Because learning changes everything.

Chapter 2

Strategic Human
Resource Management
Human Resource Management
Gaining A Competitive Advantage
TWELFTH EDITION
Raymond Noe, John Hollenbeck, Barry Gerhart,
Patrick Wright

© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
 Learning Objectives 1

LO 2-1 Describe the differences between strategy

formulation and strategy implementation.
LO 2-2 List the components of the strategic management
process.
LO 2-3 Discuss the role of the HRM function in strategy
formulation.
LO 2-4 Describe the linkages between HRM and strategy
formulation.

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 Learning Objectives 2

LO 2-5 Discuss the more popular typologies of generic

strategies and the various HRM practices associated
with each.
LO 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 HRM 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:
• Administrative linkage
• One-way linkage
• Two-way linkage
• 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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© McGraw Hill SOURCE: Adapted from K. Golden and V. Ramanujam, “Between a Dream and a Nightmare,” Human Resource Management 24 (1985), pp. 429–51. 13
 Table 2.2 SWOT Analysis for Google, Inc.

STRENGTHS WEAKNESSES
Expanding liquidity Issues with Chinese government
Operational efficiency Dependence on advertising segment
Broad range of services portfolio Losses at YouTube
OPPORTUNITIES THREATS
Growing demand for online video Weak economic outlook
Growth in Internet advertising market Invalid clicks
Inorganic growth Microsoft–Yahoo! deal

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 Strategy Implementation 1

Strategy Implementation
• “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

LO 2-5
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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 continued
• Vertical alignment occurs when HR 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

(blank)
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 continued

• 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 continued

• 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 continued

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

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 Strategy Implementation 9

HRM Practices continued

• 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 continued

• 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 slowed since 2008
• 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 Layoff Events and Separations 2009 to 2013

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© McGraw Hill SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, “Mass Layoffs Summary,” May 13, 2013, www.bls.gov/ news.release/mslo.nr0.htm. 36
 Strategy Implementation 18

Downsizing continued
• 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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No reproduction or further distribution permitted without the prior written consent of McGraw Hill.