resource-based view Strategy creation built around the
further exploitation of core competencies and strategic
capabilities.
Core competences Distinctive skills and knowledge, related
to product, service or technology, that can be used to gain
competitive advantage.
The VRIO framework:
– Value
– Rarity
– Inimitability
The resouce-based view of SHRM
The VRIO framework:
– Value
– Rarity
– Inimitability
– Organization
The resouce-based view of SHRM
The VRIO framework:
– Value
How the HR function can create value to reduce cost, such as
reduction in headcount and the introduction of flexible working
practices ….
How they might increase revenue, as the business as effiency, also
as customer selection, customer retention and customer referral,
means through enhanced customer service and customer added
value.
Which HR contribute the most to suitainable competitive advantage
The resouce-based view of SHRM
The VRIO framework:
– Rarity
The HR Executive needs to consider how to develop
and exploit rare characteristics of a firm’s human
resources to gain competitive advantage
The resouce-based view of SHRM
The VRIO framework:
– Inimitability
If an organization’s human resources add value and
are rare, they can provide competitive advantage in
the short-term, but if other firms can imitate these
characteristics, then over time competitive advantage
may be lost and replaced with competitive parity.
The resouce-based view of SHRM
The VRIO framework:
– Organization
To ensure that the HR function can provide
sustainable competitive advantage, the VRIO
framework suggests that organizations need to
ensure that they are organized so that they can
capitalize on the above, adding value, rarity and
inimitability.
The resouce-based view of SHRM
Applying the resource-based view of SHRM
The resource-based view of SHRM has recognized that
both human capital and organizational processes can
add value to an organization; however, they are likely to
be more powerful when they mutually reinforce and
support one another.
The resouce-based view of SHRM
Limitations of the resource-based view
– The resource-based view represents a paradigm shift in
strategic HRM thinking by focusing on the internal resources of
the firm as a key source of sustainable competitive advantage,
rather than focusing on the relationship between the firm and
the external business context
– Human resources, as scarce, valuable, organization-specific
and difficult to imitate resources, therefore become key
strategic assets.
Best-practice SHRM:
high-commitment models
Best practice:
A ‘set' or number of human resource practices that have
the potential to enhance organizational performance when
implemented. Usually categorized as ‘high commitment',
high involvement' or ‘high performance'.
Best-practice SHRM:
high-commitment models
The best-practice approach highlights the relationship between
‘sets’ of good HR practices and organizational performance, mostly
defined in terms of employee commitment and satisfaction. These
sets of best practice can take many forms: some have advocated a
universal set of practices that would enhance the performance of
all organizations to which they were applied; others have focused
on integrating the practices to the specific business context (highperformance work practices). A key element of best practice is
horizontal integration and congruence between policies.
Best-practice SHRM:
high-commitment models
Difficulties arise here, as best-practice models vary
significantly in their constitution and in their relationship to
organizational performance, which makes generalizations
from research and empirical data difficult
Summary to Chapter 2