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Strategic Human Resource
Management
Learning Outcomes
• By the end of this module you will be able to:
• Explain the purpose of strategic planning in an
organisation
• Demonstrate the ability to explain the
importance of people in the achievement of
strategic change
• Understand the key areas of human behaviour
in sustained organisational performance
A DEFINITION OF STRATEGY
Strategy is the direction and scope of an
organisation over the long term which
achieves advantage for the organisation
through its configuration of resources within
a changing environment to meet the needs
of markets and to fulfil stakeholder expectations.
Johnson & Scholes (1999)
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Key Words
• Direction & Scope
• Long Term
• Advantage
• Configuration of Resources
• Changing Environment
• Stakeholder Expectations
LEVELS OF STRATEGY (1)
Corporate Level strategic decisions are
concerned with:
• overall purpose and scope
• adding value to shareholder investment
• portfolio issues
• resource allocation between Strategic
Business Units (SBUs)
• structure and control of SBUs
• corporate financial strategy
LEVELS OF STRATEGY (2)
Business Unit Strategy is concerned
with:
• competitive strategy
• developing market opportunities
• developing new products/services
• resource allocation within the SBU
• structure and control of the SBU
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LEVELS OF STRATEGY (3)
Operational Strategies are concerned
with:
• the integration of resources, processes,
people and skills to implement strategy
STRATEGIC MANAGEMENT IN
DIFFERENT CONTEXTS In small businesses, the importance of:
• the expectations of individuals (e.g.
owners and founders)
• competitive positioning
In the multi-national corporation, the
importance of:
• product and geographic scope
• portfolio decisions
• corporate structure and control
What is strategic human resource
management?
• Strategic human resource management may be
regarded as an approach to the management of
human resources that provides a strategic
framework to support long-term business goals
and outcomes. The approach is concerned with
longer-term people issues and macro-concerns
about structure, quality, culture, values,
commitment and matching resources to future
need.– Institute of Personnel & Development 2012
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Exhibit 2.2 Patterns of strategy development
Continuity Incremental Flux Transformational
Exhibit 2.12 The risk of strategic drift
Time
Am
ou
nt o
f ch
an
ge
Phase 1 Phase 2 Phase 3/4
Incremental change Flux Transformationalchange or demise
Strategic
change
Environmental
change
1
5
2
3
4
5
External Analysis
• PEST
Internal Analysis
• Resource analysis
– Physical resources
– Financial resources
– Human resources
– Intangible resources
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SWOT
• Internal and external analysis leads to a
complex assessment of the organisations
position
Understanding the organisation’s
competitive position
• Some tools:
• Portfolio Analysis
• Porter’s 5 Forces
• Lifecycle
• Value Chain
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Porter’s Five Forces
• Michael Porter argued that an
organisation’s competitive position was
determined by five key factors
Porters 5 Forces
• Threat of new entrants
• Bargaining Power of buyers
• Threat of substitute products and services
• Bargaining Power of suppliers
• Rivalry among existing Firms
Potential
entrants
Threat of
entrants
BuyersSuppliers
Bargaining
power
Bargaining
power
Substitutes
Threat of
substitutes
COMPETITIVE
RIVALRY
Source: Adapted from M.E. Porter, Competitive Strategy, Free Press, 1980, p.4. Copyright by the Free Press, a division of Macmillian Publishing Co., Inc. Reproduced with permission
Exhibit 3.6 Five forces analysis
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FIVE FORCES ANALYSIS
Competitive Rivalry is high when:• entry is likely
• substitutes threaten
• buyers or suppliers exercise control
• competitors are in balance
• there is slow market growth
• global customers increase competition
• there are high fixed costs in an industry
• markets are undifferentiated
• there are high exit barriers
FIVE FORCES ANALYSIS: KEY
QUESTIONS AND IMPLICATIONS
• What are the key forces at work in the
competitive environment?
• Are there underlying forces driving competitive
forces?
• Will competitive forces change?
• What are the strengths and weaknesses of
competitors in relation to the competitive forces?
• Can competitive strategy influence competitive
forces (e.g. by building barriers to entry or
reducing competitive rivalry)?
