Transcript A framework for HRM analysis

OHT 2.1
Strategic Human Resource
Management: Objectives
• To indicate the importance of the business context for
understanding the meaning and application of SHRM
• To analyse the relationship between Strategic
Management and SHRM
• To analyse the different approaches to SHRM
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The best-fit approach
The configurational approach
The resource-based view
The best-practice approach
• To evaluate the relationship between SHRM and
Performance
Human Resource Management, 4th Edition
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OHT 2.2
Strategic HRM: Understanding
the Business Context
• Any credible attempt at model building in SHRM involves taking
a position on the difficult questions: (Boxall, 1996)
• What is strategy? (Content)
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Plan?
Mission?
Objectives?
Journey?
Other?
• How is Strategy formed? (Process)
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Classical, rational-planned approach
Evolutionary
Processual
Systemic
Other?
(Whittington, 2001)
Human Resource Management, 4th Edition
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OHT 2.3
Strategic HRM
Table 2.1 Whittington’s typology of strategy
Source: Adapted from Whittington (2001: 39)
Human Resource Management, 4th Edition
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Strategic HRM:
Analysing an Organisation
OHT 2.4
• Choose an organisation you are familiar with, or use one of
the case studies: BMW or Jet Airlines
• Conduct a SWOT analysis to identify
– Strengths and Weaknesses in the internal business environment:
consider finances, market, operations, resources, customer relations
– Opportunities and Threats in the external environment: consider
political, economic, social, technological, legal factors
• What is the key focus of the organisation’s business
strategy?
• What strategic choices does the organisation need to make
now?
• What implications would this have on the management of
the organisation’s human resources?
Human Resource Management, 4th Edition
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OHT 2.5
Strategic HRM: Intended versus
Emergent Strategy
• List the factors that may prevent an organisation realising
its intended strategy
– Changes in the external environment
• E.g. Increased competition / loss of market share
• Crisis e.g. September 11th
• Other?
– Changes in the internal environment
• E.g. Product failure / Quality problems
• Industrial unrest
• Other?
• Why do new strategies emerge?
Human Resource Management, 4th Edition
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OHT 2.6
Strategic HRM: Analysing your
career / personal development
• Review figure 2.2 (Mintzberg, 1987)
• Plot your personal development / career development on
a time line, identifying the peaks and troughs
• Now analyse where you have not realised your intended
personal development strategies i.e. changes in career,
university, degree subject
• Identify the factors / processes that enabled new
strategies to emerge
• What factors / processes do you think organisations need
to take into account to successfully identify and implement
emergent strategies?
Human Resource Management, 4th Edition
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OHT 2.7
Strategic HRM:
The Best-fit Approach
• Emphasises the contingent relationship or alignment between an
organisation’s human resource policies and practices, and its
business strategy and in turn the external context of the firm
• Vertical Integration where leverage is gained through HR
procedures, policies and processes is therefore acknowledged as a
key element of Best-fit and SHRM
• Life cycle models emphasise the alignment of appropriate HR
policies and practices for the various life stages of a business.
• Competitive advantage models emphasise alignment of relevant
HR policies and practices with generic competitive advantage
strategies
• Much literature tends to emphasise tight fit, where senior
management cascade strategic objectives down to functional areas.
The role of HR here is restricted to effective implementation. Other
writers (Torrington & Hall,1998) have noted the varying levels of
integration, and the benefits of dialogue, a holistic approach or
even a HR Driven approach!
Human Resource Management, 4th Edition
© Pearson Education Limited 2004
Strategic HRM:
Competitive Advantage Models
OHT 2.8
• Compare and Contrast the approaches to SHRM advocated in a:
– Cost Reduction focussed strategy
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Fixed and explicit job descriptions
Repetitive tasks, that emphasise specialisation and efficiency
Short-term results driven appraisal / reward
Basic skills training, limited development opportunities
– Quality focussed strategy
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Competency-driven job descriptions
Involvement at job level
Individual and group performance targets for reward
Continuous training and development
• Can you identify any difficulties in applying this approach?
