STRATEGIC MANAGEMENT OF HUMAN CAPITAL

1. Concept and Importance of Strategic Management

Strategic management is a process concerned with identifying and describing strategies

that managers can use to achieve improved performance and competitive advantage for
the company. An organization is said to have a competitive advantage if its profitability
is higher than the average of all companies in its industry.

Strategic management is nothing more than planning for both foreseeable and
unfeasible contingencies. It is applicable to both small and large organizations as even
the smallest organizations face competition. And by formulating and implementing
appropriate strategies, they can achieve a sustainable advantage.

Furthermore, strategic management is an ongoing process that evaluates and controls

the business and industries in which an organization participates:

o Evaluate your competitors

o Set goals and strategies
o Reassess strategies regularly to determine how they have been implemented and
whether they were successful.

The strategic management process is a method by which managers conceive and

implement a strategy that can lead to sustainable competitive advantage. It is a
systematic or emergent way of carrying out strategic planning through initial
assessment, comprehensive analysis, strategy formulation, implementation and
evaluation.

Strategic management can also be defined as a set of decisions made by a manager that
determines the performance of the company.

For many, it is nothing more than the art of managing employees in a way that
maximizes the ability to achieve business objectives.
 1.2 The Strategic Management Process

The strategic management process is more than a set of rules to follow. It is a

philosophical approach to business. Senior management must think strategically first,
then apply that thinking to a process. The process is best implemented when everyone
within the business understands the strategy.

The five stages of the process are: goal or objective setting, analysis, strategy formation,
strategy implementation, and strategy monitoring.

Goal setting. The purpose of setting goals is to clarify the business vision. This
stage consists of identifying three facets: First, defining the short and long term
objectives. Second, identify the process of how to achieve the objectives. Finally,
customize the process to the staff, giving each member a task they can succeed
at. The objectives are detailed, realistic and match the values of the business
vision.

Analysis. Analysis is a key stage because the information obtained in this stage will
shape the next two stages. At this stage, relevant information and data is collected
to achieve the vision. The organization's strengths and weaknesses are identified,
as well as the threats and opportunities that may arise along the way.

Strategy formulation. The first step in forming a strategy is to review the

information obtained from the analysis. Determine what resources the business
currently has that can help achieve the defined goals and objectives. Identify any
areas where external resources should be sought. The problems that the company
faces must be prioritized by their importance, and based on this, the strategy
begins to be formulated. Because business and economic situations are fluid, it is
critical at this stage to develop alternative approaches that address each step of
the plan.

Implementation of the strategy. Successful strategy implementation is critical to

the success of the company. This is the action stage of the strategic management
process. If the overall strategy does not work with the current business structure, a
new structure should be installed at the beginning of this stage.
 Evaluation and control. Strategy evaluation and control actions include
performance measurements, consistent review of internal and external issues and
corrective actions when necessary. Any successful strategy evaluation begins with
defining the parameters to be measured. If you determine that the strategy is not
moving the company toward its goal, take corrective action. If those actions are
not successful, repeat the strategic management process.

Because internal and external issues are constantly evolving, all data obtained at this
stage must be maintained to assist with any future strategies.

1.3 The Role of Human Capital Management in Creating a Competitive

Advantage

Human resource management refers to the practices and policies necessary to manage
issues involving personal relationships in the managerial function.

To compete effectively, an organization must have one or more competitive advantages:

“the factors that allow an organization to distinguish its product or service from those of
its competitors, with the goal of increasing its market share.”

Today, most companies have access to the same technologies, so this resource is rarely
enough for a business to stand out. Typically, it is the employees and the administrative
system that make the difference.

Companies can create a competitive advantage when they possess or develop resources
that are valuable, scarce, unmatched, and organized.

Maintaining human capital management at a competitive advantage is perhaps the most

important part of an organization's HR function. However, on a day-to-day basis, HR
management also has other concerns regarding workers and the entire puzzle that staff
represents. These concerns include: attracting talent; maintaining a well-trained, highly
motivated and loyal workforce and managing diversity; figuring out compensation
systems; managing layoffs and health-related issues and costs. Balancing these issues is
complicated and the best perspectives vary depending on the circumstances of the
organization.

1.3.1 Strategic Administration of Human Capital Management

Because human resource management now plays a greater role in planning and
achieving organizational success than in the past, senior management expects its
human resource managers to apply their special knowledge and to be strategic partners
in developing and implementing its strategic plan. Strategic human resource
management means formulating and implementing human resource policies and
practices that produce in employees the skills and behaviors that the company requires
to achieve its strategic goals.

Human resource management has played a strategic role in recent years as

organizations seek to compete through people. There are four criteria that illustrate the
importance of people and show the closeness of management and human relations to
strategic management:

Creating value. People can increase value through their cost-cutting efforts or by offering
something unique to consumers, or by engaging in some combination of both.

It's weird. People are a resource for competitive advantage when their skills, knowledge
and capabilities are not available to all competitors.

It is difficult to imitate. People are a resource of competitive advantage when their

capabilities and contributions cannot be copied by others.

It is organized. People are a resource for competitive advantage when their talents can
be quickly combined and deployed to work on new assignments immediately.

1.3.2 Strategic Challenges of Human Capital Management.

There are two issues that characterize the strategic challenges currently facing human
resource managers. One of them is the fact that most organisations' strategies
emphasise performance improvement, and this means that priorities in human resource
management are increasingly focused on increasing competitiveness, reducing costs and
improving employee performance.

