Organization and Human Resources

Management
Week 9

STRATEGIC HUMAN RESOURCE MANAGEMENT

PSMI Laboratory Ó 2021
Industrial Engineering Department - ITS
 Alignment Framework
Business
Strategy
“HR systems and the organization
structure should be managed in a
way that is congruent with
organizational strategy (hence the
name ‘matching model)”
(Fombrun et al, 1984)
Human
Organization Resources
Structure Management

2 2
Outline

1. Definition and Aims of Strategic Human Resource Management

(HRM)
2. Approaches to Strategic HRM
3. Strategic HRM Model

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Definition and Aims
Strategic Human Resource Management (HRM)
1

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What is Strategic HRM?

• Strategic HRM defines the organization’s intentions and plans on how

its business goals should be achieved through people.
• Strategic HRM is a process that involves the use of overarching
approaches to the development of HR strategies, which are
integrated vertically with the business strategy and horizontally with
organization structure.

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What is Strategic HRM? Con’t

• It is based on three propositions:

üHuman capital is a major source of competitive advantage.
üIt is people who implement the strategic plan.
üA systematic approach should be adopted to define where the organization
wants to go and how it should get there.

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Aims of Strategic HRM

• To generate strategic capability by ensuring that the organization has

the skilled, committed and well-motivated employees.
• To provide a sense of direction in an often-turbulent environment so
that the needs of the organization and its employees can be met by
the development and implementation of coherent and practical HR
policies and programs.

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Approaches
Strategic Human Resource Management (HRM)
2

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Approaches to Strategic HRM

1. The resource-based approach

2. Strategic fit
3. High-performance management
4. High-commitment management
5. High-involvement management
6. The best-fit approach

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The Resource-Based Approach 1

• A resource-based approach will address methods of increasing the

firm’s strategic capability by the development of managers and other
staff who can think and plan strategically and who understand the key
strategic issues.
• The resource-based approach is founded on the belief that
competitive advantage is obtained if a firm can obtain and develop
human resources that enable it to learn faster and apply its learning
more effectively than its rivals (Hamel and Prahalad, 1989).

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The Resource-based Approach Con’t 1

• The strategic goal will be to ‘create firms which are more intelligent
and flexible than their competitors’ (Boxall, 1996) by hiring and
developing more talented staff and by extending their skills base.
• Resource-based strategy is therefore concerned with the
enhancement of the human or intellectual capital of the firm.

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Strategic Fit 2

• The HR strategy should be aligned to the business strategy (vertical

fit).
• HR strategy should be an integral part of the business strategy,
contributing to the business planning process as it happens.
• Vertical integration is necessary to provide congruence between
business and human resource strategy so that the latter supports the
accomplishment of the former and helps to define it.

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Strategic Fit Con’t 2

• Horizontal integration with other aspects of the HR strategy is

required so that its different elements fit together.
• The aim is to achieve a coherent approach to managing people in
which the various practices are mutually supportive.

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Strategic Fit Con’t – Vertical Fit 2

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Strategic Fit Con’t – Horizontal Fit 2

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High-Performance Management 2

• High-performance management (called in the United States high-

performance work systems or practices) aims to make an impact on
the performance of the firm through its people in such areas as
productivity, quality, levels of customer service, growth, profits and,
ultimately, the delivery of increased shareholder value.
• High-performance management practices include rigorous
recruitment and selection procedures, extensive and relevant training
and management development activities, incentive pay systems and
performance management processes.

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High-Performance Management Con’t 3

• The characteristics of a high-performance work system are:

ücareful and extensive systems for recruitment, selection and training
üformal systems for sharing information with the individuals who work in the
organization
üclear job design
ühigh-level participation processes
ümonitoring of attitudes
üperformance appraisals
üproperly functioning grievance procedures
üpromotion and compensation schemes that provide for the recognition and
financial rewarding of the high-performing members of the workforce

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High-Commitment Management 4

• One of the defining characteristics of HRM is its emphasis on the

importance of enhancing mutual commitment (Walton, 1985)
• High-commitment management is aimed at eliciting a commitment so
that behavior is primarily self-regulated rather than controlled by
sanctions and pressures external to the individual, and relations
within the organization are based on high levels of trust.

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High-Involvement Management 5

• This approach involves treating employees as partners in the

enterprise whose interests are respected and who have a voice on
matters that concern them.
• It is concerned with communication and involvement.
• The aim is to create a climate in which a continuing dialogue between
managers and the members of their teams takes place in order to
define expectations and share information on the organization’s
mission, values and objectives.