– Many organisations pursue hybrid strategies
– Fitting HR policies and practices to strategic focus of businesses in 21st
century is more complex than suggested by Schuler & Jackson,1987
Human Resource Management, 4th Edition
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OHT 2.9
Strategic HRM: Limitations of the
Best-Fit Approach
• Reliance on classical, rational-planning approach
which does not recognise the inherently messy
and emergent nature of strategy
• Reliance on determinism and generic competitive
strategies
• Alignment in reality tends to focus on fit
(Torrington & Hall, 1998) where HR is
downstream of strategic activity
• Emphasis on the external context at expense of
internal context
Human Resource Management, 4th Edition
© Pearson Education Limited 2004
OHT 2.10
Strategic HRM: The
Configurational Approach
• Recognises the existence of hybrid strategies
• Recognises the limitations of focussing on
vertical integration alone
• Recommends identification of internal set of HR
practices, that are horizontally integrated to
ensure synergistic benefits
• Which are in turn linked to the appropriate
strategic configuration of the business
• Thus both horizontal and vertical integration are
maximised
Human Resource Management, 4th Edition
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OHT 2.11
Strategic HRM: The Resourcebased view
• Represents a paradigm shift in SHRM
thinking by focussing on the internal
resources of the organisation
• Human resources are identified as key
strategic assets
• Which are capable of being a key source
of sustainable competitive advantage
Human Resource Management, 4th Edition
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Strategic HRM:
The Resource-based view
OHT 2.12
The VRIO Framework
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Rarity
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Adding value will at best only provide temporary competitive advantage, and may only provide
competitive parity. The organisation needs to identify and exploit the rare characteristics of its
human resources to gain competitive advantage.
Inimitability
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How can an organisation’s human resources add value to the business? How can they enhance
customer added value?
Achieving value and rarity will only provide temporary competitive advantage over an
organisation’s rivals. If a competitor can imitate these characteristics, CA will be lost over time.
The organisation needs to develop and nurture characteristics that cannot be easily imitated by
its competitors, such as socially complex phenomena, ie. Unique history or culture and team
synergies.
These are strengthened through causal ambiguity and social complexity.
Organisation
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Finally to achieve SCA (Sustainable Competitive Advantage) the HR function needs to ensure
they are organised or have appropriate integrated systems to capitalise on the value, rarity and
inimitability of their human resources.
Barney & Wright, 2001
Human Resource Management, 4th Edition
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OHT 2.13
Strategic HRM: Nordstrom and
South West Airlines
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How did Nordstrom exploit the rare characteristics of its employees?
– Operates in highly competitive retail environment which is usually characterised by
low skill and high turnover yet
– Nordstrom focusses on competence and attitude of individual salespeople to
provide sustainable competitive advantage
– Attracts high calibre graduates to career in retailing
– High reward, upto twice the industry average
– Encourage employees to make a heroic effort to meet customer needs
– Taken a relatively homogeneous labour pool, and exploited rare characteristics to
gain competitive advantage over rivals
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How did South West Airlines create a culture that was difficult to copy?
– Exploited inimitability of socially complex phenomena i.e. South West’s culture to
gain competitive advantage
– Culture of fun and trust
– Employees empowered to do what it takes to meet customer needs
– Extensive selection process
– Empowerment reinforced by CEO
Human Resource Management, 4th Edition
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OHT 2.14
Strategic HRM: Resource-based View
and Knowledge-based Organisation
• Both approaches advocate that it is a firm’s ability to learn
faster than its competitors that leads to sustainable
competitive advantage
• Hamel & Prahalad identify the need to create the future
through its core competencies
• Thus strategy goes beyond achieving ‘fit’ and resource
allocation to achieving stretch and resource leverage
through emphasising the importance of both tacit and
explicit knowledge and the ability of employees to learn.
