Human Resource Management,

Arab World Edition

Gary Dessler, Akram Al Ariss

Chapter 3: Strategic Human Resource Management and

the HR Scorecard

Lecturer:

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 After studying this chapter, you should be able
to:

1. Outline the steps in the strategic management process.

2. Explain and give examples of each type of companywide
and competitive strategy.
3. Explain what a strategy-oriented human resource
management system is and why it is important.

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 The Strategic Management Process

Strategic Plan
• How an organization intends to match its internal strengths and
weaknesses with its external opportunities and threats to maintain a
competitive advantage. Its about setting the direction.

Strategy
• A course of action

Strategic Management

• The process of identifying and executing the organization’s

mission by matching its capabilities with the demands of its
environment. Its overall process of achieving that
direction, from planning to executing.

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 Business Vision and Mission

Vision
• A general statement of an organization’s intended direction
that evokes emotional feelings in its members

Mission
• Spells out who the company is, what it does, and where it is headed

EX: IKEA
• Mission: Offer a wide range of well-designed, functional home furnishing products at prices so low that as
many people as possible will be able to afford them.
• Vision: To create a better everyday life for the many people.

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 FIGURE 3-2 A SWOT Chart

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 FIGURE 3-3 Relationships Among Strategies in Multiple-Business Firms

• Example:
• Indevco Group with Sanita, Unipak, Masterpak, Mediapak and a lot more
• Debbane Saikali group with Exotica, Enotica, Ixir, Pesco telecommunication amon
gothers

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 Types of Strategies

Corporate-Level
Strategies

Vertical Geographic
Diversification Consolidation
Integration Expansion
Strategy Strategy
Strategy Strategy

Input – Process – output

Forward vertical integration - OUPUT
Backward vertical integration - INPUT

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 Corporate Level Strategies

• Diversification: is to enter into a new market or industry

which the organization is not currently in, whilst also
creating a new product for the new market.

• Vertical Integration: a strategy whereby a company

owns or controls its suppliers, distributors or retail
locations to control its value or supply chain

• Consolidation: refers to the mergers and acquisitions of

many smaller companies into much larger ones for
economic benefit.

• Geographic expansion strategy:

simply expanding from its original location to
additional geographical sites

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 Types of Strategies (cont)

Business-Level/
Competitive Strategies

Cost Leadership Differentiation Focus/Niche

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 Business Strategies

Competitive Advantage: Any factor that allow an

organization to differentiate its product or service from those
of the competitors.

Cost Leadership: attempts to earn higher returns and

competitive advantages through offering products or services
at the lowest prices in the industry.

Differentiation: providing customers with something

unique, different and distinct from items their competitors
may offer in the marketplace.

Focus / Niche: expanding in a narrow market or industry

segment.

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 Functional strategies

• Each department such as: sales, HRM manufacturing

should identify the basic course of action that it will pursue
to help the business attain its competitive goals
• It focuses the achievement of a goal on the skills and
abilities of individual departments and their employees.

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 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

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 FIGURE 3-5 Linking Company-Wide and HR Strategies

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 Strategic Human Resource Challenges

Basic Strategic
Challenges

Need to support Focus on

Corporate expanded role of Increased HR
productivity & employees in the team involvement
performance organization’s in design of
improvement performance strategic plans
efforts efforts

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 Human Resource Management’s Strategic
Roles

Strategic
Planning
Roles

Strategy Strategy
Execution Formulation
Role Role

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 Creating the Strategic Human Resource
Management System

Components of a
Strategic HRM System

Human Resource Employee

Human Resource
Policies and Behaviors and
Professionals
Practices Competencies

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 TABLE 3-3 Comparison of HR Practices in High-Performance and
Low-Performance Companies