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The Best Fit Approach 6

• The best-fit approach emphasizes that HR strategies should be

contingent on the context, circumstances of the organization and its
type.
• ‘Best fit’ can be perceived in terms of vertical integration or alignment
between the organization’s business strategies and HR strategies.
• There is a choice of models: (a) life cycle, (b) competitive strategy, and
(c) strategic configuration.

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The Best Fit Approach: The Life Cycle Model 7
a

• The life cycle model is based on the theory that the development of a
firm takes place in four stages: start-up, growth, maturity and decline.
• The basic premise:
üHuman resource management’s effectiveness depends on its fit with the
organization’s stage of development
üAs the organization grows and develops, human resource management
programs, practices and procedures must change to meet its needs.

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The Best Fit Approach: The Life Cycle Model Cont’ 7
a

• A start-up phase:
üManagement of the HR function may be loose and informal; it may even be
performed by the founder/owner.

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The Best Fit Approach: The Life Cycle Model Cont’ 7
a

• The growth phase:

üAs the organization experiences high growth in sales, products and markets,
the demand for new employees increases.
üThis demand is beyond the capacity of the founder and line managers to
handle.
üThe organization typically responds to this pressure by adding more formal
structure and functional specialists, including HR.
üThe role of HR in this high-growth stage is to attract the right kinds and
numbers of people, but it is also the time for innovation and the development
of talent management, performance management, learning and development
and reward policies and practices.

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The Best Fit Approach: The Life Cycle Model Cont’ 7
a

• The mature phase:

üAs the organization matures, HR may become less innovative and more
inclined to consolidate and develop existing practices rather than create new
ones.
• The decline phase:
üHR may not have the scope to engage so wholeheartedly with the programs
operating in maturity.
üHR might well be involved in the difficult decisions that follow downsizing and
being taken over.

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The Best Fit Approach:
Best Fit and Competitive Strategies
7
b

• Schuler and Jackson (1987):

‘effectiveness can be increased
by systematically melding human
resource practices with the
selected competitive strategy’.
• They described the HR
characteristics of firms pursuing
one or other of the three
strategies

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The Best Fit Approach: Strategic Configuration 7
c

• Delery and Doty (1996) suggest that organizations should align their
HR systems with the strategy linked to their configuration.
• Two systems are identified:
1. The market-type system: hiring is mainly from outside the organization,
little use is made of internal career ladders, there is no formal training,
performance appraisal is results-orientated, there is not much security, and
jobs are not clearly defined.
2. The internal system: hiring is mainly from within the organization, extensive
use is made of career ladders, a lot of formal training is provided,
performance is appraised by behavior-orientated measures, there is
considerable security, and jobs are tightly defined.

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Strategic
Human Resource Management (HRM)
3

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A Linear Strategic HRM Model

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HR Strategy

• HR strategies set out what the organization intends to do about its

human resource management policies and practices, and how they
should be integrated with the business strategy and each other.
• The purpose of HR strategies is:
üGuide development and implementation programs.
üProvide a means of communicating to all concerned the intentions of the
organization about how its human resources will be managed.
üThey enable the organization to measure progress and evaluate outcomes
against objectives.

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Two Basic Types of HR Strategies

1. Overarching HR strategies
2. Specific strategies relating to the different aspects of human
resource management

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Overarching HR Strategies

• Describes the general intentions of the organization about how

people should be managed and developed and what steps should be
taken to ensure that the organization can attract and retain the
people it needs and ensure so far as possible that employees are
committed, motivated and engaged.
• They are concerned with overall organizational effectiveness:
ü‘better people in organizations with better process’
ü‘a great place to work’.

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Different Aspects of HRM

• Specific HR strategies set out what the organization intends to do in

areas such as:
üTalent management – how the organization intends to ‘win the war for
talent’;
üContinuous improvement – providing for focused and continuous
incremental innovation sustained over a period of time;
üKnowledge management – creating, acquiring, capturing, sharing and using
knowledge to enhance learning and performance;
üResourcing – attracting and retaining high-quality people;

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Different Aspects of HRM Con’t
• Specific HR strategies set out what the organization intends to do in
areas such as:
üLearning and developing – providing an environment in which employees are
encouraged to learn and develop;
üReward – defining what the organization wants to do in the longer term to
develop and implement reward policies, practices and processes that will
further the achievement of its business goals and meet the needs of its
stakeholders;
üEmployee relations – defining the intentions of the organization about what
needs to be done and what needs to be changed in the ways in which the
organization manages its relationships with employees and their trade unions

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Criteria for an Effective HR Strategy

• Satisfy business needs.

