Chapter 3

Strategic Human Resource

Management
Chapter 3: HR’s Strategic
Challenges
 Strategic plan
• A company's plan for how it will match its internal
strengths and weaknesses with external
opportunities and threats in order to maintain a
competitive advantage.

 Three basic challenges:

1. The need to support corporate productivity and
performance improvement efforts.
2. Employees play an expanded role in employers'
performance improvement efforts.
3. HR must be more involved in designing —not just
executing—the company's strategic plan.
The Strategic Management Process
 Strategic management
– The process of identifying and executing the
organization’s mission by matching its
capabilities with the demands of its
environment.
 Strategy
– A strategy is a course of action.
– The company’s long-term plan for how it will
balance its internal strengths and
weaknesses with its external opportunities
and threats to maintain a competitive
advantage.
Strategic Management Process
(cont’d)
 Strategic management tasks
– Step 1: Define the Business and Its Mission
– Step 2: Perform External and Internal Audits
– Step 3: Translate the Mission into Strategic
Goals
– Step 4: Formulate a Strategy to Achieve the
Strategic Goals
– Step 5: Implement the Strategy
– Step 6: Evaluate Performance
Steps in Strategic
Management…
Step 1: Define the Business and Its Mission

Management experts use the terms Vision & Mission to help

define a company’s current & future business.
What business do we want to be in or expand, even lessen?
We choose our strategies to take us there.

Vision:
A statement of where the company intends to go, evokes
emotional feelings in organization members.
A mental image of a future desirable state.
What the business should be.

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Step 1: Define the Business and Its Mission

Why a shared Vision is necessary?

 A Strategic vision widely shared among all
employees functions similar to how a magnet
aligns iron filings.

 When all employees are to committed firm’s

long-term direction, optimum choices on
business decisions are more likely Individuals
and teams know intent of firm’s strategic
vision.
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Step 1: Define the Business and Its
Mission

 Mission
Spells out who the company is, what it does,
and where it’s headed.
Tells us who the company is supposed to be
now.

Mission is more specific & shorter term.

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Step 1: Define the Business and Its Mission
 Begins with thinking strategically about firm’s future
makeup and forming vision of firm’s future for 5-10
years.
 Task is to
– Inject sense of purpose into firm’s activities
– Provide long-term direction
– Give strong firm identity
– Decide WHO we are, WHAT we do, & WHERE we
are headed.

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Step 1: Define the Business and Its Mission
 An organization’s MISSION
– reflects management’s vision of what firm seeks to
do & become
– Provide clear view of what firm is trying to
accomplish for its customers
– Indicate intent to stake out a particular business
position.

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Steps in Strategic
Management…
 Step 2: Perform External and Internal Audits

SWOT Analysis
Managers base their strategic The use of a SWOT chart to
plans on methodical analysis of compile and organize the
their external & internal process of identifying company
situations. The basic point of a
strategic plan should be a
direction for the firm that makes
sense, in terms of external
opportunities & threats it faces
& internal strengths &
weaknesses it possesses.

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Steps in Strategic
Management…

Step 3: Translate the Mission Into Strategic Goals

Managers need long-term strategic goals.
What does the mission mean for the next 5 years?
What kinds of partnerships do we form? Short-term goals as well!

Step 4: Formulate a Strategy to Achieve the Strategic Goals

How are we going to get there?

Get the employees involved!!

People will not implement strategies they don’t buy into.

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Steps in Strategic
Management…
Step 5: Implement The Strategy
Translate the strategy into action and results!
Involves all of the management functions-
Planning
Organizing
Staffing
Leading
Controlling

Step 6: Evaluate Performance

Strategic Control! – Keeps our strategies up to date.
Take constant corrective action as needed.
“Are all the resources we have contributing as planned to achieve our
goals?”

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Types of Strategic Planning
 Corporate – Level Strategy

 Business – Level Strategy

 Functional Strategy

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Types of Strategic
Planning
 Corporate-level strategy
– Identifies the portfolio of businesses that, in total,
comprise the company and the ways in which these
businesses relate to each other.
– 4 strategies used here:
• Diversification strategy implies that the firm will expand by
adding new product lines.
• Vertical integration strategy means the firm expands by
producing its own raw materials, or selling its products
direct.
• Consolidation strategy reduces the company’s size.
• Geographic expansion strategy takes the company
abroad.

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Types of Strategic
Planning . . .
 Business-level/competitive strategy
– Identifies how to build and strengthen the business’s long-
term competitive position in the marketplace.
– Breaks down each of the businesses
– At this stage we focus on strategies to affect a
competitive advantage:
• Cost leadership: the enterprise aims to become the low-cost
leader in an industry.
• Differentiation: a firm seeks to be unique in its industry along
dimensions that are widely valued by buyers.
• Focus: a firm seeks to carve out a market niche, and compete
by providing a product or service customers can get in no
other way.

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What is Competitive
Advantage?
 Competitive advantage

– Any factors that allow an organization to

differentiate its product or service from
those of its competitors to increase market
share.

– Superior human resources are an important

source of competitive advantage

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 Strategies in Brief

Company Strategic Principle

Dell Be direct
eBay Focus on trading communities
General Electric Be number one or number two in
every
industry in which we compete, or get
out
Southwest Airlines Meet customers’ short-haul travel
needs
at fares competitive with the cost of
automobile travel
Vanguard Unmatchable value for the investor-
owner
Wal-Mart Low prices, every day
Examples of Achieving Strategic
Fit…
 Michael Porter
– Emphasizes the “fit” point of view that all of
the firm’s activities must be tailored to or fit
its strategy, by ensuring that the firm’s
functional strategies support its corporate
and competitive strategies.
 Gary Hamel and C. K. Prahalad
– Argue for “stretch” in leveraging resources
—supplementing what you have and doing
more with what you have—can be more
important than just fitting the strategic plan
to current resources.
HR and Competitive Advantage
 Competitive advantage
– Any factors that allow an organization to
differentiate its product or service from
those of its competitors to increase market
share.
– *Superior human resources are
an important source of
competitive advantage*
HR and Competitive Advantage
To be continued…..

Thanks