The Manager’s Role in Strategic Human

Resource Management

Chapter 3

Part 1 | Introduction

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e
 After
After reading
reading this
this chapter,
chapter, you
you should
should be
be able
able to:
to:
1. Outline the steps in the strategic management process.
2. Explain and give examples of each type of
companywide and competitive strategy.
3. Explain what a strategy-oriented human resource
management system is and why it is important.
4. Illustrate and explain each of the eight steps in the HR
Scorecard approach to creating human resource
management systems.

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3–2
 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 chosen course of action.
• Strategic Plan
 How an organization intends to balance its internal
strengths and weaknesses with its external
opportunities and threats to maintain a competitive
advantage over the long-term.
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 Essence of Strategic Planning

 Where are we now as a business , where do we want

to be and how should you get there
 A manager will formulate specific strategies to take
the company from where it is now to where she wants
to be
 When Yahoo tried to figure out whether to sell search
business to Microsoft engaging in strategic planning
 Maruti Suzuki wanted an independent engineering
research and design centre to help launch its first car
designed and made in India engaged in Strategic
planning
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 • Strategic plans
 A company ‘s method for making company in a
current business environment
 who the company serves
 What products and services it provides
 What differentiates it
 Its competitive advantage
 How it makes money

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 Business Vision and Mission
• Vision
 A general statement of an organization’s intended direction that
evokes emotional feelings in organization members.
• Mission
 Spells out who the company is, what it does, and where it’s
headed.
 Should we expand into this new business or not
 Ford Motor company : Where quality is Job 1
 Google: is to organize the world information and make it
universally accessible and useful
 Pepsico mission “ to be the world’s premier consumer products
company focused on convenient foods and beverages

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 Strategic Management Process
• Define the current business
 What products to we sell
 Where do we sell
 How do our products differ from our competitors
• Some important issues
• Product scope : Apple: computers ipods aand
ipads
• Vertical integration: to what extent should we
design , manufacture and sell your own products
• Geographic range : Times of India / Bangalore
• Competitive advantage
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 • Perform External and internal audits
 Are we heading in the right direction given the challenges that
we face
• Create strategic options
 Competition from Apple / Google Microsoft had an option to
focus on software for microcomputers/ tablets
 Procter and Gamble decided to enter beauty care market with
Oil of Olay to compete with Loreal / or buy a existing brand
• Review strategic options
 Microsoft acquired Nokia and access to intellectual property
relates to mobile devices

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 • Translate into goals (P&G
 Eg “ generate 20% of corporate revenues from Oil of
Olay brand within 4 years
 Capture 18%of top tier beauty care market within 3
years
 Ford : “ no more than 1 initial defect per 10,000 cars

• Implement the strategy

• Evaluate Performance
 P&G Oil of Olay line into world class brand
 Microsoft tablets are in slow start
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 FIGURE 3–7 A SWOT Chart

Strengths Weaknesses

Example: Market leadership Example: Large inventories

Opportunities Threats

Example: New overseas markets Example: Market saturation

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 FIGURE 3–8 Relationships Among Strategies in Multiple-Business Firms

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 Types of Strategies

Corporate-Level
Strategies

Vertical Geographic
Diversification Consolidation
Integration Expansion
Strategy Strategy
Strategy Strategy

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 Types of Strategies
• Corporate strategies
 How many and what kind of business
 Growth strategy
– When a business has indentified a unique niche and is
successfully and aggressively expanding within that particular
market niche it is pursuing a growth strategy
– focuses on the growth and expansion of the corporation
– Starbucks uses a rapid growth strategy as it continues its
geographic and brand expansion opening on average at least
one new stores somewhere in the world every day.
– It an be pursued internally by opening additional locations or
externally through mergers, joint ventures or the acquisitions
of other businesses

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 • Diversification strategy
 Corporation makes a decision to own and operate several different business
 GE owes several businesses that manufactures aircraft engines, industrial
products, major appliances and technical products as well as financial services
and insurance businesses
 Various business owned by the corporation are usually related to each other in
some way or the other
 Corporation can achieve synergy among various business it owns
 Rotate managers among various businesses so they develop on overall managerial perspective on
the whole firm
 Markets for each business is similar , the firm can develop relatively uniform procedures for
selection , compensation and training

 PVR began its innings in the movie exhibition business by introducing

world-class multiplexes in India and went for a 'related' diversification
into the high-risk high-return business of film production. It decided to
get out of the movie making business post the 2012 release of Hindi
movie Shanghai because it doesn't see this as a viable business
opportunity for the long term
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 Examples
• Infosystems, that it will phase out its manufacturing business over the
next few years to improve margins and increase organisational efficiency
• The company will instead focus on strengthening the services and
distribution verticals.
• Unrelated diversification
 Attempts to operate several unique businesses in different , unrelated markets
 GE owns business that compete in different unrelated areas
 ITC, is one of those rare examples where the company has successfully diversified
much beyond its core business. The company, which started as a tobacco products
manufacturer, eventually expanded to hotels, paper and packaging, with agri-business
and foods being added recently.

Videocon Industries This 'Indian multinational' started out primarily as a consumer

durables manufacturer, but its ambitions have today led it into a wide-ranging set of
businesses, which include oil exploration, telecommunications, financial services,
direct-to-home, apart from its staple consumer durables division.