• Based on detailed analysis and study.
• Actionable programs that anticipate implementation requirements
and problems.
• Coherent and integrated, being composed of components that fit
with and support each other.
• Takes account of the needs of line managers and employees generally
as well as those of the organization and its other stakeholders.

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Strategic Framework for HR

b d

a c

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The Loyal Soldier Strategy a

• The Loyal Soldier label emphasizes hiring and retaining loyal

employees who do whatever the company asks of them.
• Organizations with this strategy design work so that employees have
broad roles and perform a variety of different tasks.
• People are recruited and hired because they fit the organization
culture and because of their potential to become loyal employees.
• Efforts are made to satisfy the needs of employees and build a strong
bond that reduces the likelihood of employee turnover.

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The Loyal Soldier Strategy Con’t a

• Organizations hire people early in their careers and provide them with
extensive training in several different skills.
• Careers often include a number of very different positions, with
promotions often made into positions that are not closely related to
previous experiences.
• Performance appraisals are designed to facilitate cooperation rather
than competition.
• Compensation includes long-term incentives and benefits and is often
linked to the overall performance of the organization.
• Unions, frequently help build feelings of unity.

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Bargain Laborer HR strategy b

• The emphasis of this strategy is obtaining employees who do not demand

high wages.
• Organizations with this strategy design work so that managers can tightly
control employee efforts.
• Each employee is given clearly defined tasks that can be learned easily.
• People are recruited and hired to perform simple tasks that do not require
clearly developed skills.
• Little attention is paid to meeting the long-term needs of employees.
• Organizations with this human resource strategy don’t provide careers with
clear paths for promotion and advancement.

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Bargain Laborer HR strategy Con’t b

• Performance appraisal focuses on day-to-day feedback and rarely

incorporates formal measures.
• Training is mostly limited to on-the-job techniques that teach specific
methods for completing particular tasks.
• Compensation is frequently based on hours worked, and benefits and
long-term incentives are minimal.
• The lack of consistency among employees tends to make unions
somewhat rare.

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Committed Expert HR strategy c

• The primary objective of this strategy is to hire and retain employees

who specialize in performing certain tasks.
• Organizations using this strategy design work so that employees have
a great deal of freedom to innovate and to improve methods of
completing tasks.
• People are recruited and hired because of their potential fit with the
organizational culture, as well as their aptitude for becoming experts
in particular areas.
• These organizations hire people early in their careers and train them
to be experts in specific fields, such as accounting or sales.

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Committed Expert HR strategy Con’t c

• Performance appraisals are designed to balance cooperation and

competition among employees.
• Careers generally include numerous promotions into similar jobs with
increasing responsibility.
• Employees receive long-term training that helps them develop strong
expertise.
• Compensation is relatively high and usually includes a good benefits
package that ties employees to the organization.

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Free Agent HR Strategy d

• The main emphasis associated with this strategy is hiring people who
have critical skills but who are not necessarily expected to remain
with the organization for a long period of time.
• Work is designed so that employees have extensive responsibility
within specific areas and substantial freedom to decide how to go
about their work.
• Long-term commitments are avoided, and no efforts are made to
encourage strong attachments between employees and the
organization.
• People are recruited because they already have the skills and
experience that they need to perform specific jobs.

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Free Agent HR Strategy Con’t d

• They are not led to expect long-term careers in the organization.

• Higher-level positions are frequently given to people from outside the
organization.
• Performance appraisal focuses on outcomes and results.
• Training is rare.
• Short-term compensation is usually high, which is necessary if the
organization is to obtain people with top skills.
• Pay is linked specifically to individual performance results.
• Benefits and long-term compensation packages, which tie employees to
the organization, are avoided.
• Unions are rarely seen in these organizations.

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Alignment of HR and Competitive Business Strategies

• Organizations are likely to have human resource practices that fit with
their competitive business strategies.
• Organizations whose human resource strategies match their
competitive strategies do indeed perform better.
• Research suggests that organizations with a cost leadership
competitive strategy excel when they follow a Loyal Soldier HR
strategy.
• Organizations with a differentiation competitive strategy excel when
they use a Committed Expert strategy.

