Chapter 2 Aligning HR with Strategy 1 Learning

  • Slides: 30
Download presentation
Chapter 2 Aligning HR with Strategy 1

Chapter 2 Aligning HR with Strategy 1

Learning Outcomes After reading this chapter, you should be able to: • Understand the

Learning Outcomes After reading this chapter, you should be able to: • Understand the importance of strategic HR planning • Identify the risks associated with not planning 2

Learning Outcomes After reading this chapter, you should be able to: • Discuss approaches

Learning Outcomes After reading this chapter, you should be able to: • Discuss approaches to linking strategy and HR, including the barriers to becoming a strategic partner • List the characteristics of an effective HR strategy 3

Human Resources Management Thinkstock Human resources management (HRM) is an umbrella term that encompasses:

Human Resources Management Thinkstock Human resources management (HRM) is an umbrella term that encompasses: • Overarching HR philosophies • Formal HR policies • Specific HR practices 4

Strategic HRM • Interrelated philosophies, policies, and practices that facilitate the attainment of organizational

Strategic HRM • Interrelated philosophies, policies, and practices that facilitate the attainment of organizational strategy 5

History of HRM • HRM started out as personnel management, an administrative function oriented

History of HRM • HRM started out as personnel management, an administrative function oriented to cost control. • Many organizations realized the connection between human capital and organizational performance. • HRM developed as a response to the demand that HR could make strategic contributions. 6

Resource-Based View • This theory suggests that the management of resources and capabilities will

Resource-Based View • This theory suggests that the management of resources and capabilities will lead to competitive advantage, resulting in superior performance and value creation. Competitive Advantage Capabilities Resources 7

Resource-Based View • Typical resources might include: a) Human resources b) Proprietary knowledge c)

Resource-Based View • Typical resources might include: a) Human resources b) Proprietary knowledge c) Reputation • Typical capabilities might include: a) Adaptability b) Flexibility c) Speed of bringing new products to market 8

Contingency Perspective • The contingency perspective blends both the human capital and behavioural theories.

Contingency Perspective • The contingency perspective blends both the human capital and behavioural theories. • It refers to the need to modify HR strategies relative to its business and organizational strategies. 9

Human Capital Thinkstock Human capital • The collective sum of employees’ attributes, experience, knowledge,

Human Capital Thinkstock Human capital • The collective sum of employees’ attributes, experience, knowledge, and commitment invested in the organization 10

Human Capital Theory • Classical economists view the firm as having control over three

Human Capital Theory • Classical economists view the firm as having control over three types of resources in the production of goods and services, including: 1. Land 2. Labour (or human capital) 3. Capital Land Labour Capital 11

Human Capital Theory Human capital also includes: • Knowledge • Education • Vocational qualifications

Human Capital Theory Human capital also includes: • Knowledge • Education • Vocational qualifications • Professional certifications • Work-related experience • Competence of an organization’s employees 12

Human Capital Value Added • The value added of human capital investments or the

Human Capital Value Added • The value added of human capital investments or the human capital return on investment (ROI) can be calculated: 13

The Behavioural Perspective • This theory suggests that different HR strategies are required to

The Behavioural Perspective • This theory suggests that different HR strategies are required to influence the diverse behaviours of employees. • HR’s role is to reinforce certain behaviours via the HR practices such as recruitment, selection, training, compensation, and performance. 14

The Importance of Strategic Planning There are two main reasons strategic planning is so

The Importance of Strategic Planning There are two main reasons strategic planning is so important: 1. Employees help an organization achieve success because they are its strategic resources. 2. The planning process itself results in improved goal attainment. 15

Employees as Strategic Resources • Human resources can deteriorate if skills and knowledge become

Employees as Strategic Resources • Human resources can deteriorate if skills and knowledge become obsolete. • Investment in employees’ skills increases the value of the organization’s human capital. • The “value” of this human capital must be captured within the strategic HR plan. 16

Employees as Strategic Resources Human assets offer organizations a competitive advantage: • An organization

Employees as Strategic Resources Human assets offer organizations a competitive advantage: • An organization that manages its human resources strategically is more likely to survive and profit • Human assets must be managed and matched to the organizational strategy 17

Improved Goal Attainment • Strategy formulation is important to the attainment of organizational goals.

