HR STRATEGIES

(SHRM / HRM-402)

AJAY SOLKHE
M.B.A, Ph.D.(HRD)
Faculty
University School of Management
Kurukshetra University, Kurukshetra
(A+ Grade NAAC Accredited)
[email protected]
Mob: 9896544852
TOPICS TO BE COVERED

 What are HR strategies?

 What is the purpose of HR strategies?

 What are the main types of overall HR strategies?

 What are the main areas in which specific HR

strategies are developed?
 What are the criteria for an effective HR strategy?

 How should HR strategies be developed?

 How should HR strategies be implemented?

WHAT ARE HR STRATEGIES ?
 HR strategies set out
 what the organization intends to do about its
human resource management policies and
practices and
 how they should be integrated with the business
strategy and each other.
 They are described by Dyer and Reeves (1995)
as ‘internally consistent bundles of human
resource practices’, and
 In the words of Peter Boxall (1996) they provide
‘a framework of critical ends and means’.
WHAT ARE STRATEGIES?
 Richardson and Thompson (1999) suggest
that
 ‘A strategy, whether it is an HR strategy or
any other kind of management strategy,
must have two key elements:
there must be strategic objectives (ie things
the strategy is supposed to achieve), and
there must be a plan of action (ie the means
by which it is proposed that the objectives will
be met).’
 Because all organizations are different, all HR
strategies are different. There is no such thing as a
standard strategy, and research into HR strategy
conducted by Armstrong and Long (1994) and
Armstrong and Baron (2002) revealed many
variations.
 Some strategies are simply very general
declarations of intent. Others go into much more
detail.
 But TWO BASIC TYPES of HR strategies can be
identified. These are:
 OVERALL STRATEGIES such as high performance
working; and
 SPECIFIC STRATEGIES relating to the different aspects
of human resource management such as learning and
development and reward.
WHAT IS THE PURPOSE OF HR STRATEGIES?
 The purpose of HR strategies is to articulate what
an organization intends to do about its human
resource management policies and practices now
and in the longer term, bearing in mind the dictum
of Fombrun et al (1984)
 that business and managers should perform well in the
present to succeed in the future.
 HR strategies may set out intentions and provide a
sense of purpose and direction, but they are not
just long-term plans.
 As Lynda Gratton (2000) commented, ‘There is no
great strategy, only great execution.’
TYPE 1: OVERALL STRATEGIES
 Overall strategies describe the general
intentions of the organization about how
people should be managed and developed and
what steps should be taken to ensure that the
organization can attract and retain the people it
needs and ensure so far as possible that
employees are committed, motivated and
engaged.
 There are four categories of overall strategy:
 Category 1:
 An emergent, evolutionary and possibly
unarticulated understanding of the required
approach to human resource management.
 This will be influenced by the business strategy as it
develops, the position of the organization in its life
cycle, and the organizational configuration
(prospector, defender or analyser).
 It will also be affected by the views, experience and
management style of the chief executive, senior
managers and the head of HR, whose influence will
depend on position and credibility.
 Category 2:
 Broad-brush statements of aims and purpose
that set the scene for more specific
strategies.
 They will be concerned with Overall
Organizational Effectiveness – achieving
human resource advantage by, as Boxall and
Purcell (2003) point out, employing ‘better
people in organizations with better process’
and generally creating ‘a great place to
work’.
 Category 3:
 Specificand articulated plans to create
‘bundles’ of HR practices and develop a
coherent HR system.
 Category 4:
 The conscious introduction of overall
approaches to human resource management
such as high-performance management,
high-involvement management and high-
commitment management . These overlap to
a certain extent.
HIGH PERFORMANCE MANAGEMENT
 High-performance management aims to make an impact on the
performance of the organization through its people in such
areas as productivity, quality, levels of customer service,
growth, profits and, ultimately, the delivery of increased
shareholder value.
 High-performance management practices include rigorous
recruitment and selection procedures, extensive and relevant
training and management development activities, incentive pay
systems and performance management processes.
 As a bundle, these practices are often called HIGH-
PERFORMANCE WORK SYSTEMS (HPWS). This term is more
frequently used than either high-involvement management or
high-commitment management, although there is a degree of
overlap between these approaches and an HPWS.
HIGH INVOLVEMENT MANAGEMENT
 The term ‘high involvement’ was used by Lawler (1986) to describe
management systems based on commitment and involvement, as
opposed to the old bureaucratic model based on control.
 He claimed that high-involvement practices worked well because they
acted as a synergy and had a multiplicative effect.
 This approach involves treating employees as partners in the
enterprise whose interests are respected and who have a HR
strategies voice on matters that concern them. It is concerned with
communication and involvement.
 The aim is to create a climate in which a continuing dialogue between
managers and the members of their teams takes place in order to
define expectations and share information on the organization’s
mission, values and objectives. This establishes mutual
understanding of what is to be achieved and a framework for
managing and developing people to ensure that it will be achieved.
HIGH COMMITMENT MANAGEMENT