Low-Performance High-Performance
Sample HR Practices Company Company
Number of qualified applicants per position (recruiting) 8.26 36.55
Percentage hired based on a validated selection test 4.26 29.67
Percentage of jobs filled from within 34.90 61.46
Percentage in a formal HR plan including recruitment, development, and 4.79 46.72
succession
Number of hours of training for new employees (less than 1 year) 35.02 116.87
Number of hours of training for experienced employees 13.40 72.00
Percentage of employees receiving a regular performance appraisal 41.31 95.17
Percentage of workforce whose merit increase or incentive pay is tied to 23.36 87.27
performance
Percentage of workforce who received performance feedback from multiple 3.90 51.67
sources (360-degree feedback)
Target percentile for total compensation (market rate = 50%) 43.03 58.67
Percentage of the workforce eligible for incentive pay 27.83 83.56
Percentage of difference in incentive pay between a low-performing and a high- 3.62 6.21
performing employee
Percentage of the workforce routinely working in a self-managed, crossfunctional, 10.64 42.28
or project team
Percentage of HR budget spent on outsourced activities (e.g., recruiting, benefits, 13.46 26.24
payroll)
Number of employees per HR professional 235.88 139.51
Percentage of the eligible workforce covered by a union contract 30.00 8.98

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 FIGURE 3-7 Basic Model of How to Align HR
Strategy and Actions with Business Strategy

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 FIGURE 3-A1 Simple Value Chain for Southwest Airlines

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 FIGURE 3-A3 Simple Value Chain for KAMCO

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 Value Chain / Strategy Map

• Value chain: • Strategy Map:

Identifies the Diagram that
primary activities summarizes the
that create value chain of major
for customers and activities that
the related support contribute to a
activities company’s success

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 HR Scorecard

An HR scorecard is a visual representation of key measures

of human resource department achievements, productivity
and other factors important to the organization. Factors
measured include costs, hiring, turnover, training,
performance management and alignment with corporate
goals

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 TABLE 3–A1 HR Scorecard: Strategic Activity Metrics

Chapter HR Activity Metrics

3. Strategic Human Resource Percentage of employees who can quote company strategy/vision
Management and the HR
Percentage in a formal HR plan including recruitment, development, and succession
Scorecard
4. Job Analysis Percentage of employees with updated job descriptions
5. Personnel Planning and Number of applicants per recruiting source
Recruiting
Number of qualified applicants per position
Number of jobs filled from within
Cost per hire
6. Employee Testing and Percentage of employees hired based on validated employee tests
Selection
Job offers versus high-performance players rejected (or accepted)
Time taken to fill an open position
7. Interviewing Candidates Percentage of applicants receiving a structured interview
8. Training and Developing Number of hours’ training per employee per year (experienced)
Employees
Number of hours’ training per new employee
Number of hours’ training per experienced employee per year
Competency development per employee
Cost per trainee hour
Number of training days and programs per year
Percentage of employee development plans completed
Percentage of employees with access to appropriate training and development opportunities
9. Performance Management and Number of employees getting feedback
Appraisal
Percentage of appraisals completed on time
Percentage of employees receiving a regular performance appraisal
Number and quality of performance appraisal discussions per year

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 TABLE 3–A1 HR Scorecard: Strategic Activity Metrics (cont)

Chapter HR Activity Metrics

10. Managing Careers Percentage of employees with formal development plan
11. Compensation, Incentives, Total compensation expense per employee
and Benefits
Target percentile for total compensation (pay in top 25 percent)
Percentage of employees satisfied with their benefits
Percentage of workforce with merit increase or incentive pay tied to performance
Percentage of workforce eligible for merit pay
Percentage of workforce eligible for incentive pay
Percentage difference in incentive pay between low- and high-performing employees
Average merit increase granted by job classification and job performance
Range in merit increase granted by classification
Ratio of company’s salaries to competitors’ salaries
12. Ethics and Fair Treatment in Number of grievances per year
HR Management
quality of employee feedback systems
Percentage of employees able to quote ethics code
13. Employee Safety and Health Accident costs per year (US$)
Hours lost due to accidents
Number of safety training and awareness activities
14. Managing Global Human Percentage of expatriates receiving predeparture screening and/or counseling
Resources

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 FIGURE 3-A4
HR Scorecard for
KAMCO:
Strategic HR
Management

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 Key Terms

competitive advantage strategic plan

leveraging strategy
metrics strategy map
mission SWOT analysis
strategic control value chain
strategic human resource vision
management
strategic management

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