Lesson 2

Topic: STRATEGIC HUMAN RESOURCE MANAGEMENT

Sub Topics: Aligning HR Strategy with Business Strategy/ HR as a Strategic Partner

Learning Objectives:

a. Identify the different concept of strategy

b. Outline suitable strategy for business through human resource efforts
c. Annotate HR Framework in terms of aligning long and short term strategies.

INTRODUCTION

Strategy is a high-level plan to achieve one or more goals under conditions of uncertainty.
Strategy is an action that managers take to attain one or more of the organization’s goals. Strategy
can also be defined as “A general direction set for the company and its various components to
achieve a desired state in the future. Strategy results from the detailed strategic planning process”.

o Chandler defines Strategy is the determination of the basic long-term goals of an enterprise,
and the adoption of courses of action and the allocation of resources necessary for carrying
out these goals.

o Mintzberg defines Strategy is a mediating force between the organization and its
environment: consistent patterns in streams of organizational decisions to deal with the
environment.

o Prahlad defines Strategy is more then just fit and allocation of resources. It is stretch and
leveraging of resources

o Jauch and Glueck defines “Strategy is a unified, comprehensive and integrated plan that
relates the strategic advantages of the firm to the challenges of the environment. It is
designed to ensure that the basic objectives of the enterprise are achieved through proper
execution by the organization.”

NATURE OF STRATEGY

Based on the above definitions, we can understand the nature of strategy. A few aspects
regarding nature of strategy are as follows:

o Strategy is a major course of action through which an organization relates itself to

its environment particularly the external factors to facilitate all actions involved in
meeting the objectives of the organization. · Strategy is the blend of internal and
external factors. To meet the opportunities and threats provided by the external
factors, internal factors are matched with them.

o Strategy is the combination of actions aimed to meet a particular condition, to solve

certain problems or to achieve a desirable end. The actions are different for different

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 situations. · Due to its dependence on environmental variables, strategy may
involve a contradictory action. An organization may take contradictory actions
either simultaneously or with a gap of time. For example, a firm is engaged in
closing down of some of its business and at the same time expanding some.

o Strategy is future oriented. Strategic actions are required for new situations which
have not arisen before in the past.

 Strategy requires some systems and norms for its efficient adoption in any
organization.

 Strategy provides overall framework for guiding enterprise thinking and action.

CONCEPT OF STRATEGY

The concept of strategy is based on

three subsidiary concepts:

 Competitive advantage
 Distinctive capabilities and
 Strategic fit.

Competitive advantage

The concept of competitive advantage was formulated by Michael Porter (1985).

Competitive advantage, Porter asserts, arises out of a firm creating value for its customers.
To achieve it, firms select markets in which they can excel and present a moving target to
their competitors by continually improving their position.

Distinctive capabilities

A distinctive capability or competence can be described as an important feature that

confers superiority on the organization’. Kay extends this definition by emphasizing that
there is a difference between distinctive capabilities and reproducible capabilities.
Distinctive capabilities are those characteristics that cannot be replicated by competitors,
or can only be imitated with great difficulty. Reproducible capabilities are those that can

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 be bought or created by any company with reasonable management skills, diligence and
financial resources. Most technical capabilities are reproducible.

Strategic fit

The concept of strategic fit states that to maximize competitive advantage a firm
must match its capabilities and resources to the opportunities available in the external
environment. A critical aspect of top management’s work today involves matching
organizational competences (internal resources and skills) with the opportunities and risks
created by environmental change in ways that will be both effective and efficient over the
time such resources will be deployed.

FORMULATION OF STRATEGY

Strategy formulation refers to the process of choosing the most appropriate course of action
for the realization of organizational goals and objectives and thereby achieving the organizational
vision. The process of strategy formulation basically involves six main steps. Though these steps
do not follow a rigid chronological order, however they are very rational and can be easily followed
in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to

set the long-term objectives of the organization. It is known that strategy is generally a medium
for realization of organizational objectives. Objectives stress the state of being there whereas
Strategy stresses upon the process of reaching there. Strategy includes both the fixation of
objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider term
which believes in the manner of deployment of resources so as to achieve the objectives. While
fixing the organizational objectives, it is essential that the factors which influence the selection of
objectives must be analyzed before the selection of objectives. Once the objectives and the factors
influencing strategic decisions have been determined, it is easy to take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general
economic and industrial environment in which the organization operates. This includes a review
of the organizations competitive position. It is essential to conduct a qualitative and quantitative
review of an organizations existing product line. The purpose of such a review is to make sure that
the factors important for competitive success in the market can be discovered so that the
management can identify their own strengths and weaknesses as well as their competitors’
strengths and weaknesses. After identifying its strengths and weaknesses, an organization must
keep a track of competitors’ moves and actions so as to discover probable opportunities of threats
to its market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the
quantitative target values for some of the organizational objectives. The idea behind this is to
compare with long term customers, so as to evaluate the contribution that might be made by various
product zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic
trends.

