Human resources activities can be the unifying force in helping an organizationmaster strategic change. Here is a model for forging the links between

business needs and HR practices.

Strategic HumanResources Management:

Linking the People with theStrategic Needs of the Business

RANDALL S. SCHULER

here really shouldn't be any mysteryJL about the word strategic in the phrase

strategic human resources management.According to Horace Parker, director of

strategic education at the Forest ProductsCompany, a 17,000-person division of Weyer-haeuser in Seattle, Washington, strategic hu-man resources management is about "gettingthe strategy of the business implemented ef-fectively." For BiU Reffett, senior vice presidentof personnel at the Grand Union, a 20,000-per-son supermarket operation on the East Coast,strategic human resources managementmeans "getting everybody from the top of thehuman organization to the bottom doingthings that make the business successful."

The viewpoints of the academics, al-though stated in slightly different terms, echothe same themes. A composite definition fromthis source might include the following:

Strategic human resources management islargely about integration and adaptation. Itsconcern is to ensure that: (1) human resources(HR) management is fully integrated with thestrategy and the strategic needs of the firm;(2) HR policies cohere both across policy areasand across hierarchies; and (3) HR practicesare adjusted, accepted, and used by line man-agers and employees as part of their everydaywork.

Together, these viewpoints suggest thatstrategic HR management has many differentcomponents, including policies, culture, val-ues, and practices. The various statementsalso imply what strategic human resourcesmanagement does, i.e., it links, it integrates,and it coheres across levels in organizations.Implidtly or explicitly, its purpose is to moreeffectively utilize human resources vis-a-visthe strategic needs of the organization.

The author wishes to thank Bill Reffett, Bill Maki, Horace Parker, Peter Wickens, John Fulkerson, JohnSiocum, Susan Jackson, and Elmer Burackfor sharing their insights and experiences.

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WhUe aU of this helps us identify the gen-eral purview of the subject, it does not pro-vide a framework for melding together theseparate components as defined by the prac-titioners and academics. The purpose of thisarticle is to provide a model for just such anintegration, forming a basis for fiarther re-search as weU as more effective practice.

THE 5-P MODEL

The 5-P Model of strategic human resourcesmanagement, shown in Exhibit 1, melds variousHR activities with strategic needs. Viewed thisway, many activities witliin the five "Vs" (HRPhilosophy, PoHdes, Programs, Practices, andProcesses) can be strategic. Thus, categorizingthese activities as strategic or not depends uponwhether they are systematically linked to the strate-gic needs of the business, not on whether they aredone in the long teim rather than short term orwhether they focus on senior managers ratherthan nonmanagerial employees.

One benefit of the 5-P Model is that itshows the interrelatedness of activities thatare often treated separately in the literature.This separate focus, perhaps necessary for re-search purposes, tends to understate the com-plexity of how HR activities influence indi-vidual and group behavior. Thus, by usingthe 5-P Model, we may gain greater under-standing of this complex interaction. Anotherbenefit of the 5-P Model is that it highlightsjust how significant the strategy-activity linkcan be, as the case liistories included in this ar-ticle illustrate.

Before we discuss the individual compo-nents of the 5-P Model, however, we need toconsider the element that sets it aU in motion.

DEFINING STR^VTEGIC NEEDS

Typically, organizations define (or redefine)their strategic business needs during times ofturbulence. As such, these needs reflect man-agement's overaU plan for survival, growth,adaptability, and profitability. Internal char-acteristics (e.g., culture, the nature of the busi-

Randall S. Schuler Is research professorat the Stern School of Business, New YorkUniversity. His interests include interna-tional human resources management,human resources strategy, entrepreneur-ship, and the interface of competitive strategyand human resources issues. He hasauthored or edited more than twenty-fivebooks, including International Dimensionsof Human Resource Management, Person-nel and Human Resource Management,Case Problems in Management andOrganizational Behavior, Human ResourceManagement in the Information Age,Managing Human Resources, and Managirig]Job Stress. In addition, he has contributedmore than twenty chapters to books ofcollected readings and published morethan eighty articles in professional journalsand academic proceedings. Currently, heis associate editor of the Journal of Busi-ness and Economic Studies and is on theeditorial boards of Human ResourcePlanning, Human Resource Management,Organization Science, The internationalJournal of Human Resource Management,Asia Pacific Human Resource Managemerit,and Journal of High Technology Manage-,ment Research. He is a fellow of theAmerican Psychological Association.