 High-commitment management has been

described by Wood (1996) as ‘A form of
management which is aimed at eliciting a
commitment so that behaviour is primarily
self-regulated rather than controlled by
sanctions and pressures external to the
individual, and relations within the
organization are based on high levels of
trust.’
 The approaches to achieving high commitment as
described by Beer et al (1984) and Walton (1985)
are:
 the development of career ladders and emphasis on
trainability and commitment as highly valued
characteristics of employees at all levels in the
organization;
 a high level of functional flexibility, with the
abandonment of potentially rigid job descriptions;
 the reduction of hierarchies and the ending of status
differentials;
 a heavy reliance on team structure for disseminating
information (team briefing), structuring work (team
working) and problem solving (quality circles).
 Wood and Albanese (1995) added to this list:
 job design as something management consciously
does in order to provide jobs that have a considerable
level of intrinsic satisfaction;
 a policy of no compulsory lay-offs or redundancies, and
permanent employment guarantees, with the possible
use of temporary workers to cushion fluctuations in the
demand for labour;
 new forms of assessment and payment systems and,
more specifically, merit pay and profit sharing;
 a high involvement of employees in the management of
quality.
TYPE 2 : SPECIFIC HR STRATEGIES
 Specific HR strategies set out what the
organization intends to do in areas such as:
 HUMAN CAPITAL MANAGEMENT – obtaining,
analysing and reporting on data, which inform the
direction of value-adding people management
strategic, investment and operational decisions;
 HIGH-PERFORMANCE MANAGEMENT – developing
and implementing high performance work
systems;
 CORPORATE SOCIAL RESPONSIBILITY – a
commitment to managing the business ethically in
order to make a positive impact on society and the
environment;
 ORGANIZATION DEVELOPMENT – the planning
and implementation of programmes designed
to enhance the effectiveness with which an
organization functions and responds to change;
 ENGAGEMENT – the development and
implementation of policies designed to
increase the level of employees’ engagement
with their work and the organization;
 KNOWLEDGE MANAGEMENT – creating,
acquiring, capturing, sharing and using
knowledge to enhance learning and
performance;
 RESOURCING – attracting and retaining high-
quality people;
 TALENT MANAGEMENT – how the organization
ensures that it has the talented people it needs to
achieve success;
 LEARNING AND DEVELOPMENT – providing an
environment in which employees are encouraged
to learn and develop;
 REWARD – defining what the organization wants
to do in the longer term to develop and implement
reward policies, practices and processes that will
further the achievement of its business goals and
meet the needs of its stakeholders;
 EMPLOYEE RELATIONS – defining the intentions of
the organization about what needs to be done and
what needs to be changed in the ways in which the
organization manages its relationships with
employees and their trade unions.
CRITERIA FOR AN EFFECTIVE HR STRATEGY
 An effective HR strategy is one that works in the sense
that it achieves what it sets out to achieve.
 In particular, it:
 will satisfy business needs;
 will be founded on detailed analysis and study, not just
wishful thinking;
 can be turned into actionable programmes that anticipate
implementation requirements and problems;
 is coherent and integrated, being composed of components
that fit with and support each other;
 takes account of the needs of line managers and employees
generally as well as those of the organization and its other
stakeholders. As Boxall and Purcell (2003) emphasize, ‘HR
planning should aim to meet the needs of the key
stakeholder groups involved in people management in the
firm.’
HOW SHOULD HR STRATEGIES BE DEVELOPED?
 Boxall (1993) has drawn up the following
propositions about the formulation of HR strategy
from the literature:
 The strategy formation process is complex, and
excessively rationalistic models that advocate
formalistic linkages between strategic planning
and HR planning are not particularly helpful to our
understanding of it.
 Business strategy may be an important influence
on HR strategy but it is only one of several factors.
 Implicit (if not explicit) in the mix of factors that
influence the shape of HR strategies is a set of
historical compromises and trade-offs from
stakeholders.
SCHOOLS OF STRATEGY DEVELOPMENT

 Purcell (2001) has identified three main

schools of strategy development:
The Design School,
the Process School and

the Configuration School.