Human Resource Management, 4th Edition
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OHT 2.15
Strategic HRM: The Knowledgebased view & Core Competency
• Hamel & Prahalad, 1994: 217-218
• A core competency is:
– A bundle of skills and technologies that enable a company to
provide particular benefits to customers
– Is not product specific
– Represents . . . The sum of learning across individual skill sets
– Must be competitively unique
– Is not an asset in the accounting sense of the word
– Represents a broad opportunity arena or gateway to the future
Human Resource Management, 4th Edition
© Pearson Education Limited 2004
OHT 2.16
Strategic HRM: The Bestpractice Approach
• Notion that set of HR best-practices, whether focussing
on high commitment, high involvement or high
performance, will contribute to enhanced organisational
performance through
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Improved employee attitude and behaviours
Improved morale
Higher levels of skill
Lower levels of turnover/absenteeism
• Which it is assumed leads to higher productivity/
profitabilty, enhanced quality of service and product and
enhanced efficiency
Human Resource Management, 4th Edition
© Pearson Education Limited 2004
OHT 2.17
Strategic HRM: The best-practice
approach and universalism
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Universalists argue that all organisations will benefit and see improvements
in organisational performance if they identify and gain commitment to a
universal set of best HR practices
The closer an organisation can get to the ideal set of best practices, the
better the organisation will perform
Pfeffer’s revised practices (1998) for building profits by putting people
first
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Employment security
Selective hiring
Extensive training
Sharing information
Self-managed teams / teamworking
Reduction of status differentials
High pay contingent on company performance
Role of HR = gaining senior management commitment and ensuring effective
implementation
Human Resource Management, 4th Edition
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Strategic HRM: High
performance Work Practices
OHT 2.18
• Recognises the need to examine and quantify the
relationship between SHRM and organisational
performance
• Emphasises the HRM system and the need to develop
bundles of integrated HR practices that are tailored to meet
an individual organisation’s specific context:
– Need to be aligned and integrated with each other
– To avoid deadly combinations of HR practices which work against
each other
– The total HRM systems needs to support business priorities
– To gain full benefit from the powerful connections or synergies
between practices
Huselid, 1995
Human Resource Management, 4th Edition
© Pearson Education Limited 2004
OHT 2.19
Strategic HRM: Problems with
operationalising Best-practice
• Inconsistencies in defining what actually constitutes best HR practice
• In analysing the empirical evidence, it is difficult to confirm whether it
is HR practices that lead to enhanced organisational performance, or
whether strong organisational performance enables organisations to
invest in Best-practice HRM
• Difficult to convince organisations operating within tight financial
margins to invest in expensive HR practices
• In short-termist Western economies hard HR techniques tend to be
justified in terms of the greater good of the organisation and
increased return on shareholder value. Therefore difficult to justify
cost of best HR practices, as benefits not always easy to quantify
• Tend to assume a unitarist perspective and ignore pluralist values
Human Resource Management, 4th Edition
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OHT 2.20
Strategic HRM and Performance:
The Balanced scorecard
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Kaplan & Norton, 1996, 2001
The Balanced Scorecard relates critical non-financial factors to financial outcomes, by
assisting firms to map key cause-effect linkages in their desired strategies
Challenges the short-termism found in many Western traditional budgeting processes
Emphasises the significance of the implementation stage of the strategy-making
process: ‘business failure is seen to stem mostly from failing to implement and not from
failing to have wonderful visions’. Kaplan & Norton, 2001:1
Adopts a stakeholder perspective, and identifies the need to satisfy investors,
customers and employees
Through setting objectives, measures, targets and initiatives in
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Financial: to succeed financially, how should we appear to our shareholders?
Customer, to achieve our vision how should we appear to our customers?
Internal Business Processes, to satisfy our shareholders and customers, what business
processes must we excel at?
Learning and Growth, to achive our vision, how will we sustain our ability to change and
improve?
Human Resource Management, 4th Edition
© Pearson Education Limited 2004