HRM Chapter 2

Session 2 Strategic Human
Resource Management
Learning Objectives
• HRM and competitive advantage
• HRM and corporate strategy
• Best practices school
• Contingency school
HRM AND COMPETITIVE ADVANTAGE
Sources of Sustainable Competitive Advantage
• Valuable to the firm in that it exploits

weaknesses or neutralizes threats
• Must be rare among competitors
• Must be difficult for competitors to imitate
• Must not be easily substitutable
The New Competitive Environment
• Shortened product life-cycles
• Erosion of patent protection
• Decreased regulation and protected markets
• Increased access to capital markets
• Increasing importance of innovation, both
process and product
• HR is a key lever in addressing these challenges!

Pfeffer: Competitive advantage through
people
1. How does Pfeffer challenge the traditional

sources of competitive advantage
2. What are the crucial sources of competitive
advantage in Pfeffer’s view? What reasons has
he given?
Contribution of HR Department to the Company
(Survey: 406/2010)
Contribution 1 2 3 4 5
(Low) (High)
Supporting company’s strategic goals 9.1% 17.2% 35.6% 25.3% 12.8%
Facilitating the cultivation of a cohesive corporate 7.4% 13.8% 37.6% 24.8% 16.5%
culture
Building a promotion system that identifies fit 7.4% 21.1% 31.9% 27.8% 11.8%
candidates
Building an effective and fair incentive system 6.6% 19.7% 34.4% 28.5% 10.8%
Building an effective employee development and 8.4% 26.5% 36.6% 17.4% 11.1%
knowledge management system
Driving corporate changes and reforms 10.3% 23.6% 32.4% 25.8% 7.9%
Top Management’s Commitment to HRM
(Survey: 406/2010)
1 (Low) 2 3 4 5 (High)
Discussing HRM issues with 8.1% 18.9% 33.2% 29.0% 10.8%
HR professionals
Providing support to HR 7.6% 18.2% 33.2% 27.5% 13.5%
department
Promoting the 7.9% 19.4% 36.6% 26.3% 9.8%
understanding and
engagement of HRM
among line departments
Engaging in key HRM tasks 7.9% 21.9% 24.3% 28.5% 17.4%
Building effective employee 8.4% 25.4% 36.0% 20.0% 10.3%
development and
knowledge management
systems
Involving HR department in 10.9% 18.8% 31.1% 26.9% 12.3%
key decision makings
HRM AND CORPORATE STRATEGY
SHRM: Linking Company-Wide Strategy and HR Strategy
3–10
Strategic Human Resource Management
– 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 formulating and executing HR systems—
HR policies and activities—that produce the
employee competencies and behaviors that the
company needs to achieve its strategic aims.
3–11
How to Align HR Strategy and Actions with Business
Strategy
Portman Ritz-Carlton Hotel, Shanghai

3–12
(5 Star)
How to Align HR Strategy and Actions with
Business Strategy
Portman Ritz-Carlton Hotel, Shanghai
An outstanding property offering

superior customer service
Care for and respect customers,

Proactive
Installing the Ritz-Carlton Company’s HR

system, interviews by top management,
selecting
Hours of training per employee,

productivity per employee, customer
satisfaction
BEST PRACTICES
Best Practices
• A best practice is a method or technique that has consistently
shown results superior to those achieved with other means, and
that is used as a benchmark.
• In addition, a "best" practice can evolve to become better as
improvements are discovered.
• Best practice is considered by some as a business buzzword, used
to describe the process of developing and following a standard way
of doing things that multiple organizations can use.
• Discussion:
• Please recommend three to five best practices in HRM.
Becker & Gerhat, 1996,
（
AMJ
）
Becker & Gerhat, 1996,
（
AMJ
）
Best Practices and AMOI
The effect and goals of best practices:
1. Ability: Employees have knowledge and skills
that managers do not have;
2. Motivation: Employees have the motivation to
apply the knowledge and skills;
3. Opportunity: Employees have the opportunity
to apply the knowledge and skills;
4. Information: Employees have the information
needed on how to create high performance.
CONTINGENCY PERSPECTIVE
Discussion
• Differences between Foxconn and Toyota
• Benchmark, environment and business
features
Contingency Perspective
• A contingent proposition is neither necessarily
true nor necessarily false.
• Internal consistency/horizontal fit
– Consistency across practices: E.g. Lincoln
Electronics
– Consistency across employees: VIP employees
– Temporal consistency: a GSM professor’s bonus
• External consistency/vertical fit
– stakeholders
Where is the missing bonus ？！
$
￥ 2*k Policy curve
￥ 1*k
100 hrs 200 hrs Teaching hours
YiChi ZHANG 22
It’s here ！
￥ 2*k
New policy curve

