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Strategic HRM

(An Overview)

Arif Hartono, SE., MHRM. PhD.

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Strategic Management (review)


A process or approach to addressing the competitive challenges faced by an organisation. organisation. It can be thought of as managing the pattern or plan that integrates an organisations major goals, policies and action sequences into a cohesive whole (Quinn, 1980). Strategic Management Process Determining what needs to be done to achieve corporate objectives, often over 3 - 5 years Examining organization and competitive environment Establishing optimal fit between organization and its environment Reviewing and revising strategic plan
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Models of Strategy (review) Industrial Organization (I/O) Model


External environment is primary determinant of organizational strategy rather than internal decisions of managers Environment presents threats and opportunities All competing organizations control or have equal access to resources Resources are highly mobile between firms Organizational success is achieved by: Offering goods and services at lower costs than competitors Differentiating products to bring premium prices
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Models of Strategy review)


Resource-Based View (RBV) ResourceAn organizations resources and capabilities, not external environmental conditions, should be basis for strategic decisions Competitive advantage is gained through acquisition and value of organizational resources Organizations can identify, locate and acquire key valuable resources Resources are not highly mobile across organizations, and once acquired are retained Valuable resources are costly to imitate and non-substitutable non14

Contrasting the Two Approaches Research provides support for both positions What drives strategy?
I/O: External considerations RBV: Internal considerations

I/O: Strategy drives resource acquisition RBV: Strategy determined by resources

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Process of Strategic Management (review)

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Level of Strategy
Corporate Strategy

Business Unit Strategy

HR Strategy Marketing Strategy Financial Strategy Production Strategy .........................


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Most Popular Corporate & Business Unit Strategies


Corporate strategies: Growth Stability Turnaround or Retrenchment Business unit strategies: Porters Model: Cost leadership Differentiation Focus Miles & Snows Model Defender Prospector Analyzer
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Paradigm shift of HRM


There are many different perspectives, even debatable, among HRM scholars in describing the route of HRM movement from the past to present, and to the future. However, it can be said that the main discussions lie on the transition from Personnel Management to HRM. More specifically, then followed by HRM. Strategic HRM era.

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Paradigm shift of HRM (contd.)


Table 2.3 Stereotypes of personal management and human resource management

Personnel Management

HRM

Time and planning perspective Psychological contract Control system Employee relation perspective Preferred structures/systems Roles Evaluation criteria
Source: Guest, 1987: 507.

Short-term, reactive, adhoc, marginal Compliance External control Pluralist, collective, low trust Bureaucratic/mechanistic, centralist, formal defined roles Specialist/professional Cost-minimization

Long-term, proactive, strategic, integrated Commitment Self control Unitarist, individual, high trust Organic, devolved, flexible roles Largely integrated into line management Maximum utilization (human asset accounting)
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HR Management Roles
Administrative Role
Processing and record keeping

Operational and Employee Advocate Role


Identify and implement programs and policies Champion for employee issues and concerns

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HR Management Roles
Strategic Role
Having a seat at the table by contributing to organizational results and success. HR becomes a strategic business partner by:
Focusing on developing HR programs that enhance organizational performance. Involving HR in strategic planning at the onset. Participating in decision making on mergers, acquisitions, and downsizing. Redesigning organizations and work processes Accounting and documenting the financial results of HR activities.
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Changing Roles of HR Management

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Administrative vs. Strategic HR


Administrative HR Internal focus on day-to-day issues such day-toas handling personnel requisitions, payroll, employee records, heath insurance sign-up, employee signorientation, planning recognition events, benefits administration, etc. Focus on doing things right (efficiency) Strategic HR Takes care of the details (they are important and have to be done) but understands that the organizations goals can only be accomplished if the right people with the right skills are doing the right things Focus on doing the right things (effectiveness)

Maintains the status quo by making only slight refinements for efficiency or costcostsavings Maintains a reactive posture through offering services and support in response to events

Looks for and adopts broader innovations and programs

Proactively anticipates events in order to prevent problems or 14 minimize their negative impact
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HRM Roles (Ulrichs Model)


Strategic Partner
Acive role in setting strategic Design & implement HR programs that align/fit with the business vision

Change Agent
Effecting transformation & change Create cross-functional collaboration & organization crossreadiness to accomplish change initiatives & performance results

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HRM Roles (Ulrichs Model)


Administrative Expert
Process optimization & efficiency Continue improvement of the HR processes to optimize operational efficiencies & employee self ervice

Employee Champion
Motivated & competent personnel Develop employee competencies with continuous skills & knowledge management; foster achievement/ performance recognition programs

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HRM Roles (Ulrichs Model)


Strategic Partner Change Agent

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Administrative Expert

Employee Advocate
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Strategic HRM
Strategic Human Resource Management
A pattern of planned human resource deployments and activities intended to enable an organisation to achieve its goals. The linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. Involves aligning initiatives involving how people are managed with organizational mission and objectives Formulating and executing HR systemsHR policies and systems activities activitiesthat produce the employee competencies and behaviors the company needs to achieve its strategic aims.
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Nature of Strategy and HR Management


Strategy Strategic HR Management

The proposition an organization follows for how to compete successfully and thereby survive and grow.