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 5. Performance Analysis - Performance analysis includes discovering and analyzing the
gap between the planned or desired performance. A critical evaluation of the organizations past
performance, present condition and the desired future conditions must be done by the organization.
This critical evaluation identifies the degree of gap that persists between the actual reality and the
long-term aspirations of the organization. An attempt is made by the organization to estimate its
probable future condition if the current trends persist.

6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course
of action is actually chosen after considering organizational goals, organizational strengths,
potential and limitations as well as the external opportunities.

STRATEGY IMPLEMENTATION

Strategy implementation is the translation of chosen strategy into organizational action so

as to achieve strategic goals and objectives. Strategy implementation is also defined as the manner
in which an organization should develop, utilize, and amalgamate organizational structure, control
systems, and culture to follow strategies that lead to competitive advantage and a better
performance.

Steps in implementing a strategy:

 Developing an organization having potential of carrying out strategy successfully.

 Disbursement of abundant resources to strategy-essential activities.
 Creating strategy-encouraging policies.
 Employing best policies and programs for constant improvement.
 Linking reward structure to accomplishment of results.
 Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential
to note that strategy implementation is not possible unless there is stability between strategy and
each organizational dimension such as organizational structure, reward structure, resource-
allocation process, etc.

SHRM DEFINITION

“Strategic human resource management means formulating and executing human resource policies
and practices that produce the employee competencies and behaviors that the company needs to
achieve its strategic aims.”- Gary Dessler

“Strategic human resource management is an approach to making decisions on the intentions and
plans of the organization concerning the employment relationship and the organization’s
recruitment, training, development, performance management, and the organization’s strategies,
policies, and practices.” – Armstrong

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 Strategic human resource management (SHRM) is defined as “the pattern of planned human
resource deployments and activities intended to enable an organization to achieve its goals”. –
Wright & McMahan

NATURE OF SHRM

 Long-term Focus: As business strategies have a long-term orientation, therefore, focus of SHRM
is also long-term probably more than one year
 Associated with Goal-Setting: SHRM is highly related with setting of objectives, formulation of
policy and allocation of resources and it is carried out at all levels of top management.
 Interrelated with Business Strategies: There is an interrelation between business strategies and
SHRM. E.g. it gives significant inputs when business strategy is formulated, and human resource
strategies (like recruitment, staffing, training and performance appraisal)
 Fosters Corporate Excellence Skills: SHRM considers employees as the strategic potential of the
organization and on that basis makes effort to differentiate the organization from its competitors
present in the markets. It also promotes learning of modern skills.

COMPONENTS OF STRATEGIC HUMAN RESOURCE MANAGEMENT

This definition implies the following four components of SHRM:

1. It focuses on an organization’s human resources (people) as the primary source of competitive

advantage of the organization.
2. The activities highlight the HR programs, policies, and practices as the means through which
the people of the organization can be deployed to gain competitive advantage.
3. The pattern and plan imply that there is a fit between HR strategy and the organization’s business
strategy (vertical fit) and between all of the HR activities (horizontal fit).
4. The people, practices, and planned patterns are all purposeful, that is, directed towards the
achievement of the goals of the organization.

IMPORTANCE OF STRATEGIC HUMAN RESOURCE MANAGEMENT

1. Identifying and analyzing external opportunities and threats that may be crucial to the
company’s success.
2. Provides a clear business strategy and vision for the future.
3. To supply competitive intelligence that may be useful in the strategic planning process.
4. To recruit, retain and motivate people.
5. To develop and retain highly competent people.
6. To ensure that people development issues are addressed systematically.
7. To supply information regarding the company’s internal strengths and weaknesses.
8. To meet the expectations of the customers effectively.
9. To ensure high productivity.
10. To ensure business surplus thorough competency.

LINKING HR PRACTICES TO BUSINESS STRATEGY AND ONE ANOTHER

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 This issue of fitting HR practices to business strategy is becoming increasingly important and
relevant HR issues for HR staff and line managers. HR fit involves making sure HR activities
make sense and help the organization achieve its goals and objectives. The three aspects of HR fit
are:

Vertical fit
This aspect of vertical fit concerns the coincidence between HR practices and overall business
strategy.