￥ 1*k
100 hrs 200 hrs Teaching hours
YiChi ZHANG 23
Contingency Perspective
• The success of HR strategies depends on the
situation or context in which they are used. An HR
strategy’s effect on firm performance is always
dependent on how well it fits with other factors.
• The key factors that firms should consider in
determining which HR strategies will have
positive impact on firm performance include:
organizational strategies, environment,
organizational characteristics, and organizational
capabilities.
Five Factors Model
（ Baron & Kreps, 1999 ）
Labor force Environment
e
Performanc
Organizational
culture HRM
Strategy Job/Org. Design
25
Five Factors Model
• Labor force
– E.g. Yu Minhong’s complaints about 90 hou
– E.g. The appropriateness of severe criticism in Huawei
• Job/Organization design
– Span of control: 2 direct reports or 9 direct reports
– Flat or tall organization: mistake types in VC vs. traditional bank
loan business
• Organization culture
– Southwest Airlines and its imitators
• Strategy
• Environment
Strategy and HRM
(Miles, & Snow, 1984 )
27
Strategy and HRM
(Miles, & Snow, 1984 )
28
Two Systems of HRM
(Arthur, 1992)
29
Two Basic Types of HRM
Delery & Doty (1996)
30
Factors in the Environment
Insert Figure 16.1 here
31
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 appraisals
superior • Flexibility
• Control emphasis • Innovation
• Efficient production
32
Selected HR Strategies For Firms Low and High on
Different Environmental Characteristics (cont.)
Environmental
Dimension Low High
Magnitude • Explicit job descriptions • Broad job classes
of Change • Formal hiring and • Informal hiring and
socialization of new socialization of new
employees employees
• “make” skills • “buy” skills
• Uniform appraisal • Customized appraisals
procedures
• Control emphasis • Flexibility
• Internal recruitment • External recruitment
• Centralized pay decisions • Decentralized pay decisions
• High dependence on • Multiple inputs for appraisals
superior
33
Discussion
Read the case "Lincoln Electronic", and answer
the following questions:
1. Is Lincoln Electronic a successful company?

Why or why not?
2. What HRM practices or policies are
introduced in the case?
3. How are these practices consistent with its
strategy?
Review question
• Consider one of the organizations you have
been affiliated with. What are some examples
of human resource practices that were
consistent with that organization's strategy?
What are examples of practices that were
inconsistent with its strategy?
YiChi ZHANG 36
Questions Used to Determine If Human Resources Are Playing a
Strategic Role in the Business
1. What is HR doing to provide value-added services to internal

clients?
2. What can the HR department add to the bottom line?
3. How are you measuring the effectiveness of HR?
4. How can we reinvest in employees?
5. What HR strategy will we use to get the business from point A to
point B?
6. What makes an employee want to stay at our company?
7. How are we going to invest in HR so that we have a better HR
department than our competitors?
8. From an HR perspective, what should we be doing to improve our
marketplace position?
9. What’s the best change we can make to prepare for the future? 37 1-37
Video
• Building Simpler, More Effective HR Processes
• http://hbr.org/video/2226587627001/building
-simpler-more-effective-hr-processes
• 11:32
Audio
• Building the Agile Workforce
• https://hbr.org/2014/01/building-the-agile-
workforc
• 15:53

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Session 2 Strategic Human

• Valuable to the firm in that it exploits

• HR is a key lever in addressing these challenges!

1. How does Pfeffer challenge the traditional

– The linking of HRM with strategic goals and

Portman Ritz-Carlton Hotel, Shanghai

An outstanding property offering

Care for and respect customers,

Installing the Ritz-Carlton Company’s HR

Hours of training per employee,

￥ 2*k Policy curve

100 hrs 200 hrs Teaching hours

New policy curve

100 hrs 200 hrs Teaching hours

Labor force Environment

Strategy Job/Org. Design

Insert Figure 16.1 here

1. Is Lincoln Electronic a successful company?

1. What is HR doing to provide value-added services to internal

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