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Module-1

Chapter-2
The Strategic Role of HRM

Lect.Naziya Lakhani, TNRCMS


Objective of this Chapter

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 seven steps in the HR
Scorecard approach to creating human resource management
systems.

Lect.Naziya Lakhani, TNRCMS


The Strategic Management Process

Strategy A chosen course of action. A well formulated strategy


helps to allocate an org’s resources into a unique manner.

Strategic plan is the company’s plan for how it will match its
internal strengths & weaknesses with external opportunities &
threats in order to maintain a competitive advantage.

Strategic Management The process of identifying and


executing the organization’s mission by matching its capabilities
with the demands of its environment.

Lect.Naziya Lakhani, TNRCMS


Business Vision and Mission

Vision
– A general statement of an organization’s intended direction
that evokes emotional feelings in organization members.
– where the organisation wants to go in the future

Mission
– Spells out who the company is, what it does, and where it’s
headed.
– summary of the beliefs of the organisation and where it is
now

Whereas visions usually lay out in broad terms what the


business should be, the mission lays out in broad terms what
our main tasks are now.
Lect.Naziya Lakhani, TNRCMS
IBM:

Vision Statement - Solutions for a small planet

Mission Statement - At IBM, we strive to lead in the invention,


development and manufacture of the industry's most advanced
information technologies, including computer systems,
software, storage systems and microelectronics.

We translate these advanced technologies into value for our


customers through our professional solutions, services and
consulting businesses worldwide.

Lect.Naziya Lakhani, TNRCMS


Example

In 2006, Apollo Tyres, the number one Indian manufacturer of


automotive tyres was facing heavy competition, rising costs, &
high employee Turnover.

While its aim was to be one among the world’s five best tyre
companies.

They coined the strategy termed “Passion in Motion” which


rested on the three pillars of people, technology & Quality

According to the strategic plan, by 2015, Apollo Tyres aimed to


be among top five tyre manufacturers globally.

Lect.Naziya Lakhani, TNRCMS


It implied placing a high level of focus on

– Employee Performance
– Growth
– International Acquisition

Lect.Naziya Lakhani, TNRCMS


The Strategic Management Process

Strategic planning is part of the Strategic Management process.

Strategic Management entails both strategic planning &


Implementation & is “the process of identifying & executing the
organization’s strategic Plan, by matching the companies
capabilities with the demand of the envt”.

Lect.Naziya Lakhani, TNRCMS


Step-1: Step-2: Step-3: Step-4: Step-5: Step-6 Step-7
Define Perform Formulate Translate Formulate Implement Evaluate
the External & new the strategies to the Performance
Current Internal business & mission achieve the strategy
Business Audit mission into goals strategic
& Mission Statement goals

Strategic Strategic
Strategic Planning Execution Evaluation

Lect.Naziya Lakhani, TNRCMS


1. Define the Current Business & Mission

Every company must choose the envt., on which it will compete- in


particular,

What products it will sell


Where it will sell them
How its products or service will differ from its competitors

Eg:- Rolex & Seiko are both in the watch business, but Rolex sells a
limited product line of high-priced quality watches. Seiko sells a wide
variety of relatively inexpensive but innovative watches.

Therefore, the most basic strategic decisions managers make involve


deciding “What business” their firms should be in

For Instance, in terms of the products or services they will sell, the
geographic locales in which they will sell them & how they will distinguish
their products or services from competitors.
Lect.Naziya Lakhani, TNRCMS
They have to see Company’s opportunities & threats and its strength &
weakness.

Manager then choose strategies – course of action such as buying


competitors or expanding overseas – to get the company from where it is
today to where it wants to be tomorrow

Managers sometimes use a VISION Statement as a shorthand to


summarize how they see the business down the road.

The Company’s Vision is a general Statement of its intended direction that


shows, in broad terms “WHAT WE WANT TO BECOME”

Eg:- one eye care company says “Our vision is caring for your Vision”

Visions are usually longer term, broader images; most managers also
formulate mission statements to “…. Communicate ‘who we are, what we
do, & where we’re headed.’”
Lect.Naziya Lakhani, TNRCMS
Whereas visions usually lay out in broad terms what the business should be,
the mission lays out in broad terms what our main tasks are now.