DESIGN SCHOOL

 The design school is deliberate and is ‘based

on the assumption of economic rationality’.
 It uses quantitative rather than qualitative tools
of analysis and focuses on market
opportunities and threats.
 What happens inside the company is ‘mere
administration or operations’.
PROCESS SCHOOL
 The process school adopts a variety of approaches
and is concerned with how strategies are made
and what influences strategy formulation:
 ‘It is much more a study of what actually happens
with explanations coming from experience rather
than deductive theory.’
 As Purcell suggests, the implication of the design
concept is that ‘everything is possible’ while that
of the process school is that ‘little can be done
except swim with the tide of events’.
CONFIGURATIONAL

 The configuration school draws attention to the

beliefs that,
 first,strategies vary according to the life cycle of the
organization,
 second, they will be contingent on the sector of the
organization and,
 third, they will be about change and transformation.

 The focus is on implementation strategies,

which is where Purcell thinks HR can play a
major role.
LEVELS OF STRATEGIC DECISION MAKING
 Research conducted by Wright et al (2004)
identified two approaches that can be adopted
by HR to strategy formulation:
 the inside-out approach and
 the outside-in approach.

They made the following observations about

the HR–strategy linkage:
 At the extreme, the ‘inside-out’ approach begins
with the status quo HR function (in terms of skills,
processes, technologies etc) and then attempts
(with varying degrees of success) to identify linkages
to the business (usually through focusing on ‘people
issues’), making minor adjustments to HR activities
along the way…
 On the other hand, a few firms have made a
paradynamic shift to build their HR strategies from
the starting point of the business. Within these
‘outside-in’ HR functions, the starting point is the
business, including the customer, competitor and
business issues they face. The HR strategy then
derives directly from these challenges to create real
solutions and add real value.
STRATEGIC OPTIONS AND CHOICES

 The process of developing HR strategies

involves generating strategic HRM options and
then making appropriate strategic choices.
 The process of developing HR strategies
involves the adoption of a contingent approach
in generating strategic HRM options and then
making appropriate strategic choices.
 Choices should relate to but also anticipate the
critical needs of the business.
 They should be founded on detailed analysis
and study, not just wishful thinking, and should
incorporate the experienced and collective
judgement of top management about the
organizational requirements while also taking
into account the needs of line managers and
employees generally.
 Consideration needs to be given to the impact of
the five forces on HR policy choice identified by
Baron and Kreps (1999):
 1. the external environment (social, political, legal and
economic);
 2. the workforce;
 3. the organization’s culture;
 4. the organization’s strategy;
 5. the technology of production and organization of
work.
DEVELOPING HR STRATEGIES

 Five fundamental questions that need to be asked

in formulating HR strategies have been posed by
Becker and Huselid (1998):
 1. What are the firm’s strategic objectives?
 2. How are these translated into unit objectives?

 3. What do unit managers consider are the

‘performance drivers’ of those objectives?
 4. How do the skills, motivation and structure of the
firm’s workforce influence these performance drivers?
 5. How does the HR system influence the skills,
motivation and structure of the workforce?
METHODOLOGY FOR FORMULATING HR
STRATEGIES
 ASSESS FEASIBILITY. From an HR point of view,
feasibility depends on whether the numbers and
types of key people required to make the proposal
succeed can be obtained on a timely basis and at
a reasonable cost, and whether the behavioural
expectations assumed by the strategy are realistic
 Eg. retention rates and productivity levels.
 DETERMINE DESIRABILITY. Examine the
implications of strategy in terms of
untouchable/sancrosanct HR policies
 Eg a strategy of rapid retrenchment would have to be
called into question by a company with a full
employment policy.
 DETERMINE GOALS. These indicate the main
issues to be worked on and they derive
primarily from the content of the business
strategy.
 For example, a strategy to become a lower-cost
producer would require the reduction of labour
costs. This in turn translates into two types of HR
goals: higher performance standards (contribution)
and reduced headcounts (composition).
 Decide means of achieving goals. The general rule
is that the closer the external and internal fit, the
better the strategy, consistent with the need to
adapt flexibly to change.
 External fit refers to the degree of consistency between
HR goals on the one hand and the exigencies of the
underlying business strategy and relevant
environmental conditions on the other.
 Internal fit measures the extent to which HR means
follow from the HR goals and other relevant
environmental conditions, as well as the degree of
coherency or synergy among the various HR means.
ACHIEVING VERTICAL FIT – INTEGRATING
BUSINESS AND HR STRATEGIES
 Wright and Snell (1998) suggest that seeking fit requires
knowledge of the skills and behaviour necessary to implement
the strategy, knowledge of the HRM practices necessary to elicit
those skills and behaviours and the ability to quickly implement
the desired system of HRM practices.
 It should be remembered that business and HR issues influence
each other and in turn influence corporate and business unit
strategies.
 It is also necessary to note that, in establishing these links,
account must be taken of the fact that strategies for change
have also to be integrated with changes in the external and
internal environments.
 Fit may exist at a point in time, but circumstances will change
and fit no longer exists.
ACHIEVING HORIZONTAL INTEGRATION