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EXHIBIT 1T H E 5 - P MODEL: LINKING STRATEGIC BUSINESS NEEDS & STRATEGIC HR MANAGEMENT ACTIVITIES

ORGANIZATIONAL STRATEGY

Initiates the process of identifyingstrategic business needs and

provides specific qualities to them

INTERNAL CHARAQTERISTICS i EXTERNAL CHARACTERISTICS

STRATEGIC BUSINESS NEEDS

Expressed in mission statements orvision statements and translated into

strategic business objectives

\

STRATEGIC HUMAN RESOURCES MANAGEMENT ACTIVITIES

Human Resources Philosophy "1Expressed in statements defin- Jing business values and culture J

Human Resources Policies ^Expressed as shared values \(guidelines) J

Human Resources Programs ^Articulated as Human Resources \strategies J

Human Resources Practices "iFor leadership, managerial, and Joperational roles J

Human Resources Processes ^For the formulation and implemen-Jtation of other activities I

Expresses how to treat andvalue people

Establishes guidelines foraction on people-related businessissues and HR programs

Coordinates efforts to facilitatechange to address major people-related business issues

Motivates needed role behaviors

Defines how these activities arecarried out

ness) as weU as external characteristics (e.g.,the state of the economy, critical success fac-tors in the industry) may well influence thedefirution of needs. But the biggest factor af-fecting strategic HR management is not a par-ticular characteristic so much as it is experi-ence with this mode of planning. HRmanagers who have never before been asked

to meld human resources activities withstrategic needs will find that the process takestime, persistence, and a detailed understand-ing of the needs that have been defined. Infact, linkages between human resources ac-tivities and business needs tend to be the ex-ception even during non-turbulent times.When such linkages do occur, they are usual-

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ly driven by the organization's efforts to for-mulate and implement a particular strategy.

To frigger specific actions, the businessneeds are generally translated into more ac-tionable statements, which might be calledstrategic business objectives. For example, atPepsi-Cola International, the strategic busi-ness objectives are:

• Committed bottling organization• Uncompromising dedication to quality• Development of talented people• Focus on growth• Quality business plansFor other organizations, these might be

called business vision statements. By callingthem strategic business objectives, Pepsi-Colabelieves that the statement conveys a morespecific action element, starting with an influ-ence on HR philosophy.

Human PLesources Philosophy

This is a statement of how the organization re-gards its human resources, what role the re-sources play in the overal success of the busi-ness, and how they are to be treated andmanaged. This statement is t3rpically very gen-eral, thus allowing interpretation at more spe-cific levels of action within an organization. Afirm's HR philosophy can be found in its state-ment of business values. For example, one of thefour value statements used at the Forest Prod-ucts Company (FPC) describes the compan/sphilosophy of what employees mean to thecompany and how they are to be managed:

• People are mature, responsible individ-uals who want to contribute.

• People hold themselves to high stan-dards of integrity and business etliics; theyare responsible stewards of the land and en-vironment.

• Our work environment is based on mu-tual respect, personal satisfaction, and growthopportunities for everyone.

• People recognize that teamwork, coop-eration, and a clean, safe, well-maintainedwork place are essential to fulfilling our cus-tomer commitments.

• Continuing education is an ongoingcommitment that involves everyone.

Instead of using the terms HR philosophyor HR values to describe how human re-sources are regarded, treated, and managed,some organizations use the term culture. Thatis, "We will create a culture that recognizesthe importance we place on people, and thatbuilds trust and cooperation." The difference,however, may be more semantic than real.For comparison, here is a statement of the cul-ture at Pepsi-Cola International (PCI):

LEADERSHIP IN PEOPLEWe will develop an excellent organi-zation focused on building the busi-ness by:• Empowering people to drive thebusiness from the closest point to themarket• Developing the right skills to be thebest in the business• Building career opportunities• Building teamwork:

o With bottlers to ensure that wemaintain strong partnershipso Among area, division, and head-quarters staff to ensure that we co-'ordinate functional strengths toproduce the best possible resultso Across markets to ensure that weshare the best practices throughoutthe enterprise

• Helping people succeed by build-'ing an environment with:

o High integrityo Strong and consistent valueso Continuous improvement

For both PCI and FPC, these descriptionsof HR philosophy are part of a larger state-ment of business (corporate) culture or businessvalues. These statements describe the impor-tance to the firm of other, broader aspects ofthe organization: customers, operations, mar-keting, products, and general patterns of or-ganization. These generally follow front astatement of the firm's vision or strategic busi-ness objectives, and vision and objectives fol-low from its strategy. For example, PCI's sfmt-egy is "Being No.l by Creating Value throughLeadership and Excellence." This vision in-cludes being:The fastest growing

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• The most committed to customerservice and attuned to customerneeds• The best operators• The best selling and marketingcompany• The best people-oriented company

And PCI's business values include:

LEADERSHIP IN OUR BRANDSWe wiU achieve brand superiority by:• Delivering the best products in themarketplace:

o The highest qualityo The best tastingo The most consistento Communicating these benefits ina high-impact, persuasive and con-sistent manner

LEADERSHIP IN MARKETINGWe wiU build on our brand platformsby:• Creating new brand, channel, andpackage segments that build the busi-ness:

o Faster off the marko Better ideaso Quicker to create and take ad-vantage of opportunities

LEADERSHIP IN OPERATIONSWe wiU build exceUence in our ownand bottler operations by:• Being the low-cost producer• Establishing and maintaining astrong focus on customer servicesand sales management:

'..' These cornerstones will make usthe best sales company

• Standardizing operating systems to:c Enhance our ability to providethe highest level of customerservicec Develop an ability to measureand manage key parameters of thebusiness in a consistent fashiono Provide a common set of prac-tices and disciplines for the orga-nization

Human Resources Policies

AU of these statements provide guidelines foraction on people-related business issues andfor the development of HR programs andpractices based on strategic needs. The termHR Policy, as used here, does not mean HRPolicy Manual. While a policy manual maycontain statements of general guidelines, em-ployees often perceive the manual as a 'rulebook" prescribing very specific actions per-mitted in very specific situations.

