LINKING HR STRATEGY WITH

BUSINESS STRATEGY

U1L4
Learning Objectives
 Applying the concepts associated with HR strategy
and business strategy
 Understanding how HR strategies can be a guided
tool in implementing orgn’l strategy
Linking the Processes
 HR Planning relates to Strategic Planning in several
ways, but at a fundamental level one can focus on 2
issues:
(i) Strategy Formulation: HRP provides a set of
inputs in terms of what is possible; whether the
types & numbers of people are available to
pursue a given strategy
(ii) Strategy Implementation: resource allocation,
decisions pertaining to structure, processes &
human resources
 Cos like GE, IBM have combined these 2 aspects of
strategic mgmt
 HR people enhance their expertise in business
strategies
 Involvement of HR at early stages, means either a
rejection of poor targets or better preparation for
the merger
 HRP & SP is most effective when there is reciprocal
relationship bet the 2 processes
LINKAGE
MISSION
VISION Business / Corporate Strategies Human Resources
VALUES • identify purpose & scope •Capture underlying philosophy
• long term direction •Foundation of culture
• establishing beliefs & principles •Ethical codes of conduct
EXT
ANALYSIS • opportunities & threats •Demographic trends
• environmental scanning •Ext supply of labour
• industry/ competitor analysis •Competitor benchmarking

• strengths & weaknesses •Culture, competencies

INT
•Core competencies •Forecast demand
ANALYSIS
•Resources •Forecast supply

•Corporate strategy •Productivity & efficiency

STR •Business strategy •External fit & internal fit
FORMULATION •Functional strategy: alignment
•Reconcile supply & demand
•Design, structure, systems etc •Downsizing, layoffs etc
STR •Allocate resources •HR practices: Staffing, training,
IMPLEMENTATION •Leadership. Communication, change rewards etc

•Assessment & benchmarking •Human capital metrics

•Ensuring alignment •Balanced scoreard
EVALUATION •Agility & flexibility
MISSION, VISION & VALUES

 MISSION: basic purpose of the org; scope

of operations, written in terms of general
clients; maybe broad or narrow;
 VISION: perspective on where the org is
headed & what it can become in the future
 CORE VALUES: strong, enduring beliefs &
principles that co uses as a foundation for its
decisions
 Eg Infosys’s mission statement: To achieve our
objectives in an environment of fairness,
honesty & courtesy towards our clients, emps,
vendors & society at large
ENVIRONMENTAL ANALYSIS

 Analysis of external opportunities & threats

 Affects how orgs are run & people are
managed
 Env scanning is the systematic monitoring of
major external forces influencing the org;
 Some external issues are:
1. Economic factors: general, regional & global
conditions
2. Industry & Competitive trends: new processes,
services & innovation
3. Technological changes: IT, innovations &
automation
4. Govt & legislative issues: laws &
administrative rulings
5. Social concerns: child care, older care,
the env & educational priorities
6. Demographic & labour market trends:
age, composition & literacy
Competitive Environment

•Face entry barriers

New Entrants •Change “rules of the
game”

Who?
Suppliers Rival Customers
•Raw materials
•Money
firms •Cust value
•Info •One size doesn’t fit all
•people •Delivery speed
•Extraordinary needs
•service

Substitutes
•Products
•services
INTERNAL ANALYSIS

 3 Cs: Culture, Competencies & Composition

 Culture: auditing values, beliefs & attitudes:
- How do emps spend their time?
- How do they interact with each other?
- Are emps empowered?
- Predominant style of leadership?
- Advancement of emps within the org?
 Competencies: integrated knowledge & skill sets.
McDonalds Core competency is mgmt efficiency &
training.
 Composition: human capital architecture:
-whom to employ internally?
-contract externally
-manage diversity
-core knowledge workers
-Contract labour: less strategic value
-alliance partners: skills that are unique, but frequently
not directly related to cos core strategy
Strategy Implementation
 7 S framework
structure

strategy systems

Shared
values

skills
style

staff
 Org Structure: framework in which activities of the
orgn’l members are coordinated
 Closely related are systems & processes (formal &
informal)
 Shared values are a guiding parameter for
strategic planning
 At fundamental level, HR ‘s role in Strategy
Implementation focuses on reconciling :
(1) HR demanded and

(2) HR available

 These are based on forecasted trends in business

activity & supply considerations
 Downsizing, Outsourcing & Offshoring
Evaluation & Assessment
 To evaluate, firms need to establish a set of
parameters that focus on the “desired outcomes” of
strategic planning & metrics
 Benchmarking: process of identifying “best
practices” in any given area – productivity, logistics,
brand mgmt etc- then comparing your practices &
perf with those of others.
 Metrics: 2 types – Human capital
Metrics & HR Metrics
 Human capital metrics: assess aspects of
the w/f
 HR metrics: assess the perf of the HR
function itself
 Measuring Strategic Alignment: some
techniques help manager assess the
extent to which they have achieved
these objectives- Balanced Score Card
Balanced Score Card
 Developed by Harvard Professors, Robert Kaplan &
David Norton
 Translates strategic goals into operational
objectives
 4 related cells, (1) Financial (2) Customers (3)
Processes & (4) Learning
 Eg Starbucks under customer metrics might look into
% of repeat customers, no of new customers ,
growth rate.
Measuring Internal Fit
 Refers to all HR practices aligned with one another
to establish a configuration that is mutually
reinforcing
 3 steps:

(1) Managers need to identify key w/f objectives they

hope to achieve. This infor can come from people/
learning cell of BSC & might include loyalty, cust
service, productivity & creativity
 (2) identify each of the HR practices used to elicit or
reinforce those w/f objectives. Eg job design,
staffing etc
 (3) managers would evaluate each practice on a
scale of -5(not supportive) to 5(supportive).
 By tallying up the ratings, orgs can get a very clear
idea of which HR practices are working together to
achieve the w/f objectives & which are not.
Strategic Flexibility
 Ensuring strategic flexibility for future successful hr
planning helps inc orgn’l capability & capacity to
continuously act & change in pursuit of sustainable
competitive advantage
 Flexibility can be achieved in 2 primary ways:
coordination flexibility & resource flexibility
Example: How Harley-Davidson Is Taking Advantage of a Diverse Customer Base

Harley-Davidson had been a highly successful American company by marketing its

motorcycles to a particular segment of the market, namely middle-age white males. In the
last few years, the company has come to the realization that – to be competitive in the long
run- it has to expand its demographic customer base and has to use a more diverse
workforce in its dealerships to appeal to potential “non-traditional” buyers. Current sales are
down by a third from years past, and better diversity management may be a new way to
reverse this trend. Keith Wadell, Harley-Davidson’s chief executive, recently declared tha a
major priority for the company’s strategic plan in the near future is to target young adults,
women, African Americans, and Hispanics. He noted that these diversity efforts are already
paying off with domestic sales among these “non-core customers”growing at nearly twice the
rate as sales to traditional buyers. These domesetic diversity efforts are also helping the
company to expand sales outside of North America,with sales in the recent past growing by
25.6% in Asia and by 39% in Latin America.

Source: Based on www.harley-davidson.com (2014)

Assessment – Discussion

At times, SHRM involves questioning decisions of line managers. Is

the HR manger right?
References:

HRM (K Aswathappa, 8th ed) page no 78

HRM (Gary Dessler, 15th ed) page no 70