Horizontal fit
This relates to the extent to which HR activities are mutually consistent. Consistency ensures that
HR practices reinforce one another

External fit
The third aspect concerns how well HR activities match the demands of the external environment.
Ensuring these aspects of fit requires HR practice choices. The challenge is to develop internally
consistent configurations of HR practice choices that help to implement the firm’s strategy and
enhance its competitiveness. There is a need for strategic flexibility along with a strategic fit for
the long-term competitive advantage of the firm. The fit is defined as a temporary state in an
organization, whereas flexibility is defined as the firm’s ability to meet the demands of the dynamic
environment. The two types of flexibility identified are:

Resource Flexibility
Resource flexibility is the extent to which a firm can apply its resources to a variety of purposes.
It also involves the cost, difficulty, and time needed to switch resources from one use to another.

Coordination flexibility
Coordination flexibility concerns the extent to which an organization has decision-making and
other systems that allow it to move resources quickly from one use to another. This task is
accomplished by having an effective partnership between HR managers and line managers.

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 HR AS A STRATEGIC PARTNER

How to move from HR Tactics to HR Strategy

Transitioning from the tactical role of HR manager to that of a strategic HR partner is pivotal in
today's dynamic business landscape. While both roles are vital, they serve distinct purposes
within an organization.

The HR manager has long been the backbone of HR departments, overseeing the day-to-day
operations, ensuring compliance, managing payroll, and handling recruitment. HR managers are
essential for maintaining the smooth functioning of HR processes, but they primarily operate at a
tactical level, focusing on the immediate needs of the workforce.

Becoming a strategic HR partner marks a significant shift in HR's function.

Instead of getting caught up in the minutiae of daily HR tasks, a strategic HR partner operates at
a higher altitude, aligning HR initiatives with the overarching goals of the organization.

The roles of a strategic HR partner

Instead of getting caught up in the minutiae of daily HR tasks, a strategic HR partner operates at
a higher altitude, aligning HR initiatives with the overarching goals of the organization.

1. Strategic Advisor: Strategic HR partners act as trusted advisors to top leadership. They
leverage their deep understanding of HR and the organization to provide insights and
guidance on strategic decisions. This includes talent acquisition strategies, workforce
planning, and initiatives to improve employee engagement.

2. Problem Solver: They are adept at identifying and addressing complex workforce
challenges. Whether it's resolving interdepartmental conflicts or devising innovative
solutions for talent retention, strategic HR partners are the go-to problem solvers in the
organization.

3. Mentor and Coach: Beyond managing HR processes, they invest time in nurturing
talent within the HR team and across the organization. They mentor emerging HR
professionals, helping them grow into future strategic partners themselves. Additionally,
they coach managers on effective leadership and people management.

4. Independent Leader: While collaborating closely with HR departments, strategic HR

partners maintain a degree of independence. This independence allows them to offer
unbiased perspectives, ensuring that HR initiatives are aligned with the organization's
best interests.

5. Driving Alignment: The primary goal of a strategic HR partner is to ensure that

everyone within the organization is pulling in the same direction. They work closely with
HR departments and the leadership team to align HR strategies with broader
organizational goals, fostering a unified and purpose-driven workforce.

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 Strategic HR partners are the architects of HR strategy, contributing directly to the achievement
of organizational objectives.

By shifting the focus from tactical HR tasks to strategic HR initiatives, businesses can navigate
the evolving needs of the workforce, foster innovation, and drive sustainable growth.

Embracing this transformation is not just a choice; it's a strategic investment in today's
competitive business environment.

Why you should become a strategic HR partner?

Too often, HR teams operate in a silo, disconnected from the conversations and decision making
happening among senior leadership. This can create misalignment between HR and the rest of
the business and hinders HR’s ability to support (and ultimately drive) strategic business
outcomes.

Successful, high-performing organizations build alignment across teams and departments. And
HR is uniquely positioned to enable and promote alignment when working together with senior
leadership as a strategic partner.

HR is the glue that binds teams and organizations together—which means HR has the potential
for high impact across the organization. From behind-the-scenes administration to internal
communication, leadership training, and recruiting and onboarding programs, HR plays a critical
role in company culture, employee engagement, and ultimately, business performance.

That’s where HR as a strategic partner can really make a difference for both HR efforts and
overall business success.

Strategic HR partners can help drive individual, team, and organizational performance using a
variety of tactics.

1. Have CEOs refocus on talent strategies

Today's CEOs and senior leadership teams are increasingly recognizing the pivotal role of talent
strategies in achieving organizational success. The need to attract, retain, and develop top talent
has become paramount. HR, as the steward of talent management, needs to step into a strategic
partnership to address this demand effectively.

2. Use workplace culture as a performance driver

Research from Quantum Workplace underscores the undeniable connection between culture and
performance. High-performing organizations attribute their success to a culture that reflects their
values and beliefs.

75% of high-performing organizations say that their organization's culture reflects their values
and beliefs. 70% of high-performing organizations say that their organization's culture drives
desired organizational outcomes and business results.
https://www.quantumworkplace.com/future-of-work/hr-as-a-strategic-partner

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