People-related business issues are thosethat affect the immediate and future successof the business and involve people. Flowingfrom the stratejjic business needs, they mayinclude the need to hire skilled workers, theneed to improve worker productivity, or theneed to reduce health care costs. Other peo-ple-related business issues include the need todevelop a top cadre of international man-agers, the need to have an adaptable andskilled workforce under changing environ-mental conditions, and the need to reduce ex-cessive turnover of younger, talented individ-uals who are blocked by the limited numberof traditional promotion opportunities.

One example, drawn from PCI, illustrateshow an fffi policy can link values with a par-ticular people-related business need. The val-ue, in tliis case, is stated in corporate literatureas "high standards of personal performance,"and the need was to develop communicationskiUs that would foster such performance in adecentralized international environment.

HR Policy at PCI. Communication in aninternational environment is difficult evenunder the best of circumstances, as anydiplomat knows. For PCI, the overlay of 150potentially different national cultures makesit likely that some \eve\ of misundersta ndingon almost any topic will occur on a regularbasis.

In the early 1980s, it was clear to almostevery manager in Pepsi-Cola Internationalthat expectations for individual performancestandards varied from country to country, forexample, in Eastern Europe it was acceptablefor a manager to meet his quota and take therest of the day off. In Germany, however.

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managers expected continuous improve-ment, a more demanding standard. Thus, thecompany needed a simple yet direct and cul-turally flexible tool to develop more consis-tency in managing performance. The answerturned out to be something called "instantfeedback"—a device that any sophisticatedhuman resources executive would havecalled too simple and unstructured to workglobally. Stated simply, the principle of in-stant feedback says that if you have a problemor an idea about any aspect of the business, orabout an individual's performance, then theorganization demands that you raise the issueappropriately and discuss it maturely. Atwenty-minute video tape was used to dra-matize and explain how instant feedbackcould be applied in an international environ-ment. Over time, instant feedback became theconnecting link in a chain of feedback systemsdesigned to improve and maintain high lev-els of personal performance.

Pepsi-Cola International is fundamental-ly a "feedback driven" organization. Thisfeedback is now mirrored in every tool usedto measure and improve performance, andthe language of feedback has become part ofthe everyday vocabulary. It is heard whensomeone with an iiisue or problem says to an-other individual, "Let me give you some in-stant feedback." V\ ith travel schedules, fre-quent phone contact, and constant time-zonepressures, instant feedback has become ashorthand for getting to the point and com-municating clearly.

But perhaps the most fascinating aspect ofthe concept is that it has worked in every na-tion, although with some cultural modifica-tions. Americans use it because it fits the fast-paced way we do business. In most Asiancultures, feedback may be tough and direct,but it should never be given in public. Also inAsian cultures, there may be a lot of head nod-ding during instant feedback, as if signifyingagreement. In reaUty, the nods mean only thatthe message has been heard. Some Latins willargue very strongty if they do not agree withthe feedback, and some nationalities (e.g., In-dian) willinsist on a great deal of specificity.Canadians will say that Americans are too di-

rect and some Europeans will say that Airieri-cans are too demanding and critical.

Instant feedback worls amid cultural di-versity because the focus is always on how toimprove business performance, not on cuUiir-al-specific behavior. Some would argue thatthis method is nothing more than effectivecommunication. This is only partially conect.It is communication directed at solving per-formance problems, and while total culturalneutrality is not possible, instant feedbacksays, in effect, "It doesn't really matter howyou do it, as long as you do it."

This instant feedback example also illus-trates the impact of organization structure onstrategic HR management. PCI refers to itsglobally dispersed organization structure as"mature decentralization" and considers thisstructure as a key to success in global mar-kets. Essentially, mature decentralizationmeans that as many decisions as possible bemade in the field, as close to the consumer aspossible.

Despite the emphasis on decentraliza-tion, PCI recognizes the need for operatingunits to be globally integrated and coopera-tive. The human resources challenge is to as-sure that a level of trust and open communi-cation prevails so that needed resources,regardless of their source, can be brought tobear on a given problem. Common businessobjectives and human resources practices arecertainly critical in this. But in the face of di-versity, global cooperation is also accom-plished by:

• Identifying values that support the ob-jectives of the business, the organizationalstructure, and the needs of the individual em-ployee, and

• Developing a set of shared under-standings concerning individual perform^ancethat flow from the values that shape the hu-man resources practices.

