Appunti di strategic human resources management

Strategic human resource management

An introduction to the organization, its environment and human resource management

Case study – OXFAM: Oxfam is currently responding to emergencies in 30 countries to the humanitarian crisis caused by waterlogging in Bangladesh. The demands of having to recruit people fast in a crisis situation and of sustaining long-term development work mean that HR is key to the success of Oxfam’s programmes. "There has been a deliberate strategy over the past five years to build up regional management and have fewer people based in Oxford." "While CPMs may come from any country in the world, the organization endeavours to employ and develop local staff. 'We recruit locally where we can,' Layton says, 'because immediately that person can speak the language, can understand the culture and they may have useful connections in that country'." For some specialist roles, Layton acknowledges that there are countries where it is difficult to recruit people with certain skills, like in a country which doesn’t have a proper education and infrastructure. In addition to regional and country-based staff, a team of emergency staff coordinated from the Oxford headquarters, known as humanitarian support personnel (HSP), are ready to be sent anywhere in the world at a moment’s notice.

Organization: 'A social arrangement for achieving controlled performance in pursuit of collective goals' (2010 Buchanan & Huczynski). The common factors that organizations share: 'interactions and efforts of people in order to achieve objectives channelled and coordinated through structure directed and controlled via management' (2010 Mullins).

HRM: A distinctive approach to employment management which seeks to achieve competitive advantage through the strategic development of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques’ (1995 Storey). HRM includes 'anything and everything associated with the management of the employment relationship in the firm’ (Boxall and Purcell).

HR: Since the 1970s, moving from personnel administration through to personnel management, through to human resource management and now 'people management'. From an administrative function → to transformational function, through to utilization of human resources for goals. The degree to which HR functions are 'strategic' remains questionable and may vary tremendously across industry sectors, countries, and sizes.

→ What does HR do? Recruitment and selection, arranging employment contracts, communicating employment terms and conditions and dismissal, dealing with promotion and career structures, job design, performance assessment, employee welfare, employment relations, management development and communication to employees.

Models of HRM

HRM was linked to the strategic goals of the organization and provided a vital input into achieving competitive advantage. The key models of HRM are concerned with strategic issues, however, those sometimes termed 'Hard' models typically have a stronger focus on ensuring that the HRM strategy 'fits' and is driven by the overall corporate strategy (Fombrun et al.). This model introduced the concept of strategic human resource management by which HRM policies are linked to the 'formulation and implementation of strategic corporate and/or business objectives'. It emphasizes a 'tight fit' or vertical integration between HR strategy and business strategy and the use of a set of HR policies and practices that are integrated with each other and with the goals of the organization.

Two key assumptions underlie the model: 1. That the most effective way of managing people will vary from one organization to the other and 2. Be dependent upon the organizational context; and the assumption of unitarism, i.e. working together for common goals. The 'hard' tag comes partly from the fact that if the strategy required in a competitive environment denotes tight performance measures or cost-cutting, then these will be reflected in the approach adopted by HR. A differentiation or quality enhancement strategy, however, would result in an approach to HR that mirrors the high commitment approach of the 'soft' models. It can be seen as such a 'softer' model.

Fig. 2: A key feature of the Harvard framework is its treatment of HRM as an entire system, with the various sub-elements of HRM combining to accomplish the stated outcomes, including high commitment. The focus is also arguably more on horizontal alignment or integration as opposed to vertical. 'Guest (1989, 1997) discusses 6 key components including an:

• HR strategy
• A set of HR policies
• A set of HR outcomes
• Behavioural outcomes
• Performance outcomes
• Financial outcomes

Guest acknowledges that the context in which HR operates may have a significant impact upon the effectiveness of HR.

Organizational strategy

Coordination of activities to achieve organizational goals, which are determined by the strategy and structure. Organizational strategy: (a strategy is simply a plan) 'the process of positioning the organization in its competitive environment and implementing actions to compete successfully’, for example:

• Cost minimization strategy seeks to control costs and keep prices low.
• Imitation strategy is a mix between the two
• Innovation strategy focuses on exploring new opportunities and creating new products/services.

A strategy by itself is not enough and needs to be supported by a range of activities that may include: vision, mission, strategic plans, goals/objectives, and taken in the context of organizational culture.

Organizational structure

'The formal system of task and reporting relationships that control, co-ordinate and motivate employees to work together to achieve organizational goals.' The most popular form is the FUNCTIONAL STRUCTURE. There are other organizational designs, such as PRODUCT/SERVICE, MATRIX, GEOGRAPHICAL or, possibly, COMBINATIONS OF THESE.