Improved Goal Attainment • Strategy formulation is important to the attainment of organizational goals. • Aligns all HR functional strategies with overall strategy • Focuses employees on important missions and goals of the organization • Developing HR practices that support the strategy lead to improved strategy implementation. 18

The Risks Is there a downside to strategic HR planning? • Time and energy

The Risks Is there a downside to strategic HR planning? • Time and energy in making decisions • Information overload potential • Impossible commitments to employees • Overconcern with employee reactions 19

The Risks • Potential job losses • Myopia developed from commitment to one strategy

The Risks • Potential job losses • Myopia developed from commitment to one strategy • Inability to see and adapt to changes developing in environment 20

Thinkstock Cliché “An organization that fails to plan, plans to fail. ” 21

Thinkstock Cliché “An organization that fails to plan, plans to fail. ” 21

Linking HR Processes to Strategy Aligning HR strategy with business strategy can be done

Linking HR Processes to Strategy Aligning HR strategy with business strategy can be done in one of three ways: 1. Start with organizational strategy and then create HR strategy. 2. Start with HR competencies and then craft corporate strategies based on these competencies. 3. Do a combination of both in a form of reciprocal relationship. 22

Corporate Strategy Leads to HR Strategy • A traditional view that supports the notion

Corporate Strategy Leads to HR Strategy • A traditional view that supports the notion that HRM programs flow from corporate strategy • The HR needs are derived subsequent to the inception of the corporate plan. • For example, a low-cost strategy needs to be aligned with low-cost labour, like Mc. Donald’s or Walmart 23

HR Competencies Lead to Business Strategy • A more current view assumes that an

HR Competencies Lead to Business Strategy • A more current view assumes that an organization cannot implement a strategy if it does not have the necessary human capital. • Small businesses are more in tune with this approach because the impact of human capital has a greater effect. 24

HR Competencies Lead to Business Strategy Thinkstock • This is also known as a

HR Competencies Lead to Business Strategy Thinkstock • This is also known as a “skills determine strategy. ” • Drawbacks include overreliance on employee capabilities and not enough environmental analysis or changing HR practices 25

HR Becomes a Business Partner • Requires concurrent strategy formulation • HR professionals play

HR Becomes a Business Partner • Requires concurrent strategy formulation • HR professionals play a more strategic role, moving from outsider to insider status. • HR managers apply their financial, forecasting, and entrepreneurial skills to assist in developing the strategy. • HR manager is a partner and problem solver 26

Reciprocal Interdependency • There is a reciprocal interdependency between HR strategy and business strategy.

Reciprocal Interdependency • There is a reciprocal interdependency between HR strategy and business strategy. • Both strategies influence each other. • Changes to one type of strategy will require changes to the other type. • HR should build its strategy by acknowledging the main issues facing the business. 27

Strategic Partnering • Although most HR professionals recognize their need to be involved in

Strategic Partnering • Although most HR professionals recognize their need to be involved in strategic issues, most non-HR managers do not see the importance of HR professionals as a strategic partner. • The main reason is that “people issues” are an HR issue rather than a strategic one. 28

Characteristics of an Effective HRM Strategy • External fit Thinkstock • Fit HR and

Characteristics of an Effective HRM Strategy • External fit Thinkstock • Fit HR and organizational strategies • Internal fit • Link HR programs to other functional areas. • Focus on results • Results must be measured and tracked. 29

HR Program Linkages HR Program ↓ Employee Competencies ↓ Organizational Strategy ↓ Organizational Outcome

HR Program Linkages HR Program ↓ Employee Competencies ↓ Organizational Strategy ↓ Organizational Outcome 30