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Chapter 2
Strategic Human
Resource Management

Human Resource Management

Gaining A Competitive Advantage
THIRTEENTH EDITION
Raymond Noe, John Hollenbeck, Barry
Gerhart, Patrick Wright

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 Learning Objectives
2-1 Describe the differences between strategy formulation
and strategy implementation.
2-2 List the components of the strategic management
process.
2-3 Discuss the role of the HRM function in strategy
formulation.
2-4 Describe the linkages between HRM and strategy
formulation.
2-5 Discuss the more popular typologies of generic strategies
and the various HRM practices associated with each.
2-6 Describe the different HRM issues and practices
associated with various directional strategies.
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 Introduction
Strategic Management:
• Having the goal to deploy and allocate resources for competitive
advantage.
• Integrally involving the H RM function.

• Using a business model to create value for customers.

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 What Is a Business Model?
Business Model:
• Story of how firm will create value for customers and how it
will do so profitably.
• Accounting concepts:
• Fixed costs.

• Variable costs.

• Margins.

• Gross margin.

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 What Is Strategic Management? 1

Strategic Human Resource Management (SHRM):

• A process.
• Approach to addressing competitive challenges
organizations face.
• Managing the “pattern or plan that integrates an
organization’s major goals, policies, and action sequences
into a cohesive whole.”
• Developing strategies for achieving company’s goals in
light of its current environment.

LO 2-1
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 What Is Strategic Management? 2

Components of the Strategic Management Process:

• Strategy formulation:
• Strategic planning groups decide on strategy.

• Strategy implementation:
• Organization follows through on strategy.

LO 2-2
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 Figure 2.2 A Model of the Strategic
Management Process

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 What Is Strategic Management? 3

Linkage Between HRM and the Strategic Management

Process:
• Strategic choice answers these questions:
• Where to compete?

• How to compete?

• With what will we compete?

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 What Is Strategic Management? 4

Role of HRM in Strategy Formulation:

• Answers the question “With what will we compete?”
• Four levels of integration between HRM and strategic
management function:
1. Administrative linkage.

2. One-way linkage.

3. Two-way linkage.

4. Integrative linkage.

LO 2-3 & 2-4

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 Figure 2.4 Linkages of Strategic Planning
and HRM

SOURCE: Adapted from K. Golden and V. Ramanujam, “Between a Dream and a Nightmare: On the Integration of the Human Resource Function
and the Strategic Business Planning Process,” Human Resource Management 24 (1985), pp. 429–51.

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 Strategy Formulation
Five Major Components:
• Mission.
• Goals.
• External analysis.
• Internal analysis.
• External analysis and internal analysis combined constitute
SWOT analysis.

• Strategic choice.

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 Figure 2.5 Strategy Formulation

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 Table 2.2 S WOT Analysis for Google, Inc.

STRENGTHS WEAKNESSES
• Expanding liquidity. • Issues with Chinese
• Operational efficiency. government.

• Broad range of services • Dependence on advertising

portfolio. segment.
• Losses at YouTube.
OPPORTUNITIES
• Growing demand for online THREATS
video. • Weak economic outlook.
• Growth in Internet advertising • Invalid clicks.
market. • Microsoft–Yahoo! Deal.
• Inorganic growth.
Source: GlobalData

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 Strategy Implementation 1

“An organization has a variety of structural forms and

organizational processes to choose from when implementing
a given strategy.”
Five variables:
• Organizational structure.

• HRM tasks:
• Task design.

• Selection, training, and development of people.

• Reward systems.

• Types of information and information systems.

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 Figure 2.6 Variables to Be Considered in
Strategy Implementation

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 Strategy Implementation 2

Organizational Culture:
• “…a complex set of values, beliefs, assumptions, and
symbols that define the way in which a firm conducts its
business.”
• Helps define relevant stakeholders (employees,
customers, suppliers, and competitors) and how to interact
with them.
• Both strategy and culture need to be aligned with the value
they provide to customers.

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 Strategy Implementation 3

Talent:
• Individuals who can have a disproportionate (positive or
negative) impact on the firm.
• Key groups of employees who are critical to driving value
in the value chain that drives value to the customer.

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 Figure 2.7 Supply Chain, Manufacturing,
Distribution, and Service

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 Strategy Implementation 4

Talent

• Vertical alignment occurs when H R practices and processes address

strategic needs of the business.

• Link is primarily through people:

• Job analysis and design.

• Recruitment.

• Selection systems.

• Training and development programs.

• Performance management systems.

• Reward systems.

• Labor relations programs.

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 Figure 2.9 Strategy Implementation

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 Table 2.3 Menu of HRM Practice Options

HRM Practice Options

• Job Analysis and Design.
• Recruitment and Selection.
• Training and Development.
• Performance Management.
• Pay Structure, Incentives, and Benefits.
• Labor and Employee Relations.