Thus, at PCI shared values (reflected inHR policies) result in part from the organiza-tion's structure that in turn results in partfrom the firm's strategic directions. For PCI,policies serve to integrate the company'sglobal operation by providiing a basis for thedevelopment of HR practices and programs.

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HR Programs

Shaped by HR policies, HR programs repre-sent coordinated HR efforts specifically in-tended to initiate, disseminate, and sustainstrategic organizational change efforts neces-sitated by the strategic business needs. Theseefforts may begin at the top of the organiza-tion and filter down, or they may begin else-where. They may even begin in two places atthe same time. For example. Ford's early-1980s strategic decision to emphasize qualityevolved at the top-management level and theplant level simultaneously, a serendipitousdevelopment.

HR programs can be initiated, dissemi-nated, and sustained for many types of strate-gic organizational change efforts. These ef-forts, however, have several elements incommon. First, they receive their impetusfrom the firm's strategic intentions and direc-tions. Second, they involve human resourcesmanagement issues, i.e., they represent majorpeople-related business issues that require amajor organizational change effort to address.They also share the reality of having strategicgoals against which program effectiveness canbe measured.

A number of generic questions help toidentify the fundamental issues for thesetypes of programs:

• What is the nature of the corporate cul-ture? Is it supportive of the business?

• Will the organization be able to copewith future challenges in its current form?

• What kind of people and how manywill be required?

• Are performance levels high enough tomeet demands for increased profitability, in-novation, higher productivity, better quality,and improved customer service?

• What is the level of commitment to thecompany?

• Are there any potential constraints suchas skill shortages or HR problems?

Programs formulated in answer to suchquestions are typically associated with theterm HR strategies. This makes sense because,after all, HR strategies are essentially plansand programs to address and solve funda-

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mental strategic issues related to human re-sources management. For this reason alone,HR strategies and HR programs are used in-terchangeably in the framework here. Again,an example from the Forest Products Compa-ny illustrates this concept.

In the early 1980s, FPC became aware of adecline in large-volume, commodity lumberbusinesses and growth among small mills thattailor-made products to meet customers' de-mands. The smaU, nonunion, owner-operat-ed, entrepreneurial mills were more market-oriented and operated at lower cost.

Deciding that going out of business wasnot an alternative, Charles Bingham, ForestProduct's CEO, suggested that somethingneeded to be done, preferably sooner thanlater. Together, the top dozen manage]s de-cided that a massive reorganization wascalled for, accompanied by a radical change instrategy. According to Bingham, the changein strategy went something like this:

Approximately 80 percent of our salesdollars in 1982 represented productssold as commodities. By 1995. . ,\vemust reverse the proportions.

The result was a decision to dramaticallydecentralize. The three operating units, ofwhich FPC was one, were given free reign onhow to conduct their businesses. In addition,Bingham and his top team split operationsinto 200 profit centers, each center largely re-sponsible for its own bottom line.

This restructuring proved to be only onestep in the right direction. The top team soonrealized that there would have to be a totaltransformation—the corporate culture,knowledge base, skill levels, style of leader-ship, and team orientation would all have tochange. And this change would have to im-pact everything, from the way business wasconducted at headquarters to how a salesper-son dealt with customers. To meet this mas-sive challenge, top management established aLeadership Institute. This institute, they felt,could become a powerful catalyst to acceler-ate the normal process of change.

The institute's first major objective was todevelop and implement a four-week HR pro-

gram for top executives, followed by a similarprogram for middle managers. A kejr elementin both programs was attention to new HRpractices, the fourth component of the Five-PModel.

Human Resources Practices

One useful way to approach this componentof HR strategy is from the fiamework of roles.Generally speaking, the roles that individualsassume in organizations fall into three cate-gories: leadership, managerial, and opera-tional. In each case, behaviors associated witha given role should support strategic needs.The following examples illustrate this concept.

Leadership Roles. These include establish-ing direction, aligning people, motivating andinspiring individuals, and causing dramaticand useful change. Within the FPC, leadershiproles are defined and measured with state-ments like these:

• Live by the basic values of the ForestProducts Company

• Demonstrate honesty and ethical be-havior in business transactions

• Show a high degree of personal in-tegrity in dealing with others

• Avoid wastinig time or resources• Strive for continuous improvement in

all you do• Demonstrate confidence in yourself as

a leaderBy the way, these statements are taken

from a more extensive questionnaire used inthe company's lecidership program. Man-agers complete the questionnaire (i.e., ratethemselves on each point) and ask their em-ployees and customers to provide similar as-sessments.

Managerial Roles. Another part of thequestionnaire contains statements on man-agerial roles. Basically, these are the tradition-al roles of planning, directing, delegating, or-ganizing and coordinating. Here are someexamples:

• Make sure that objectives are clearlyunderstood

• Level with people on what is not nego-tiable

• Give appropriate orientation to peopleon new assignments

• Deal effectively with performanceproblems

• Give people the information they needto be successful

• Give developmental performance feed-back in a timely manner

• Give people the freedom they need todo their jobs

• Give co-workers the opportunity to tryout their new ideas

• Encourage appropriate collaborationon work assignments

• Encourage people to participate whenappropriate

Again, managers use self-assessment andassessment from employees and peers togauge how well they are plapng the roles.

