HRM - Role of Strategic HRM

8/7/2019 HRM - Role of Strategic HRM

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Strategic Role Of HRM

(Chapter 3)

Compiled By:

Nirav Vyas

Asst Professor

JVIMS-Jamnagar


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Objectives of the Chapter

Meaning Of Strategy, Strategic Plan and

Strategic Management

Steps in Strategic Management Levels Of Strategies

HRMs Strategic Roles

Creating SHRM


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Meaning

Strategy

The organizational long term view for how itwill balance its internal strength and

weakness with its external opportunities andthreats to maintain a competitive advantage

Strategic Plan

The organizational Plan for using its strengthsand opportunities to overcome its weaknessand threats and to achieve the achievetowards the competitive advantage


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Meaning

Strategic Management

The process of identifying and executing the

organizational mission by matching its

capabilities with the demands of its

environment


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Meaning of Vision and Mission

To understand the meaning of strategicmanagement, we should first understandthe meaning of Vision and Mission

Vision

It is a companys general statement of itsintended direction that shows in a broad term

A vision statement sums up in just a fewwords, the promoters image of where thebusiness should move.

What we want to become


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Meaning of Vision and Mission

Mission

Mission lays outs in broad terms what main

tasks are needed to move in the direction of

vision

It is more concrete and quantifiable

Spells out who the company is, what it does

and where is headed Most important phrase is How can we

become


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Examples

Vision "To bring inspiration and innovation to every athlete*

in the world" If you have a body, you are an athlete.

Nike

Mission Statement of Nike To Provide for the best athletic accessories to the

inspiring athletes


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Examples

Vision "The become leader in the Indian automobile

industry, creating customer delight and

shareholder's wealth; a pride for India.

Maruti Udyog

Mission Statement of Maruti Udyog To create customer obsession through innovation,

creativity, networking, partnership, openness and

learning.


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Steps in Strategic Management


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Strategic Management Process

Define Current Business

Perform External and Internal Audits

Formulate New Business and Mission Statements

Translate Mission into strategic goals Formulate Strategies to achieve goals

Implement the Strategies

Evaluate Performance


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Define the Current Business This does not mean mentioning the core business about what we are

doing. It means identifying the segment to which our products are most

appealing to

The organization must also define the area of its operation

A clear Vision statement should be there accompanied with a mission

statement

Perform External and Internal Audits

This is done to check the strengths, weakness, opportunities and threatsfaced by the organization

Decision of strategies and tactics will be based on this mix

SWOT analysis is to be used for this


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Example of SWOT of Amul

Strengths

High and

regular demand

Easy availability

of raw material

Weaknesses

Perishability

Logistics

Problem

Opportunities

Export Potential

Threats

UnorganizedSector


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Formulate new business and mission

statements Based on the situation analysis, what should our new business be, in

terms of what products it will sell, where it will sell them and how itsproducts or services will differ from its competitors

Translate Mission Statements in goals

Segment the overall mission statement into goals of different

department

E.g. Saying We want to make best quality goods is one thing and

operationalizing the statement into goal of achieving 6 sigma for

production department is other


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Formulate Strategies to achieve the

strategic goals It shows how the organization will move from the business it is in now

to the business it wants to be in.

It takes into consideration the results of SWOT analysis

Eg. Strategy of Wal-Mart is Low Prices Everyday. What would be

the implementation of strategy

Low Cost everyday


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Implement the strategies It means translating the strategies into actions and results.

Actual hiring (or firing) people, entering in to new markets, opening or

closing plants, adopting technologies etc. Evaluate Performance

An basic evaluation model has to be thought of for evaluating what we

were expecting after the implementation of strategies and what actually

has happened

This is basically called strategic control


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Levels of Strategies


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Common elements of any strategy

Low Costs

Customer Focus

Incremental Profits


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Corporate Strategy

Business

Strategies

SBU 1 SBU

2

SBU 3

Different

Depts

Different

Depts

Different

Depts

Different

Depts

Functional Strategies


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Levels of Strategy

Corporate level An organizations corporate level strategy identifies

the portfolio of business that, in total, comprise theorganization and the ways these businesses relate to

each other. Business level (Competitive)

It identifies how to build and strengthen thebusinesss long term competitive position in themarketplace

Functional Level (Departmental) It identify the basic courses of action that each

department will pursue in order to help the businessattain its competitive goals


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Example


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Corporate Level Strategy

An organizations corporate level strategy

identifies the portfolio of business that, in total,

comprise the organization and the ways these

businesses relate to each other Basically there are five recognized corporate

strategies which are Diversification

Vertical Integration Horizontal Integration

Consolidation

Geographic Expansion


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Diversification Expansion by adding new product lines.

E.g. Mobile service providers have started new product lines by

providing internet surfing devices

Vertical Integration Forward:- Purchasing the retailers, dealers etc.

E.g. Factory outlets of various fashion clothing companies

Backward:- Purchasing the suppliers of raw materials.

Horizontal Integration

Mergers and Acquisition (If you wanttoreducecompetitors,purchasethem)


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Consolidation Reducing the organizations size

Geographic Expansion


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Business Level (Competitive)

Strategies

It identifies how to build and strengthen the

businesss long term competitive position in the

marketplace

Types Cost Leadership:-

It means the organization aims to become the low cost

leader in any industry and acquire a market share.

E.g Micromax Mobiles

Differentiation:- It means an organization seeks to be unique in its industry

along dimensions that are widely valued by buyers

E.g Rolex is knows for style while Casio for durability


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Business Level (Competitive)

Strategies

Focus strategy It basically means identifying a niche into the target

segment and producing customized products in order to

cater to that particular niche.