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 Selected HR Strategies that Fit Porter’s Three Major
Types of Business Strategies
Business Common Organizational
The overall cost Strategy Characteristics HR Strategies
leadership strategy is Overall • Sustained capital • Efficient production
aimed at gaining a cost investment and access to • Explicit job descriptions
competitive advantage leadership capital • Detailed work planning
• Intense supervision of • Emphasis on technical
through lower costs. labor qualifications and skills
• Tight cost control requiring • Emphasis on job-specific
frequent, detailed control training
reports • Emphasis on job-based
• Low-cost distribution pay
system • Use of performance
• Structured organization appraisal as a control
and responsibilities device
• Products designed for
ease in manufacture

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 Selected HR Strategies that Fit Porter’s Three Major
Types of Business Strategies Con’t
A differentiation Business Common Organizational
business strategy Strategy Characteristics HR Strategies
attempts to achieve a Differ- •Strong marketing •Emphasis on innovation
competitive entiation abilities and flexibility
advantage by creating •Product engineering •Broad job classes
•Strong capability in •Loose work planning
a product or service
basic research •External recruitment
that is perceived as •Corporate reputation for •Team-based training
unique. quality or technological •Emphasis on individual-
leadership based pay
•Amenities to attract •Use of performance
highly skilled labor, appraisal as
scientists, or creative development tool
people.

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 Selected HR Strategies that Fit Porter’s Three Major
Types of Business Strategies Con’t
A focus strategy relies Business Common Organizational
on both a low-cost Strategy Characteristics HR Strategies
position and Focus •Combination of cost- •Combination of HR
differentiation, with the leadership and strategies above.
objective of serving a differentiation strategy
narrow target market directed at a particular
strategic target.
better than other firms.

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Linkage of Organizational and HR Strategies

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Selected HR Strategies that Fit Miles and Snow’s Two
Major Types of Business Strategies
Strategic
HR Area Defender Strategy Prospector Strategy

Work flows •Efficient production •Innovation

•Control emphasis •Flexibility
•Explicit job descriptions •Broad job classes
•Detailed work planning •Loose work planning

Staffing •Internal recruitment •External recruitment

•HR department makes •Supervisor makes
selection decision selection decision
•Emphasis on technical •Emphasis on fit of
qualifications and skills applicant with culture
•Formal hiring and •Informal hiring and
socialization process socialization process of
new employees

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Selected HR Strategies that Fit Miles and Snow’s Two
Major Types of Business Strategies Con’t
Strategic
HR Area Defender Strategy Prospector Strategy
Employee • Voluntary inducements • Layoffs
separations to leave • Recruit as needed
• Hiring freeze • Individual on his/her own
• Continuing concern for • No preferential treatment
terminated employee for laid-off workers
• Preferential rehiring
policy

Performance • Uniform appraisal • Customized appraisals

appraisal procedures • Used as developmental
• Used as control device tool
• Narrow focus • Multipurpose appraisals
• High dependence on • Multiple inputs for
superior appraisals

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Selected HR Strategies that Fit Miles and Snow’s Two
Major Types of Business Strategies Con’t
Strategic
Defender Strategy Prospector Strategy
HR Area
Training •Individual training •Team-based or cross-
•On-the-job training functional training
•Job-specific training •External training
•“Make” skills •Generic Training
emphasizing flexibility
•“Buy” skills

•Fixed pay •Variable pay

•Job-based pay •Individual-based pay
Compensation•Seniority-based pay •Performance-based pay
•Centralized pay •Decentralized pay
decisions decisions

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Selected HR Strategies For Firms Low and High on
Different Environmental Characteristics
Environmental
Dimension Low High
Degree of • Detailed work planning • Loose work planning
Uncertainty • Job-specific training • Generic training
• Fixed pay • Variable pay
• High dependence on • Multiple inputs for
superior appraisals

Volatility • Control emphasis • Flexibility

• Efficient production • Innovation
• Job-specific training • Generic training
• Fixed pay • Variable pay

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Selected HR Strategies For Firms Low and High on
Different Environmental Characteristics Con’t
Environmental
Dimension Low High
Magnitude •Explicit job descriptions •Broad job classes
•Formal hiring and
of Change •Informal hiring and
socialization of new socialization of new
employees employees
•“make” skills •“buy” skills
•Uniform appraisal •Customized appraisals
procedures
•Flexibility
Complexity •Control emphasis •External recruitment
•Internal recruitment •Decentralized pay
•Centralized pay decisions
decisions •Multiple inputs for
•High dependence on appraisals
superior

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