Operational Roles. These are the rolesneeded to deliver services or make products.In essence, they are "doing" roles, and assuch their content is far more specific thanfor the other roles. In a service setting, a rolestatement might be "greets customers asthey enter the sales area." In a manufacfiar-ing organization, a role might be "readsblueprints accuratel}^' or "performs solder-ing operations consistent with qUaUty stan-dards."

Roles Can Move. Although these threeroles are labeled leadership, managerial, andoperational, this doesn't necessarily meanthat only nonmanagers perform the opera-tional roles or only managers perform themanagerial and leadership roles. In the pro-cess of formulating and implementing newstrategic objectives, organizations typicWlyevaluate the "who does what" question^ Insome cases, this results in a shift of rolei re-sponsibilities. For example, at the Nissan I0o-tor Manufacturing Plant in the United Kipg-dom and the Honda Manufacturing Plant inMarysviJle, Ohio, an analysis of roles andi re-sponsibilities performed by first-level super-visors led to a more effective allocation ofwork. The main activities associated wthfirst-line supervision are identified in Exhibit2. Many of these activities, it turned out, coiildbe distributed to nonmanagedal employees.

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EXHIBIT 2MOST COMMON ROLES AND RESPONSIBILITIES OF SUPERVISORS

»Absence control• Employee appraisal• Bonus calculations• Deployment of staff• Discipline• Drawing up shift rotations' Employee welfare' Handling grievances• Health and safetyI Induction training

• Keeping personnel records• Keeping production records• Leading quality circles• Planning/aUocating work• Quality control• Recruitment• Team briefing• Team building• Communicating

Matching Practices and Roles. Once therole behaviors, whether leadership, manage-rial, or operational, are identified, HR prac-tices can be developed to cue and reinforcerole performance. While many HR practicesare used in organizations without regard toorganizational strategy, some practices tierole behavior directly to strategic needs. Con-sider, for example, a company that has de-fined a need to improve quality. HR practicesmight provide cues for group participation inproblem solving, training in statistical mea-sures of quality control, and the like.

HR Processes

This area deals with "how" all the other HRactivities are identified, formulated, and im-plemented. Thus, it is a significant strategichuman resources management activity. In theFPC situation, the process for establishing theLeadership Institute and the HR programswas accomplished through a great deal of in-teraction among the director of strategic edu-cation and the line managers. According toHorace Parker,

The trump card in closing the deal [toestablish the Leadership Institute andthe HR programs] was to involve theexecutives at various levels of the or-ganization in the planning stages.

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This process of involvement at the FPCwas not aimed solely at helping executivesand HR people understand the organization-al change strategy. It also provided opportu-nity for others to "buy into" the change pro-cess. Moreover, involvement is in itseifconsistent with the aims of the programs andthe strategic business needs. That is, the ex-ecutives' participation in change helps orientthese individuals toward giving their em-ployees more participation and involvementin devising tactics to meet strategic businessneeds. (Most quality improvement programs,for example, rely heavily on employee partic-ipation.) On the other hand, to the extent thatsuggestions, commitment, and executivewillingness to change are not necessary, theneed For a participatory HR process dimin-ishes. These situations are increasingly rare,however, as employees at aU levels continueto call for empowerment, ownership, andparticipation.

Thus, HR processes seem to vary along acontinuum of extensive participation by allemployees to no participation by any em-ployees. Two continuua could be used to dif-ferentiate between the formulation andimplementation stages: e.g., high participa-tion/involvement during formulation, butlow involvement at implementation. But itappears that there is a need for consistencyacross these two process dimensions.

This need for consistency becomes evi-

dent across all the strategic human resourcesmanagement activities. This need arises be-cause all such acti-'/ities influence individualbehavior. If they are not consistent with eachother, i.e., if they are not sending the samemessages about what is expected and re-warded, the organization is likely to be an ag-gregation of people pulling in different direc-tions. This is hardly a situation for thesuccessful implementation of strategic busi-ness needs.

Recognizing this need for consistency,then, is an important component. This need,along with an awareness of the other aspectsof strategic human resources management,translates into a greater need to be systemat-ic. Strategic human resources marvagementrequires consistency and a systematic orien-tation. An example might illustrate howthese two needs actually get played out.

PUTTING IT ALL TOGETHER:THE CASE OF GIRAND UNION

The Grand Union is a large retail grocery op-eration with the majority of stores located inwell-established neighborhoods. In the mid-1980s, a new phenomenon appeared in thetraditional retail grocery business: the adventof the super store, the smallest of which wasabout twice the siz;e of Grand Union's largeststore.

The Grand Union had always defined it-self as a grocery store—a traditional high-vol-ume, low-margin, limited-selection, discount-driven, 40,000 square foot grocery store. Fiveyears ago, the top management team decidedthat competing with the new 100,000 squarefoot stores (Wal-Mart's largest H}^ermart is260,000 square feet) was not a viable mer-chandising strategy. A directly competitivestrategy would have called for moving storesfrom their current space-bound locations anduprooting relationships with customers, sup-pliers, and corrmiunities.