Eg:- In the popular movie Chak De India, the mission of the women’s hockey
team was to win the world cup hockey tournament & prove to the country,
the world, & themselves that the Indian women’s team can win the world
cup.

Lect.Naziya Lakhani, TNRCMS


2. Perform External & Internal Audits

 Ideally, managers begin their strategic planning by methodically analyzing


their external & internal situations.

 The strategic plan should provide a direction for the firm that make sense,
in terms of the external opportunities & threats for the firm faces & the
internal strengths & weaknesses it possesses.

 To facilitate this strategic external/internal audit, many managers use


SWOT analysis

Lect.Naziya Lakhani, TNRCMS


3. Formulate New Business & Mission Statements

Based on the situation analysis, what should our new business be, in
terms of

– What products it will sell


– Where it will sell them
– How its products or services will differ from its competitors ?
– What is our new mission & Vision?

Lect.Naziya Lakhani, TNRCMS


4. Translate the mission into Strategic Goals

The firm’s managers need strategic goals.

What exactly does that mission mean, for each dept, in terms of how we’ll
boost quality?

Eg:- Citicorp can’t function solely with a mission like , “to provide
integrated, comprehensive financial service world wide”

To guide managerial action, it needs goals in terms of things like building


shareholder value, maintaining superior rates of return, building a strong
balance sheet, & balancing the business by customer, product &
geography.

Lect.Naziya Lakhani, TNRCMS


5. Formulate strategies to Achieve the Strategic Goals

Again, a strategy is a course of action.

It shows how the enterprise will move from the business it is now to the
business it wants to be in, given the firm’s opportunities, threat, strength,
& weaknesses

The strategy should be the best to reach the specific goal & it should be
easily communicate with the emp.

Eg:- Nokia’s strategy helps to explain how the firm can make thousands of
decisions each week so easily.

Lect.Naziya Lakhani, TNRCMS


6. Implement the strategies

Strategy implementation means translating the strategy into actions &


results by actually

Hiring or firing people


Building or closing plants
Adding or eliminating Products

Strategy Implementation involves drawing on & applying all the


management functions

Planning
Organizing
Staffing
Leading
Controlling

Lect.Naziya Lakhani, TNRCMS


7. Evaluate Performance

Strategies don’t always succeed.

Managing strategy is an ongoing process.

Strategic control keeps the company’s strategy up to date.

Lect.Naziya Lakhani, TNRCMS


Types of Strategies
Corporate
Strategy

Business 1 Business 3
Business 2
Competitive Competitive
Competitive
strategy strategy
strategy

Functional Functional Functional


strategies strategies strategies

Lect.Naziya Lakhani, TNRCMS


Manager engage in three types of strategic planning

At the top, company wide level, many firms consist of several


business.

Eg:- PepsiCo runs Pepsi, Frito-Lay, & Pizza Hut.

Therefore PepsiCo needs a corporate level strategy.

A company’s corporate level strategy identifies the portfolio of


businesses that, in total, comprise the company & the ways in
which these businesses relate to each other.

Lect.Naziya Lakhani, TNRCMS


Corporate Level Strategies

Corporate-Level
Strategies

Vertical Geographic
Diversification Consolidation
Integration Expansion
Strategy Strategy
Strategy Strategy

Lect.Naziya Lakhani, TNRCMS


1. Diversification Strategy:- Implies that the firm will expand by
adding new Product lines.

2. Vertical Integration Strategy:- Means the firm expand by,


perhaps, producing its own raw materials or selling its
products direct.

3. Consolidation:- Reducing the company’s size

4. Geographic Expansion:- For instance, taking the business


abroad

Lect.Naziya Lakhani, TNRCMS


2. Competitive strategy/business level strategy

At the next level down, each of these businesses (Such as


Pizza Hut) needs a business level/ competitive strategy.

A competitive strategy identifies how to build & strengthen


the business’s long term competitive position in the market
place

Eg:- Pizza Hut compete with Papa John’s

Companies try to achieve competitive advantages for each


business they are in.