E.g. Ferrari

One thing to note that the organizations different

business strategies should make sense in terms of

its corporate strategy.


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Functional Strategies

It identify the basic courses of action that each

department will pursue in order to help the business

attain its competitive goals

Each business is composed of departments such assales, marketing, production, HRM. The strategies

adopted by them are called functional strategies

The organizations functional strategies should make

sense in terms of its business strategy


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HRM Strategic Roles


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HRM Strategic Roles

Formulating and executing any strategy needs anHR intervention. HR help the strategy team toidentify the human issues that are vital towards thestrategy.

HR helps in conceptualizing and executing the sortsof organizational changes that organizationincreasingly need to execute their strategic plans

Basically there are two roles that HR department

takes Strategy Execution Role

Strategy Formulation Role


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HRM Strategic Roles

Strategic Execution Roles

Top management formulates the organizational strategies

and then the HR manager designs policies and practices

that make sense in terms of the overall strategy

HRM supports the strategy execution by admistrating

firms diversification, consolidation or downsizing by out

placing employees, instituting pay for performance plans,

reducing health care costs, helping employees to work in

abroad, giving training etc


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HRM Strategic Roles

Strategic Formulation Roles

The HRM manager helps in assessing the SWOT of the

organization before it takes decision on any of its strategy

It helps in assessing the need of development needed inthe existing employees to make them aligned with the

intended strategies

They judge on the basis of how many new employees and

of what type should be taken in for creating a particular

strategy etc.


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Creating SHRM


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Creating SHRM

Creating a Strategic Human Resource Management

requires simple but concrete steps.

It involves basically the following process

Creating High performance work system Measuring HRs effectiveness

Translating strategy into HR policies and practices


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Creating SHRM

Creating High Performance Work System

Every company tends to create a HR system thats

uniquely appropriate to its needs.

HPWS is basically advocating a system which focuses onlearning and performance recognition.

Several characteristics of HPWS are multi skilled workers,

empowered front line workers, continuous training,

emphasis on better labor relations, commitment to quality

etc.


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Creating SHRM

Measuring HRs effectiveness Employers today expect their HR manager to build a persuasive

case that shows how the firms HR activities contribute tocreating value for the firm.

It is measured in two terms either low costs or high profits

Some examples are revenue earned per full time employee. Thisis used to measure the productivity of the employee.

For creating a SHRM, it is very important to create a cost tobenefit ratio of all HR activities to the overall costs or profits ofthe organization.

This cost to benefit ratio should be such which can be expressed

in mathematical terms.


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Creating SHRM

Translating Strategy into HR policies and

practices

SHRM in simple terms means formulating and executing

HR polices that produce the desired employeescompetencies which are helpful to achieve the overall

strategy of the business

Hence it is very necessary first to translate the business

strategy into HR policies which will produce the desired

employee behavior and competencies Let us see a basic model of how to align Business strategy

with the HR practices


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Model for translating strategy into HR

practices

Analyze the business strategy

Identify the desired workforce

competencies needed

Formulate HR practices that will

help to achieve those desired

competencies

Develop a system for evaluating

the practices and making them

quantifiable. HR Scorecards

Differentiation

Learning aptitude, Less

resistance to change, ready toaccept challenges

Develop interactive training

methods, recognition on

innovation, increments on new

invention etc

Cost to innovation ratio, time

devoted to study etc.


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Creating SHRM

Meaning of HR Scorecard and how to use HR Scorecards

IT is a measurement system, often summarized on a

computer screen which shows the quantitative standards

or metrics the firm uses to measure HR efforts

Basically it is a system which measures the HR functions

efficiency and effectiveness in a quantifiable terminology.

Three basic information is required to create a HR

scorecard

Knowledge of the business strategy Casual links between a particular HR practice and the

outcome in terms of employee behavior

Metrics which the HR manager can use to quantify

and measure the effectiveness of the HR practices


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Creating SHRM

HR scorecard process Define Business strategy

Outline the organizational value chain

Outline a strategy map

Identify strategically required organizational outcomes

Identify the required workforce competencies

Identify the required HR system and policies

Create HR scorecard

Choose HR scorecard measures Summarize HR scorecard and digitalize

Evaluate


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Creating SHRM

Outline the organizational value chain

Any manager who wants to understand whatemployee behaviors are vital for his firms successmust first understand what the firms required

activities are. E.g High end premium segment hotels value chain

would be Easy guest reservation

Inbound guest services

Faster and polite room service

Luxurious amenities

Outbound guest services etc.


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Creating SHRM

Outline a strategy map

A strategy map is a diagram that summarizes the chain of

major interrelated activities that contribute to a companys

success.

It basically outlines how each department and each

employee needs to contribute in order to achieve the

overall business strategy.

Identify Strategically require organizational

outcomes The strategy map helps the manager recognize the core

outcomes which are needed and relevant for the strategy.


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Creating SHRM

Identify required competencies and behavior of

employees

Listing down what does each employee should achieve in

his own specialized area in order that he can contribute tothe overall strategy of the business

Identify HR system policies and practices required

Create HR Scorecard

By expanding the value chain and strategy map, themanager creates a HR score card which lists down all the

desired competencies of every employee with some

method of measuring it.


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Creating SHRM

Choose HR scorecard measures

Basically it means identifying a ground on which the

competencies, HR practices and outcomes can be

measured

E.g Improve the disciplinary system-How to measure

Perhaps by judging number of employee and manager

grievances in period of time.

Summarize the scorecard measures in a digital

dashboard

Evaluate

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HRM - Role of Strategic HRM