New Strategic Business Needs

The top managers found themselves faced

with the need to redefine what it meant forGrand Union to be a grocery store. Taking intoaccount both competitive pressures and newcustomer habits and preferences, the team, sawthe need for a basic change in direction— itroma commodity, undifferentiated business to ahigh-quality, customer-driven business.

From an individual store perspective, thismeant eliminating many of the current itemsto make room for more national brands andmerchandise with higher margins. A majorobjective was to sell the best quality products,which meant having a deli section (witti thesmells of barbecued chicken), an expandedfresh fruit section (more tropical fruits), a va-riety of small, ethnic food booths (for eatiiig inor taking home), and a pastry shop.

The culture of the firm changed to em-phasize listening to and serving customers.Store managers and top management startedto provide the leadership John Kotter talksabout, i.e., articulating and providing excite-ment, showing confidence in the firm's abili-ty to successfuEy change in the new, rhoreuncertain environment, and setting objectivesthat would relate to the new way of doingbusiness.

Linking HR withthe Strategic Business Needs

Under the guidance of Senior Vice President ofHuman Resources Bill Reffett, the firm devel-oped an HR philosophy that said the employ-ee was a valuable, long-term source of com-petitive advantage, and that all efforts wouldbe made to provide exciting jobs, promotionopportunities, and retraining as needed. Thefirm described this philosophy as devejlop-mental. It was apparent that role behaviors foraU employees would need to change to matchthe needs of the new business.

While the physical size of the stores re-mained the same, employees were added tostaff the new sections. It was importarit tokeep these employees longer so that theycould get to know the customer and the store.Consistent with the new business, the triadi-tional command-and-control relationshipsacross all levels were modified to accommo-

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EXHIBIT 3ORGANIZATIONAL CHARACTERISTICS OF A CUSTOMER-DRIVEN SERVICE ORGANIZATION

• Just-in-time inventory• Just-in-time working commitment• Team-oriented• Multi-skilled— technical, process, interpersonal• Flexibility• Trust, harmonious employee relations• Communications• Egalitariardsm• Distributed leadership

• Responsibility for customers• Standard operating procedures• Continuous improvement• No-fault policies• Job grade reduction• Rewards for small improvements/suggestions• Supplier and customer involvement• Site visits, comparisons, benchmarks• Customer knowledge

date a more self-directed, self-managed ap-proach. Similarly, an individual orientationgave way to a team orientation.

Major effort was directed toward identi-fying new role behaviors for supervisors andother staff. This required the intense involve-ment of the employees, with guidance pro-vided by the senior vice president of humanresources. Together, they identified neededsupervisory (first-level managerial) and staffrole behaviors based upon what they saw ascharacterizing a customer-driven grocerystore. Then they compared these with currentrole behavior.

This resulted in a critical redistribution ofsupervisory role behaviors. By recognizingthe distinction, between supervisors as an em-ployee group and supervisory activities (respon-sibilitie.s associated with the supervisory role)it became easier to define role activities inways that would enhance the level of cus-tomer service.

The nonsupervisory employees also ad-dressed the question, "What does this newbusiness orientation mean for us at the store?"Because the focus was on the customer, theyfirst asked, "How do we currently interactwith customers?" This resulted in a before-and-after analysis of customer relationships.The "before" analysis produced in the follow-ing list:

• We do not know customer desires• We make limited use of customers• We are space-driven, not customer-

driven

• We have traditional departments, lowmargins, high turnover rates

• We feel no ownership of service• We iack management skillsTn contrast, the employees felt that the

new direction would require management toinitiate new practices:

• Holding focus groups with customers• Being customer-driven• Including service as part of the product• Adding high-margin departments• Having stores coordinate efforts; ex-

changing best practices• Expanding management skillsIn addition, these employees asked,

"From the broader, store viewpoint, what arethe characteristics that reflect a solutions-ori-ented, CT.istomer-driven service operation?"This question resulted in the list of character-istics for the store shown in Exhibit 3.

Based upon these characteristics, the staffanalyzed the needed role behaviors, vis-a-visthe customer, and concluded that substantialchanges were in order. The before-and-afterrole behaviors for the major job categories arelisted in Exhibit 4.