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 • Reliance into power generation, telecom, fertilizers and,
more recently, retail. Company can shield itself from the
adverse effects of business cycles
• Each unrelated business is likely to have its own unique
hiring , compensation and training needs as dictated by
its own competitive environment – these functions will
likely be customized and decentralized for each
business
• GE Jet engine compensation packages for instance will
closely resemble those at Rolls Royce another large
scale engine manufacture

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 Types of Strategies (continued)

Business-Level/
Competitive
Strategies

Cost Leadership Differentiation Focus/Niche

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e
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 • Differentiation strategy
 A company that uses a diffrentiation strategy attempts to
develop an image or reputation for its product or service that
sets the company apart from its competitors
 Eg :Rolex, BMW
• Cost leadership strategy
 Is one that focuses on minimizing the costs as much as
possible
 Fast food restaurants
 low skilled , but will not stay long
 Moving production to other countries where labor costs are lower

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 • Big Bazaar . has been successful using cost leadership strategy
very well for over years. The store has been attracting buyers with
low prices; the low prices are offered every day to attract
customers. The products are offered at a cheaper rate than
competitors consistently, not occasionally .Big Bazaar is able to
carry on the gigantic business due to its large scale and efficient
supply chain management. They source products from cheap
domestic suppliers.. This allows the company to sell their items at
low prices and they earn profits through thin margins gained from
high volumes of business.

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e
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 • The idea behind focus strategy is developing, marketing and
selling products or services to a niche market, such as a particular
type of consumer, a specific product line or a targeted
geographical area. The goal of the focus strategy is to become the
leader in the determined niche by serving the designated group
better than anyone else out there.
• Porche markets to the particular segment that likes fast and
expensive cars and can afford it
• Organic foods which are more expensive, but with promise of
better quality and enhanced for environment protection.
• Another example of a niche is of traditional 35mm film cameras
and films; these have become rare.

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e
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 • Café Coffee Day in India. This chain of coffee restaurants brought
in the concept of cafes to India where the young and the old can sit
for a while, chat, discuss, and meet over a steaming cup of coffee.
The first one opened in 1996 on Brigade Road in Bangalore. At
CCD, people can have leisure meetings. Nobody disturbs or asks
you to vacate the table. The concept instantaneously became a hit.
It has a target audience of educated, serious people in big cities
and metros where meeting places are in shortage.  Another
appreciation CCD has capped is that there are also 11,000 small
growers in India from whom they source coffee from.

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Authorized adaptation from the United States edition of Human
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 Achieving Strategic Fit

The “Fit” Point of View (Porter) consists of the

idea that each department’s strategy needs to fit
the parent business’s competitive aims.
Vertical and horizontal integration

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Authorized adaptation from the United States edition of Human
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 Strategic Human Resource Management
• Strategic Human Resource Management
 The linking of HRM with strategic goals and
objectives in order to improve business performance
and develop organizational cultures that foster
innovation and flexibility.
 Involves formulating and executing HR systems—HR
policies and activities—that produce the employee
competencies and behaviors that the company needs
to achieve its strategic aims.

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 FIGURE 3–6 Linking Company-Wide and HR Strategies

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 Creating the Strategic Human Resource
Management System

Components of a
Strategic HRM System

Human Resource Employee

Human Resource
Policies and Behaviors and
Professionals
Practices Competencies

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e
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 FIGURE 3–10
Strategy
Map for
Southwest
Airlines

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd Source: Adapted from “Creating a Strategy Map,”
Authorized adaptation from the United States edition of Human Ravi Tangri, [email protected].
Resource Management, 12/e
3–26
 FIGURE 3–12 Three Important Strategic HR Tools

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Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People,
Authorized adaptation from the United States edition of Human
Strategy, and Performance (Boston: Harvard Business School Press, 2001), p. 12.
Resource Management, 12/e
3–27
 Measuring HR’s Contribution
• The HR Scorecard
 Shows the quantitative standards, or
“metrics” the firm uses to measure
HR activities.
 Measures the employee behaviors
resulting from these activities.
 Measures the strategically relevant
organizational outcomes of those
employee behaviors.

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Resource Management, 12/e
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 Creating an HR Scorecard

The 10-Step HR Scorecard Process

Identify required HR policies

1 Define the business strategy 6
and activities

Choose HR Scorecard
2 Outline value chain activities 7
measures
Summarize Scorecard
3 Outline a strategy map 8 measures on digital dashboard
and monitor, predict, and
Identify strategically required evaluate
4
outcomes
Identify required workforce
5
competencies and behaviors

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Resource Management, 12/e
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 FIGURE 3–14 Simple Value Chain for “The Hotel Paris”

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 Five Sample HR Metrics
HR Metric* How to Calculate It
Absence rate # of days absent in month
× 100
Average # of employees during month × # of workdays

Cost per hire Advertising + agency fees + employee referrals + travel cost of
applicants and staff + relocation costs + recruiter pay and benefits
Number of hires

HR expense HR expense
factor Total operating expense

Time to fill Total days elapsed to fill job requisitions

Number hired

Turnover rate Number of separations during month

× 100
Average number of employees during month
Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–
35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on
Human Capital: New Metrics,” Compensation and Benefits Review,
January/February 2000, pp. 13–20; Thomas E. Murphy and Sourushe Zandvakili,
“Data and Metrics-Driven Approach to Human Resource Practices: Using
Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd Customers, Employees, and Financial Metrics,” Human Resource Management 39,
Authorized adaptation from the United States edition of Human no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House
Incorporated, July 17, 1996;] SHRM/BNA 2000 Cost Per Hire and Staffing Metrics
Resource Management, 12/e Survey; www.shrm.org. See also, SHRM Research “2006 Strategic HR 3–31
Management Survey Report,” Society for Human Resource Management..
 KEY TERMS

strategic plan
strategic management
vision
mission
SWOT analysis
strategy
strategic control
competitive advantage
strategic human resource management
HR Scorecard
metrics
value chain analysis

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Authorized adaptation from the United States edition of Human
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