SOURCES: Adapted from R. S. Schuler and S. F. Jackson, “Linking Competitive Strategies with Human Resource Management Practices,” Academy of
Management Executive 1 (1987), pp. 207–19; and C. Fisher, L. Schoenfeldt, and B. Shaw, Human Resource Management, 2nd ed. (Boston: Houghton
Mifflin, 1992).

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 Strategy Implementation 5

HRM Practices:
• Job analysis:
• Process of getting detailed information about jobs.

• Job design:
• Addresses what tasks should be grouped into a particular job.

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 Strategy Implementation 6

HRM Practices
• Recruitment:
• Process through which the organization seeks applicants for
potential employment.

• Selection:
• Process by which the organization attempts to identify
applicants with the necessary knowledge, skills, abilities, and
other characteristics to help it achieve its goals.

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 Strategy Implementation 7

HRM Practices
• Training:
• Planned effort to facilitate the learning of job-related
knowledge, skills, and behavior.

• Development:
• Acquiring knowledge, skills, and behavior that improve
employees’ ability to meet challenges of existing jobs or jobs
that do not yet exist.

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 Strategy Implementation 8

HRM Practices
• Performance management:
• Ensures employees’ activities and outcomes are congruent
with organization’s objectives.

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 Strategy Implementation 9

HRM Practices
• Pay structure, incentives, and benefits:
• High pay and/or benefits relative to competitors can help
company attract and retain high-quality employees.
• Might have negative impact on overall labor costs.

• Tying pay to performance can elicit specific activities and

levels of performance from employees.

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 Strategy Implementation 10

HRM Practices
• Labor and employee relations:
• Employees. Assets or expenses?

• How much should employees participate in decision making?

• What rights do employees have?

• What is the company’s responsibility to employees?

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 Strategy Implementation 11

Strategic Types:
• Porter’s cost and differentiation strategies:
• Value created by reducing costs.

• Value created by differentiating a product or service so the

company can charge a premium price relative to its
competitors.

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 Strategy Implementation 12

HRM Needs in Strategic Types

• Role behaviors:
• In cost strategies: companies define the skills they require
and invest in training employees in these skill areas.
• In differentiation strategies: employees exhibit role behaviors
such as cooperating with others, developing new ideas, and
taking a balanced approach to process and results.

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 Strategy Implementation 13

Directional Strategies:
• Concentration.
• Internal growth.
• Mergers and acquisitions.
• Downsizings.

LO 2-6
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 Strategy Implementation 14

Concentration Strategies:
• Company must maintain current skills that exist in
organization.
• Need for skill-based training and fair compensation.
• Appraisals are more behavioral, and behaviors are
established through extensive experience.

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 Strategy Implementation 15

Internal Growth Strategies:

• Companies must constantly hire, transfer, and promote
individuals.
• Compensation weighted towards achievement.
• Joint ventures require conflict resolution.

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 Strategy Implementation 16

Mergers and Acquisitions:

• On the increase.
• HR needs to be involved.
• People issues can cause problems.

• Different organizational cultures—standardization?

• Conflict resolution.

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 Strategy Implementation 17

Downsizing:
• Trend has increased significantly during March 2020 due to the
lockdown of the economy.
• Disadvantages:
• Tends to fall short of meeting companies’ financial and
organizational objectives.

• Has negative effects on employee morale and productivity.

• Must “surgically” reduce workforce by cutting less valuable workers.

• Early retirement programs usually result in rehiring.

• Survivor morale issues.

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 Figure 2.11 Layoffs and Discharges
(January 2019 to August 2020)

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, “Layoffs and discharges in small, medium, and large establishments,” Oct. 14,
2020, www.bls.gov/opub/ted/2020/layoffs-and-discharges-in-small-medium-and-large-establishments.htm

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 Strategy Implementation 18

Downsizing:
• Advantages:
• Allows company to “get rid of dead wood” and make way for
fresh ideas.
• Opportunity to change organization’s culture.

• Demonstrate to top-management the value of company’s

human resources to its ultimate success.

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 Strategy Implementation 19

Strategy Evaluation and Control:

• Must constantly monitor effectiveness of both the strategy
and implementation process.
• Helps identify problem areas and either revise existing
structures and strategies or devise new ones.

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 The Role of Human Resources in Providing Strategic
Competitive Advantage 1

Emergent Strategies:
• Strategies that evolve from grassroots of the organization.
• What organizations actually do, not what they intend to do.
• Usually identified by those lower in organizational
hierarchy.
• Intended strategies are result of rational decision-making
process used by top managers to develop strategic plan.

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 The Role of Human Resources in Providing Strategic
Competitive Advantage 2

Enhancing Firm Competitiveness:

• Develop human capital pool that allows the company to
adapt to ever-changing environments.
• Becoming a “learning organization.”
• Allows people to continually expand capacity to achieve
desired results.

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 End of Main Content

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