1 Strategic Human Resource Management Paul L. Schumann, Ph.D. © 2011 by Paul L. Schumann. All rights reserved.

2 Strategic Decisions Where should we compete? Where should we compete? What industries, products, locations, …?What industries, products, locations, …? How should we compete? How should we compete? What criteria: cost, product features, quality, reliability, …?What criteria: cost, product features, quality, reliability, …? With what should we compete? With what should we compete? What gives us competitive advantage?What gives us competitive advantage?

3 Competitive Advantage Unique, sustainable, hard to copy: Unique, sustainable, hard to copy: Product or serviceProduct or service Production or inventory methodsProduction or inventory methods Distribution methodsDistribution methods Marketing methodsMarketing methods Financing methodsFinancing methods Information management methodsInformation management methods Human resource managementHuman resource management

4 Link HRM & Strategy Administrative linkage Administrative linkage One-way linkage One-way linkage Two-way linkage Two-way linkage Integrative linkage Integrative linkage

5 Generic Strategies (Porter) Cost Leadership Strategy Cost Leadership Strategy Control overhead and other costsControl overhead and other costs Use efficient, large-scale facilitiesUse efficient, large-scale facilities Exploit the experience curveExploit the experience curve Differentiation Strategy Differentiation Strategy Differentiate through unique technology, features, customer service, brand image, etc.Differentiate through unique technology, features, customer service, brand image, etc.

6 Directional Strategies External growth External growth Mergers & acquisitions (“M&A”)Mergers & acquisitions (“M&A”) Horizontal (M&A involving competitors) Horizontal (M&A involving competitors) Vertical (M&A involving the supply chain) Vertical (M&A involving the supply chain) Internal growth Internal growth New products, new markets, innovationNew products, new markets, innovation Concentration (focus, niche) Concentration (focus, niche) Cut costs, grow market share in nicheCut costs, grow market share in niche Downsizing / divesting Downsizing / divesting

7 Transforming the HRM Function Customers Customers Products Products Methods Methods

8 Measuring HRM Effectiveness Audit approach Audit approach Measure key indicators & customer satisfactionMeasure key indicators & customer satisfaction Analytic approach Analytic approach Cost / benefit analysisCost / benefit analysis

9 Improving HRM Effectiveness Restructure HRM: Restructure HRM: HRM Centers for Expertise (specialists)HRM Centers for Expertise (specialists) HRM Field Generalists (dual reporting)HRM Field Generalists (dual reporting) HRM Service Center (specialists)HRM Service Center (specialists) Outsource HRM Outsource HRM Process redesign/reengineering HRM Process redesign/reengineering HRM Human Resource Information Systems (HRIS) Human Resource Information Systems (HRIS)