 Horizontal integration or fit is achieved when the

various HR strategies cohere and are mutually
supporting. This can be attained by the process of
‘bundling’
 Bundling is carried out by
 first identifying appropriate HR practices,
 second, assessing how the items in the bundle can be
linked together so that they become mutually
reinforcing and therefore coherent, which may mean
identifying integrating processes, and
 finally drawing up programmes for the development of
these practices, paying particular attention to the links
between them.
SETTING OUT THE STRATEGY
 There is no standard model of how an HR strategy
should be set out. It all depends on the
circumstances of the organization.
 But the following are the typical areas that may be
covered in a written strategy:
 Basis:
 business needs in terms of the key elements of the
business strategy;
 environmental factors and analysis (SWOT/PESTLE);
 cultural factors: possible helps or hindrances to
implementation.
 Content: details of the proposed HR strategy.
 Rationale: the business case for the strategy
against the background of business needs and
environmental/cultural factors.
 Implementation plan:
 action programme;
 responsibility for each stage;

 resources required;

 proposed arrangements for communication,

consultation, involvement and training;
 project management arrangements.
 Costs and benefits analysis: an assessment of
the resource implications of the plan (costs,
people and facilities) and the benefits that will
accrue, for the organization as a whole, for line
managers and for individual employees (so far
as possible these benefits should be quantified
in terms of return on investment or value
added).
IMPLEMENTATION OF STRATEGIES
 But getting strategies into action is not easy.
Too often, strategists act like Mr Pecksmith,
who was compared by Dickens (1843) to ‘a
direction-post which is always telling the way to
a place and never goes there’.
 The problem with strategic HRM as noted by
Gratton et al (1999) is that too often there is a
gap between what the strategy states will be
achieved and what actually happens to it.
 The factors identified by Gratton et al that
contribute to creating this gap included:
 the tendency of employees in diverse organizations
only to accept initiatives they perceive to be
relevant to their own areas;
 the tendency of long-serving employees to cling to
the status quo;
 complex or ambiguous initiatives may not be
understood by employees or will be perceived
differently by them, especially in large, diverse
organizations;
 it is more difficult to gain acceptance of non-
routine initiatives;
 employees will be hostile to initiatives if the
initiatives are believed to be in conflict with the
organization’s identity, eg downsizing in a culture
of ‘job-for-life’;
 the initiative is seen as a threat;
 inconsistencies between corporate strategies and
values;
 the extent to which senior management is trusted;
 the perceived fairness of the initiative;
 the extent to which existing processes could help
to embed the initiative;
 a bureaucratic culture that leads to inertia.
SOME MORE BARRIERS

 Other major barriers include failure to

 understand the strategic needs of the business,
 inadequate assessment of the environmental and
cultural factors that affect the content of the
strategies,
 the development of ill-conceived and irrelevant
initiatives, possibly because they are current fads
or because there has been an ill-digested analysis
of best practice that does not fit the organization’s
requirements.
OVERCOMING THE BARRIERS
 To overcome these barriers it is necessary to:
 1) conduct a rigorous preliminary analysis of needs
and requirements;
 2) formulate the strategy;

 3) enlist support for the strategy;

 4) assess barriers;

 5) prepare action plans;

 6) project manage implementation; and

 7) follow up and evaluate progress so that remedial

action can be taken as necessary.