• Michael Porter speaks about 5 Forces
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Firm infrastructure
Human resource management
Technology development
Procurement
Support
activities
Primary activities
Inbound
logistics
Operations Outbound
logistics
Marketing
and sales
Service
Exhibit 4.4 The value chainSource: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1985. Used with permission of The Free Press, a division of Macmillan, Inc. Copyright 1985 Michael E. Porter
Supplier
value chains
Customer
value chains
Channel
value chains
Organisation’s
value chain
Exhibit 4.5 The value systemSource: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1985. Used with permission of The Free Press, a division of Macmillan, Inc. Copyright 1985 Michael E. Porter
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Same as competitors’
or easy to imitate
Better than competitors’
anddifficult to imitate*
Necessary
resources
Core competences
Unique resources
Threshold
competences
* Provides the basis to outperform competitors or
demonstrably provide better value for money
RESOURCES
COMPETENCES
Exhibit 4.2 Resources, competences and competitive advantage
IDENTIFYING CORE
COMPETENCES (1)Competences may exist for:
• Reducing cost
– continual cost reduction
– economies of scale or scope
– control and co-ordination
– factor costs
• Identifying
– marketing skills and experience
– marketing culture
IDENTIFYING CORE
COMPETENCES (2)• Adding value
– customer culture
– value assurance
– value enhancement
– innovation
They may be core competences if they
support / enhance competitive advantage
and are difficult to imitate.Source: After Faulkner and Bowman: The Essence of Competitive Strategy: Prentice Hall, 1995
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SUSTAINABILITY OF
COMPETITIVE ADVANTAGEDepends on:
• Robustness of the competences
• Extent to which they can be imitated
• Extent to which they are embedded in
routines, tacit knowledge and culture
COMPETENCES AND CORE
COMPETENCES• Competences exist in activities
• Resources are deployed to create competences
• Core competences underpin competitive
advantage
– only some competences are core
– core varies with strategy
– core varies with time
– core can be exploited in several ways
• Mismatches resolved by
– changing core competences
– changing strategy
Identifying competences
Value chain analysis
Organisational
competences
Bases of competences
Cost
efficiencyValue
added
Managing
linkagesRobustness
Exhibit 4.3 Analysing competences and core competences
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Porter’s Generic Strategies
Porter then states there are three
generic strategies
1. Overall Cost Leadership
2. Differentiation
3. Focus
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Exhibit 6.4a The strategy clock: Bowman’s competitive strategy options
2
4
53
1
8
7
6
Differentiation
Focused
differentiationHybrid
Low
Price
‘No frills’
Strategies
destined for
ultimate failure
High
Low
Low High
PERCEIVED
ADDED
VALUE
PRICE
Position
1 ‘No frills’
2 Low price
3 Hybrid
4 Differentiation
a) Without price premium
b) With price premium
5 Focused differentiation
6 Increased price/standard value
7 Increased price/low value
8 Low value/standard price
Needs / risks
Likely to be segment specific
Risk of price war and low margins/need
to be cost leader
Low cost base and reinvestment in low
price and differentiation
Perceived added value by user, yielding
market share benefits
Perceived added value sufficient to bear
price premium
Perceived added value to a particular
segment, warranting price premium
Higher margins if competitors do not
follow/risk of losing market share
Only feasible in monopoly situation
Loss of market share
Bowman uses the dimension ‘Perceived Use Value’
Dif
fere
nti
ati
on
Lik
ely
fail
ure
Exhibit 6.4b The strategy clock: Bowman’s competitive strategy options
• Alaska Case
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Exhibit 11.1 A framework for managing strategic change
Types of strategic change
Diagnosing strategic
change needs
Managing strategic change
processes
Roles in the change process
Symbolic
processes
Communicating
change
Change tactics
Political
processes
Styles of
managing change
Structure and
control
Changing
routines
Exhibit 11.3 ‘Unfreezing’ and the management of change
Unfreezing
mechanisms
Experimentation
Organisational
anticipation
Organisational flux
Information building
Refreezing (the signalling
or confirmation of change)Sustaining change
• Questions and
challenges
• ‘Felt need’ for
change
• Competing
views of causes
of problems and
remedies
• Information
collection
• Political ‘testing’
of support
• New ideas
tested out
• Early signals made
sense of within
paradigm
• Political pressures not
to ‘rock the boat’
• Attempts to reconcile
competing views within
current paradigm
• Information made sense
of within paradigm
• Resistance to new
ideas
ORGANISATIONAL
‘SYMPTOMS’
PRESSURES FOR
CONFORMITY
STAGES
or
MANAGING EVERYDAY ASPECTS
OF STRATEGIC CHANGE
FORMAL SYSTEMS
Senior executives
are often over reliant on
structure and control
to effect change
MANAGING Means MANAGING
STRATEGY CHANGE
Managing everyday
aspects of
organisational life
is central to
effecting change
EVERYDAY
REALITIES
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Reading
• http://www.palgrave.com/business/bratton
andgold/docs/bgcha02.pdf
Strategic Role of HR Management
• Organisational human resources have grown as
a strategic emphasis because effective use of
people in the organisation can provide a
competitive advantage, both domestically and
abroad. The strategic role of HR management
emphasises that the people in an organisation
are valuable resources representing significant
organisational investments. For HR to play a
strategic role it must focus on the longer-term
implications of HR issues.
• Strategic human resource management may be regarded as an approach to the management of human resources that provides a strategic framework to support long-term business goals and outcomes.
• The approach is concerned with longer-term people issues and macro-concerns about structure, quality, culture, values, commitment and matching resources to future need.