Secondly (and because of their increasing role in performance improvement), HR

managers must also become more involved in the formulation and implementation of the
company's strategy. Traditionally, the president and his team decided whether to enter
new markets, abandon product lines or embark on a five-year cost-cutting plan. The
president then confided to some extent to his human resources managers the personnel
implications of such a plan (laying off or hiring new workers, outsourcing the work of
those laid off to outside agencies, etc.).

Today that is not enough. To formulate their strategy, senior management needs the
participation of managers responsible for hiring, training and compensating the
organization's employees. Therefore, human resources management must understand
strategic planning.

Employees are one of the most important assets in an organization, the reason for its
existence and, without a doubt, the impetus that it needs to achieve its goals and be
successful. Therefore, managing human talent correctly and efficiently is one of the
essential activities to achieve objectives and lead a company to appear at the highest
levels of competitiveness.

The skills that were highly valued at a professional level a few years ago have now
become a thing of the past, giving way to other abilities that adapt to current demands.
This is why talent management must seek to train professionals who are capable of
adapting to new challenges and are prepared to face each of the challenges that may
arise in the future. The main challenges that arise in human capital management are:

Globalization. Having employees trained to face globalization is a great challenge not

only for companies, but also for the employees themselves. Having a well-prepared
human capital in tune with the most innovative trends allows the company to keep up to
date with the opening of markets and take advantage of any expansion possibilities or
business opportunities in global markets, which are very important in the business world
today.

New technologies. New technologies are present in every aspect of our lives and, of
course, companies are no exception. That is why leveraging technology to provide
employee training is essential today and has become one of the most important
challenges in human talent management.

Proactivity in the face of changes. The world is evolving at a rapid pace and never stops.
In this context, one of the greatest challenges in managing human talent is to create,
maintain and develop a work team with sufficient talent, skill and motivation to achieve
the organization's goals.
Good work environment. Having a good working environment in the organization is an
achievement for any company and one way to achieve it is by making your work team
see that they are more than employees or resources; they must be valued and seen as
partners, allies and collaborators.

Interesting professional challenges and development opportunities. Offering your team

opportunities for improvement and a career plan that allows them to feel valued and
encouraged to develop professionally within the organization will keep them constantly
motivated. It is also a way to reduce turnover and consolidate a great team, something
that undoubtedly represents a great advantage over competitors.

1.4 Creation of the Human Capital Management System.

The Human Capital Management System is a system that integrates the set of policies,
objectives, goals, responsibilities, regulations, functions, procedures, tools and
techniques that allow the integration of human capital and external management
processes with the organization's strategy, through work competencies, superior job
performance and increased work productivity. Any management system to be
implemented in organizations must ensure the continuous improvement of these and of
human capital. In the Human Capital Management System, the elements of the rules,
procedures and management actions that ensure the continuous improvement of the
processes in which workers participate are interrelated with the interests of the
organization and its clients, through the work competencies manifested in superior
professional performance to increase the efficiency and effectiveness of work.

1.4.1 The High Performance Work System.

As part of their strategic responsibilities, today's HR managers often focus on creating

what they call high-performance work systems. A high-performance work system is an
integrated set of human resource management policies and practices that together
foster higher-performing employees.

In this case, the main objective is to establish human resource systems (for recruitment,
selection, training, evaluation and compensation, for example) so that the company
generates a greater number of job applicants, selects candidates efficiently, provides
more and better training, links salary to performance more realistically, and offers a
safer work environment. In this way, the HR team is able to make a measurable
contribution to the company.
 1.4.2 Translation of the Strategy into Human Capital Policies and
Practices.

Managers intervene at three levels of strategic planning:

Corporate strategy. At the highest level, the business portfolio that the company covers
in total is identified, as well as the ways in which these relate to each other.

Competitive strategy. At the next lower level, the way to build and strengthen the
organization's long-term competitive position in the marketplace is identified.

Functional strategy. Finally, functional strategies identify the basic lines of action that
each department will follow to help the business meet its competitive goals. The
company's functional strategies should be consistent with its business and competitive
strategies.

Specifying strategies allows us to have the ability to define Human Resources practices
and policies, these include, for example, the following:

o Conduct job analysis (determine the nature of each employee's job)

o Plan staffing needs and recruit candidates for each position
o Select candidates for each position
o Implement induction and training programs for new workers
o Evaluate performance
o Managing salaries and wages (remunerating)
o Provide incentives and benefits
o Communicate (interview, advise, discipline)
o Train and develop current employees
o Foster employee engagement

1.5 Formal Organization Models of the Human Capital Department.

The concept of Human Resources organization refers to the way in which the department
is structured and how tasks are distributed among its members. This aspect is key, since
personnel management and the decisions made by this department have a great impact
on the company's operations.

It is common to use an organizational chart that reflects the structure of the department
and the role of the professional profiles of Human Resources. This is a very useful tool to
visually capture the organization and communicate what is expected of each team
member and to whom they should report.

The organizational structure of Human Resources can be formal and is the most
traditional in which there are levels of hierarchy and each team member has assigned
tasks and objectives. Likewise, communication channels and procedures are also
established between the different areas of the company.
Conceptual Map: Strategic Management of Human Capital
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References

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MUNDO COMPETITIVO (Octava ed.). México: McGraw-Hill.
Dessler, G., & Varela Juárez, R. (2011). Administración de recursos humanos (Quinta ed.). México:
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