Case study - CHANDLER: Chandler defined strategy as 'the determination of the long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out those goals'. He argued that organizations, having identified their strategy, could then determine the most appropriate organizational structure in order to achieve this.

Modem forms of structure: The combination of outsourcing and subcontracting of activities with new electronic communication methods (information communication technologies or ICTs) gives rise to the possibility of organizations with very little in terms of physical presence → and has also given rise to the term 'the virtual organization.' A 'new economy' in tandem with new technologies has important implications for the structuring of organizations, being knowledge-based, global and networked. Many organizations have been seeking a greater degree of agility and flexibility, which has resulted in a greater reliance on market and market-like forms. Alternatives to the classic forms are: process-oriented company, network organization, joint ventures and strategic alliances, the boundaryless organization and the virtual organization.

In 1982, Peters and Waterman utilized the McKinsey model to demonstrate the components that make organizations successful. Seven aspects (the seven S’s) were highlighted:

• Strategy
• Structure
• Staff (employees)
• Shared values (primarily organizational culture)
• Systems
• Skills
• Style (primarily leadership)

Within this model, shared values were central, highlighting the importance of culture to business success.

Organizational culture

What drives employees to work in particular ways, make types of decisions, maintain working relationships, etc. Organizational culture will be considered simply as 'how things are done' and the extent 'why things are done' in a particular organization.

The eternal triangle

HR plays a critical role in decisions made around organizational direction, organizational design, organizational policies, procedures and practices, and importantly shaping and developing organizational culture.

The environment

The organization and environment fit: structural emphasis Burns and Stalker studied a number of UK firms in different industries and their settings. They characterized these settings/environments into 5 types from stable to unpredictable. Two main types of structure and management practice were also identified:

1. The mechanistic structure: high degree of task specialization & formalization, tight specification of individual responsibility and authority, centralized decision-making, formal rules
2. The organic structure: little task specialization, a low degree of formalization, delegated decision-making and a high degree of individual responsibility.

Linking HR to organizational strategy: One way of analysing the external environment is by the use of a political, economic, sociological and technical (PEST) or political, economic, sociological and technical, legal and environmental (PESTLE) analysis. Each categorization – political, economic, social or technological – and changes in these will influence HR. Examples would be changes in the law or economic fluctuations. HR will also attempt to exert some influence on the environment.

→ Environment HR ; HR Strategy HR Practices ; Diagrammatic representation of the potential relationships between organizational strategy and HR strategy, → different levels of integration between HR Strategy and organizational strategy

• Separation: activities of HR are removed from that of the organizational strategy
• Fit: Recognition is given to the importance of human resources in achieving the organizational strategy.
• Holistic model: people as a key resource for the achievement of competitive advantage rather than just something downstream of organizational strategy.

For any organization, the strategy adopted will be a result of taking into account the opportunities and threats offered by the external environment in general and the marketplace specifically; the strengths and weaknesses of the organization’s own resources, including human resources. Porter: organizations have 3 strategic options to gain competitive advantage:

1. Cost reduction
2. Quality enhancement
3. Innovation

Strategic approaches

Case study – SUBWAY: The founders developed a business formula for their restaurant: Low capital costs, around US$ 80-120,000; Around 6-8 employees per store; Clean and simple design with strong logo – name changed to 'Subway'; Clear and simple in-store pricing and product presentation – hygiene factors and training are important to ensure that all food is fresh and clean. This was the basis of the Subway franchise first offered in 1974. Over the next 30 years, Fred DeLuca found out that its franchise could be operated in smaller and more specialist outlets such as schools and factories – because of its smaller-scale business formula. They even offered a low-fat alternative to others’ fast food (1995).

Introduction: strategy in the twenty-first century

The world marketplace has become more complex in cultural and social terms:

1. Markets have become more international thus making it necessary to balance global interests and local demand variations.
2. The rapid development of technology and new forms of communication have revolutionized strategy.
3. Lower labour costs and greater wealth in countries such as China and India have put pressure on Western countries.
4. Free market competition supports and encourages growth in many newly developing countries.
5. Higher level of training and deeper skill levels of employees.
6. Higher capability and knowledge of the customers.