The use of employees to gain or keep a competitive advantage, resulting in greater organizational effectiveness.

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Corporate HR Strategies

Source: 2003, Gary Dessler, Ph.D.

Figure 36
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Translating Strategy into HR Policy and Practice


Basic Model of How to Align HR Strategy and Actions with Business Strategy
Source: Adapted from Garrett Walker and J. Randal MacDonald, Designing and Implementing an HR Scorecard, Human Resources Management 40, no. 4 (2001), p. 370.

Figure 39
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Foundation of Strategic HRM

The Harvard model of HRM The Michigan model of HRM

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The Matching/ Michigans Model of HRM

Source: Devanna et al. (1984); Tichy et al. (1982: 48)

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Why Strategic HRM?


Responsiveness to competition and globalisation Alignment to business strategy Quality HRM practices Management of change

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Approach to HRM
1. Best Practice 2. Best Fit 3. Configurational The basic idea of Best Practise is universalism; there is a general pattern that can be adopted for managing human resource.

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Approach to HRM (contd.)


The best fit school argues that HR strategy will be more effective when it is appropriately integrated with its surrounding context, especially the business strategy. It means that different business strategies will need different HR strategies. The core assumption of the configurational model is that HR strategy can be implemented successfully not merely rely on business strategy. there are particular combinations sets of mutually reinforcing factors that have greater effect than the sum of individual effects.
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Linkages between HR and organisational strategies

Accommodative follow the lead from the top Interactive two-way interactions twoFully integrated intimate associations Dependent on HR structure i.e.
No HR function Line managers alone Line managers, with centralised HR support Centralis Centralised functional generalists Centralised functional specialists Decentralised functional generalists or specialists Contract specialists

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Considerations in HR Strategy Development


External environment (political, economic, social) Internal environment Structure Numerical flexibility (different numbers at different times) Functional flexibility (multi-skilling) (multi Distancing (use of subcontractors) Pay flexibility Culture includes philosophies, values, beliefs, work systems and practices, expectations and limitations on employee behaviour

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Example HR Strategy
Offer wage rates that are equitable and non-discriminatory nonin every location; teach job skills; reward both individual and team performance; create career opportunities; have flexible work hours for student employees. Hire restaurant crews with good work habits and courteous attitudes and train them to act in ways that will impress customers; promote promising employees quickly. Provide proper training on delivering customer satisfaction and running a fast-food business to franchisees, fastrestaurant managers, and assistant managers. Promote a global mindset by aggressively transferring best practices and new ideas developed in outlets in one part of the world to outlets in other parts of the world.
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HR Policies
Policy-making is about strategy execution Policy Benefits of policies:
Congruency (with objectives) Stability (clear picture of what is required) Match (work environment) Appropriateness (fit with culture) Relationship building (needed for new strategies to be well received)

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A model of the strategic HRM process


Strategy formulation Strategy implementation

External analysis Mission Goals Strategic choice Internal analysis HR needs

HR practices Firm performance


Strategy evaluation
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HR capability

HR actions

Emergent strategies

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Environment of Human Resource Management

Unions
Legal Considerations

EXTERNAL ENVIRONMENT INTERNAL ENVIRONMENT

Society

Technology

Marketing

Operations
Unanticipated Events

Human Resource 1 Management


Economy

Finance

Safety and Health

Other Functional Areas

Shareholders

Customers

Competition

Labor Market

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Strategic HRM fact or fiction?

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Strategic HRM Process

Exhibit 9.1

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Where does HRM fit?

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Effective HR Strategy Formulation and Implementation


Organizational Strategies
Fit
Consistency

Consistency Fit

Environment

Consistency

HR Strategies

Improved Firm Performance

Fit Consistency

Fit

Organizational Characteristics

Individual Capabilities
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How HR Fits

HR Tactic

HR Strategy

Firm Strategy

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Organizational Life-Cycle Stages and HR Activities


LIFECYCLE STAGE Introduction TRAINING AND DEVELOPMEN T Define future skill requirements and begin establishing career ladders. Mold effective management team through management development and organizational development. LABOR / EMPLOYEE RELATIONS Set basic employeerelations philosophy of organization.

STAFFING Attract best technical and professional talent.

COMPENSATION Meet or exceed labor market rates to attract needed talent.

Growth

Recruit adequate numbers and mix of qualifies workers. Plan management succession. Mange rapid internal labor market movements

Meet external market but consider internal equity effects. Establish formal compensation structures.

Maintain labor peace, employee motivation, and morale.

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Organizational Life-Cycle Stages and HR Activities (contd)


LIFE-CYCLE STAGE TRAINING AND DEVELOPMENT LABOR / EMPLOYEE RELATIONS Control labor costs and maintain labor peace. Improve productivity.

STAFFING

COMPENSATION

Maturity

Encourage sufficient turnover to minimize layoffs and provide new openings. Encourage mobility as reorganizations shift jobs around. Plan and implement workforce reductions and reallocations, downsizing and outplacement may occur during this stage.

Control compensation costs.

Maintain flexibility and skills of an aging workforce.

Decline

Implement tighter cost control.

Implement retraining and career consulting services.

Improve productivity and achieve flexibility in work rules. Negotiate job security and employmentadjustment policies
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