In the final sfage, fhe employees identi-fied the HR practices that had to be formulat-ed to match the business, based upon the rolebehaviors needed from the employees, espe-cially tViose in direct contact with the cus-tomers. The analysis and formulation resultedin several HR practices that represented sig-nificant change (see Exhibit 5). While thesechanges in HR practices were prompted by

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EXHIBIT 4CUSTOMER-DRIVEN EMPLOYEE BEHAVIORS AT GRAND UNION

Employees

BAG PACKERS

Behaviors Before the Change Behaviors After the Change

Ignore customers Greet customersLack of packing standards Respond to customers

Ask for customers'preference

CASHIERS Ignore customersLack of eye contact

Greet customersRespond to customersAssist customersSpeak clearlyCall customers by name

SHELF STOCKERS Ignore customersDon't know store

Respond to customersHelp customers with

correct production/locationinformation

Knowledgeable aboutproduct location

DEPARTMENT WORKERS Ignore customersLimited Knowledge

Respond to customersKnow productsKnow store

DEPARTMENT MANAGERS Ignore customersIgnore workers

Respond to customersReward employees for

responding to customers

STORE MANAGERS Ignore customersStay in booth

Respond to customersReward employees for

serviceAppraise employees on

customer service

what the; employees thought was necessaryfor the bixsiness, they were driveri, in largepartj, by what employees thought would en-able: thern to perform as needed by the cus-tomer.

ROLE OF THE DEPARTMENT

As the Grand Union example suggests, theHR department is in an ideal position to takecharge of the 5-P's of strategic human re-sourtes nianagement. In general it can:

• Assist in the formulation of the firm'sstrategic direction and needs

• Identify the HR philosophies or cultureconsistent with the business needs

• Develop and implement HR policies,programs, and practices consistent with theHR culture

• Ensure that the HR process is conisis-tent with the other HR activities

If, as in the case of the Grand Uniott orthe Forest Products Company, the organka-tion must change in response to strat(^gicneeds, the HR department can play a criticalrole as change agent. In this process, the |HRdepartment can establish an HR initiative, li.e.,a specific HR program to serve as catalyst! forchange. The initiative can involve:

• Establishing a senior HR council ^ndexecutive operating committee

•Mounting major activities to rally! dllemployees to the change

EXHIBIT 5HUMAN RESOURCES MANAGEMENT PRACTICES AFFECTED BY THE CHANGE AT GRAND UNION

• Human Resource PlanningLonger term focusTie to the needs of the business

• StaffingMore socializationMore opportunities

• Training and DevelopmentMore skiU trainingCustomer service training

• Performance AppraisalCustomer service measuresFeedback

• CompensationRelate to performance appraisalAwards and celebration

• Developing a leadership program toensure that the change clearly includes topmanagement

In the development of the senior man-agement program (and further programs thatfacilitate the change throughout the organi-zation), the director of executive develop-ment or strategic education can often take thelead. This individual knows the top team per-haps better than any other HR person. Thisbeing the case, this person can then be in a po-sition to orchestrate the entire change pro-cess—and thus the entire strategic human re-sources management function.

Within the HR department there can befurther division of roles and responsibilities.This can be done by distinguishing betweenthe corporate HR department and the busi-ness-unit or division HR departments. Takinga very proactive stance, the corporate HR de-partment can:

• Assist senior managers in formulatingchange• Become a model of change• Develop and guide divisional HR• Change organizational structure• Serve as clearing house• Serve as trainer for other HR personnel• Do benchmark analysis• Develop HRIS capability• Audit competenciesHR activities at the divisional level can

then reflect corporate activities. In situationswhere the corporate HR department abdi-

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cates to the divisions, or where the divisionssimply seize the initiative, they can essential-ly perform the roles just ascribed to the cor-porate HR department. The Grand Unionand FPC case studies offer a flavor of both ofthese situations.

The fact is that while there may be varia-tions in how the roles are shared between cor-porate and divisional HR staffs, there shouldbe little variation in whether these roles areperformed. Indeed, in the extreme case, manyof these roles could be performed by the linemanagers with or without the assistance ofothers.

IMPLICATIONS AND SUMMARY

The concept presented here proposes that theframework of strategic human resourcesmanagement is made up of all activities af-fecting the behavior of individuals in their ef-forts to formulate and implement the strate-gic needs of the business. This rather broadconcept carries several significant implica-tions.

First, successful efforts at strategic HRmanagement begin with the identification ofstrategic business needs. If these needs areimportant to the success of the business, andif strategic human resources management canbe instrumental in meeting these needs, thenthese needs should be systematically anal-ysed for their impact on human resources

management activities, including HR philoso-phy, HR policies, HR programs, HR practices,and HR processes.

Anottier implication is that, because allemployees are affected by strategic human re-sources management, participatory processesmay help cement the link between strategyand HR practices. At both Grand Union andFPC, employees helped to analyze and definethe new roles they would play vis-a-vis thestrategic business needs. HR managementthen developed practices to cue and reinforcerole behaviors. VVhile a participator}^ processmay not always be necessary, there is mount-ing evidence that employees respond favor-ably to it when it is an option.

A third implication is that strategic hu-man resoiirces management depends upon asystematic and analytical mindset. At GrandUnion, Forest Products, and Pepsi-Cola Inter-national, the executives formulated and im-plemented HR actii/ities in a systematic andanalytical manner, first identifying strategicneeds and then designing HR activities withconsistent cues and reinforcements. While theeffectiveness of this approach has yet to beformally measured, indicators such as marketshare, profitability, and productivity' suggesta fair amount of success. A fourth implicationis that HR departments have a significantopportunity to impact their organizations'

efforts to successfully launch strategicinitiatives. This argues strongly for HR's par-ticipation in the formulation of strategy-—iffor no other reason than to get a head start onthe systematic analysis of what the strategicneeds of the business are vis-a-vis HR.

