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

5 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.

6 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.

7 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.

8 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.

9 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.

10 Steps in Strategic Management… Managers base their strategic plans on methodical analysis of their external & internal 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. SWOT Analysis The use of a SWOT chart to compile and organize the process of identifying company  Step 2: Perform External and Internal Audits

11 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.

12 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?”

13 Types of Strategic Planning  Corporate – Level Strategy  Business – Level Strategy  Functional Strategy

14 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.

15 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.

16 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

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