Corporate strategy

The scope of the firm in terms of the industries and markets in which it competes. A list of corporate strategy decisions could include investment in diversification, vertical integration, acquisition, new ventures, allocation of resources, etc. Corporate strategy is the pattern of major objectives, purposes or goals, and essential policies or plans for achieving those goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be (Andrews). Two main approaches:

1. The prescriptive approach: a prescriptive corporate strategy is one whose objective has been defined in advance and whose main elements have been developed before the strategy commences.
2. The emergent approach: an emergent corporate strategy is one whose final object is unclear and whose elements are developed during the course of its life as the strategy proceeds. (Figure shows 2 models)

Business level strategy

Concerned with competing for customers, generating value from your resources and the underlying principle of 'achieving a sustainable competitive advantage over rival companies using those resources'. The common elements in a successful strategy can be assumed as follows:

1. Simple, consistent and long-term goals. (THE FIRM - goals and values)
2. Profound understanding of the competitive environment. (The industry environment: relationship between competitors, customers, suppliers)
3. Objective appraisal of resources. (THE FIRM - resources and capabilities)
4. Effective implementation of the strategy. (THE FIRM - structure and systems)

The task of the business strategy, which represents a link between the firm and its environment, is to determine how the firm will deploy its resources within its environment and how it will organize itself to reach its long-term objective. To be successful, a strategy must be consistent with the firm’s external and internal environment, which includes goals and values, resources and capabilities, and structure and systems.

The core areas of corporate strategy

1. Strategic analysis. The organization, its mission and objectives have to be analysed in order to provide value for the people involved in the organization – its stakeholders.
2. Strategic formulation. Strategy options have to be formulated and then selected according to the particular skills of the organization and the special relationships that it has or can develop with those outside – supplier, customer, distributor and government.
3. Strategic implementation. The selected options now have to be implemented. It’s important to distinguish between context, content and process. While the context is the environment within which the strategy operates and is developed, the content consists of the main actions of the proposed strategy. Finally, the process is how to make actions link together or interact with each other. In most corporate strategy situations, context and content are reasonably clear: it is the way in which strategy is developed and enacted – the process – that usually causes the most problems.

The process of strategic analysis

The two different approaches to the core areas of corporate strategy underline important details. Strategic analysis, in both the prescriptive and emergent approach, can be divided into:

1. Identification of vision, mission and objectives
2. Analysis of the external environment: what is happening outside the organization,
3. Analysis of the internal environment: skills and resources available in the organization

The analysis of the internal/external environment helps the organization to do a SWOT analysis.

Strategy development and implementation

The prescriptive and emerging approaches clearly diverge in the development and implementation of strategy.

• According to the prescriptive approach, once the objectives are set the next step is the formal consideration of the options available to achieve them. This is followed by selecting from those options according to identified criteria in order to arrive at the prescriptive strategy.
• The emerging approach takes a much more experimental view of the strategy choice and its implementation. It seeks to learn by trial, experimentation and discussion as strategies are developed. There is no final agreed strategy, rather a series of experimental approaches that are considered by those involved and then developed further: strategy emerges during a process of crafting and testing.

→ the best approach would be to evaluate the strategy itself and then an alternative, i.e. finding the strategy that produces the highest NPV (net present value) or the same DCF (discounted cash flow) methodology is used to value individual projects, individual business units and alternative business strategies.

The core areas of business-level strategy

Products and customer analysis. The concept of competitive stance also embraces decisions as to how many segments to serve and how many products to put on the market, and at a corporate level, how many businesses to be in.

Competitor analysis

The organization has to understand the competition in order to achieve 'competitor advantage' to outperform its rivals and capture a greater share of an existing market space. (useful to apply Porter’s 5 forces)

• Competition from substitutes, from entrants, and from established rivals as sources of 'horizontal' competition
• The bargaining power of suppliers and buyers as sources of 'vertical' competition.

How to diversify different businesses.

Diversification (Ansoff): Substantial changes to the range of offerings → or to the markets served, or both.

How to balance different businesses. Economies of scope (at the business level) and synergies (at the corporate level) take 6 main forms (Goold and Campbell, 1998):

1. Sharing tangible resources, such as manufacturing, research or head office or IT facilities. Having such facilities fully utilized across a range of products makes more economic sense than having them specialized but half-used.
2. Pooling negotiating power, primarily vis-à-vis suppliers, to obtain lower prices, better quality or more responsive service, but also to obtain better treatment from retailers.
3. Co-ordinating strategic business unit (SBU) strategies, such as market entries, new product launches or pricing moves, so as to avoid a wasteful duplication of effort and improve the effectiveness of the company’s response.