A final implication releites to the formalstudy of strategic human resources manage-ment. As practitioners do their work, HR aca-demics have a significant opportunity to ob-serve organizations in transition, a real-lifelaboratory for learning. This paper is evidemceof the t5^e of insight such observation can pro-vide. Hopefully it will also stiimulate further re-search, particularly in the ai-eas of identifyingemployee role behaviors and linking HR prac-tices to them, and in mapping the patterns ofconsistency within and across the strategic hu-man resources management activities.

If you wish to make photocopies orobtain reprints of this or other

articles in ORGANIZATIONAL DYNAMICS,please refer to the special reprintservice instructions on page 80.

SELECTED BIBLIOGRAPHY

Several individuals have written articles rele-vant to this topic and their ideas have been in-corporated here. They include: F. K. Foulkes,Strategic tinman Resource Management (Engle-wood Cliffs, NJ: Prentice-Hall, 1986); J. Butler, G.R. Ferris, and N. K. Napier, Strategy and tiumanResource Management (Cincinnati: South-West-ern, 1990); and R. Cooke and M. Armstrong,

"The Search for Strategic HRM," Personnel Man-agement, December 1990, pp. 30-33.

For an insightful discussion of the impactof strategic intent and its implications forstrategic human resource management, see G.Hamel and C. K. Prahalad, "Strategic Intent,"tiarvard Business Review, May-June 1989, pp. 63-76; and C. K. Prahalad and G. Hamel, "The

Core Competence of the Corporation," HarvardBusiness Review, May-June 1990, pp. 79-91.

For how strategy and strategic directionsdetermine various aspects of human resourcemanagement, see D. C. Hambrick and C. C.Snow, "Strategic Reward Systems" in C. C.Snow, ed.. Strategy, Organization Design and Hu-man Resource Management (Greenwich, CT: JAIPress, 1989); E. E. Lawler IE, "The Strategic De-sign of Reward Systems," in R. S. Schuler and S.A. Youngblood, eds.. Readings in Personnel andHuman Resource Management, 2d ed. (St. Paul,MN: West Publishing, 1984); and J. J. Sherwood,"Creating Work Cultures with Competitive Ad-vantage," Organizational Dynamics, Winter 1988,pp. 5-27.

Comments about Pepsi-Cola Intemationalare based upon numerous discussions with J.Fulkerson, vice president of HR for PCI. Some ofthese comments are expanded upon in J. Fulk-erson and R. S. Schuler, "Managing WorldwideDiversity at Pepsi-Cola Intemational," in S. E.Jackson, ed.. Working Through Diversity: HumanResources Initiatives (New York: Guilford Publi-cations, 1992). For further descriptions of inter-national HR issues, see D. Lei and J. W. Slocum,Jr., "Global Strategic Alliances: Payoffs and Pit-falls," Organizational Dynamics, Winter 1991, pp.44-62..

For furfher examples of people-related busi-ness issues, see R. S. Schuler and J. W. Walker,"Human Resources Strategy: Focusing on Issuesand Actions," Organizational Dynamics, Summer1990, pp. 5-19.

Descriptions of the HR activities at the For-est Products Company are from conversationswith Horace Parker, director of strategic educa-

tion, and Bill Maki, director of human resources,Weyerhaeuser Company, July 1990; and from J.F. Bolt, Executive Development: A Strategy for Com-petitiveness (New York: Harper & Row, 1989),pp. 139-158. Descriptions of leadership andmanagerial roles are also in J. Kotter, A Force forChange: How Leadership Differs from Management(New York: The Free Press, 1990). Com ments onNissan and Honda from interviews with PeterWickens, director of personnel and informationsystems, Nissan UK, February 1991; and frominterviews reported in R. 5. Schulei and S. E.Jackson, "Linking Competitive Strategies andHuman Resource Management .Practices,"Academy of Management Executive, August 1987,,pp. 207-219.

The material describing the Grand Union isbased on interviews with Bill Reffett, seniorvice-president of human resources, duringMarch 1989 and July 1991. The material hererefers only to HR management-related changes;changes, of course, were also made in purcVias-ing, merchandising, and operations. For moredetail on using human resource manageirientservice organizations, see D. E. Bowen, R. B.Chase, and I. G. Cummings & Associates, Ser-vice Management Effc£tiveness (San Francisco, CA:Jossey-Bass, 1990); and S. W. Brown, E.Guinmesson, B. Edvardsson, and B. Gustavsson,Service Quality (Lexington, MA: LexingtonBooks, 1991).

A final, but important note: .A.s times changeso do companies and individuals. The ForestProducts Company was recently divided intotwo equal-si:«ed groups, Wood Products andTimbcrland. Bill Reffett is now with Korri FerryInternationai.

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