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• The issue of strategic HRM initially came to prominence during around the early 1990s, at which time academics developed definitions of strategic HRM as:– The undertaking of all those activities affecting the
behaviour of individuals in their efforts to formulate and implement the strategic needs of business.• SCHULER, R.S. (1992) Strategic human resource management: linking people with the needs of the business. Organizational Dynamics. Vol 21, No
1. pp18-32.
– The pattern of planned human resource deployments and activities intended to enable the organisation to achieve its goals.• WRIGHT, P.M. and MCMAHAN, G.C. (1992) Theoretical perspectives for SHRM. Journal of Management. March. pp215-247.
• Strategic HRM can encompass a number
of individual HR strategies. For example,
there may be strategies:
• to deliver fair and equitable reward
• to improve employee performance
• to streamline organisational structure.
• However, in themselves these strategies are not
strategic HRM. Rather, strategic HRM is the
overall framework that determines the shape
and delivery of the individual strategies.
• Boxall and Purcell assert that strategic HRM is
concerned with explaining how HRM influences
organisational performance. They also argue
that strategy is not the same as strategic
planning because:• BOXALL, P. and PURCELL, J. (2003) Strategy and human resource management.
Basingstoke: Palgrave Macmillan
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• Strategic planning is the formal process that takes place, usually in larger organisations, defining how things will be done.
• Strategy, by contrast, exists in all organisations - even though it may not be written down and articulated - and defines the organisation’s behaviour and how it attempts to cope with its environment.
• A good business strategy, one that is likely
to succeed, is informed by people factors.
One of the driving factors behind the
evaluation and reporting of human capital
data (see below) is the need for better
information to feed into the process of
formulating business strategy.
• In the majority of organisations, people are now recognised as the biggest asset. Their knowledge, skills and abilities must be deployed to the maximum effect if the organisation is to create value.
• The intangible value of an organisation relating to the people it employs is gaining recognition among accountants and investors, and it is generally now accepted that this has implications for long-term sustained performance.
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Links with workforce planning
• Effective workforce planning is an essential element in the management of people to meet the future skills needs of any organisation to support its long-term business goals.
• There has recently been a renewed interest in this issue, largely driven by the realisation that in a fast-changing economy some degree of planning is vital to ensure the organisation is developing sufficient capacity to adapt to new trends and take advantage of emerging opportunities.
Strategic HRM and Human Capital
Management(HCM)
• Human capital may be defined as people
at work and their collective knowledge,
skills, abilities and capacity to develop and
innovate.
• Both strategic HRM and HCM, then, rest
on the assumption that people are treated
as assets rather than costs, and both also
focus on the importance of adopting an
integrated and strategic approach to
managing people - which is the concern of
all the stakeholders in an organisation, not
just the people management function.
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Strategic Role of HR Management
• Organisational human resources have grown as a strategic emphasis because effective use of people in the organisation can provide a competitive advantage, both domestically and abroad.
• The strategic role of HR management emphasizes that the people in an organisation are valuable resources representing significant organisational investments.
• For HR to play a strategic role it must focus on the longer-term implications of HR issues.
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MANAGING STRATEGIC CHANGE
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Alignment
• Perceptions of consistency, fit, links or
integration between the values,
behaviours or objectives of different
stakeholders, both internal and external
and with the organisation purpose.
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Shared purpose
• An organisation’s purpose is its identity,
the reason why it exists and the golden
thread to which its strategy should be
aligned. Shared purpose takes the
connection with the organisational purpose
one step further to be shared by all
employees and often beyond, to include
external stakeholders.
Leadership
• Senior leaders articulate a future-oriented
vision in an appropriate style that informs
decision-making and empowers
employees to achieve organisational
effectiveness. The ability to lead, however,
is not confined to senior leaders and can
be demonstrated at all levels.
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Locus of engagement
• People can be engaged at different levels
and with various aspects of the
organisation or the work and their
engagement can be transactional or
emotional in nature.
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Assessment and evaluation
• The processes that occur at different
organisational levels to gather qualitative
and quantitative information, to assess the
impact of actions and inform decision-
making.
Balancing short- and long-term
horizons
• Active awareness, management and communication of both known and unknown organisational issues and pressures affecting the short term (of less than a one-year timeframe) while maintaining an active focus on longer-term priorities (with longer than a one-year timeframe)
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Agility
• The ability to stay open to new directions
and be continually proactive, helping to
assess the limits or risks of existing
approaches and ensuring that leaders and
followers have an agileand change-ready
mindset to enable them, and ultimately the
organisation, to keep moving, changing,
adapting.
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Capability-building
• Equipping the people in the organisation
with the skills and knowledge they need to
meet both present and future challenges.
Also identifying existing necessary and
potential capabilities, ensuring they are
accessible across the organisation.
Capability-building applies not only to
individuals, but also to teams and
organisations.