Competitive advantage as any factors that allow a company


to differentiate its product or service from those of its
competitors to increase market share.
Lect.Naziya Lakhani, TNRCMS
Business Level Strategies

Business-Level/
Competitive
Strategies

Cost Leadership Differentiation Focus/Niche

Lect.Naziya Lakhani, TNRCMS


1. Cost Leadership:- Means the enterprise aims to become the
low-cost leader in an industry.

Eg:- Dell . It maintains its competitive advantage through its Internet-


based sales-processing & distribution system, & by selling direct.

2. Differentiation:- In a differentiation strategy, a firm seeks to


be unique in its industry along dimension that are widely
valued by buyers.

Volvo stresses the safety


Papa John’s Pizza stresses fresh ingredients

3. Focusers:- Carve out a Market niche

Ferrari can compete by providing a product or service customers can


get in no other way
Lect.Naziya Lakhani, TNRCMS
3. Functional Strategy:-

Finally, each individual business is composed of depts. such


as manufacturing, sales & HRM.

Functional strategies identify the basic courses of action that


each dept. will pursue in order to help the business attain its
competitive goals.

Eg:- Dell’s hr strategies include putting its HR activities on the


Web to support Dell’s low-cost competitive advantage.

Lect.Naziya Lakhani, TNRCMS


HRM’S Role in Creating Competitive Advantage

To have an effective competitive strategy, the company must have one or


more competitive advantage

“factors that allow an org to differentiate its product or service”

Eg:- Jet Airways, India’s largest full-service private airline attained the
market-leader status partly through its highly trained & motivated emps who
provide better service to the customers.

Today, most companies have easy access to the same technologies, so


technology it-self is rarely enough to set a firm apart.

Eg:- Toyota doesn’t have manufacturing equipment that’s unavailable to


Ford. Why then is Toyota so much more efficient, & its cars of such high
quality?
Lect.Naziya Lakhani, TNRCMS
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.

Lect.Naziya Lakhani, TNRCMS


Example

Dell :- The essence of Dell’s competitive strategy has always been to be a


low-cost leader.

Dell’s hr managers use various HR strategies to support Dell’s low-cost


aims

Dell delivers most of its hr services, not through a conventional HR dept.,


but via the Web.

Lect.Naziya Lakhani, TNRCMS


Strategic Human Resource
Challenges
Basic Strategic
Challenges

Corporate Expanded role of


Increased HR
productivity and employees in the
team involvement
performance organization’s
in design of
improvement performance
strategic plans
efforts efforts

Lect.Naziya Lakhani, TNRCMS


Human Resource Management’s
Strategic Roles

Strategic
Planning
Roles

Strategy Strategy
Execution Formulation
Role Role

Lect.Naziya Lakhani, TNRCMS


1. The Strategy Execution Role:-

Strategy execution is traditionally the heart of the hr manager’s strategic


job.

Top Management formulates the company’s corporate & competitive


strategies.

Then the hr manager designs strategies, policies & practices that make
sense in terms of the company’s corporate & competitive strategies.

Eg:- Dell’s hr strategies – the Web-Based help desk, its centralized


internet service.

Lect.Naziya Lakhani, TNRCMS


2. The Strategy Formulation Role

HRM’s traditional role in executing strategy has expanded to include


working with top management to formulate the company’s strategic plan.

Again this expanded strategy formulation role reflects the reality


employers face today.

Globalization means more competition, more competition means more


performance & most employers are pursuing improved performance by
boosting the competence & commitment levels of the employees.

For that they require the SWOT analysis of the emp & their org.

Lect.Naziya Lakhani, TNRCMS


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

Lect.Naziya Lakhani, TNRCMS


What is an HR Scorecard?

Lect.Naziya Lakhani, TNRCMS


Strategic Importance of HRM
Item Traditional HRM Strategic HRM

Responsibility for human Specialists Line managers


resources
Objective Better performance Improved understanding and use
of human assets
Role of HRM area Respond to needs Lead, inspire, understand

Time focus Short-term results Short, intermediate, long term

Control Rules, policies, position power Flexible, based on human


resources
Culture Bureaucratic, top-down, Open, participative,
centralization empowerment
Major emphasis Following the rules Developing people

Accountability Cost centers Investment in human assets


Questions

1. What is the difference between a strategy, a vision, & a


mission? Give one example of each
2. Explain the types of strategies with suitable examples.
3. Explain how hrm can be instrumental in helping a company
create a competitive advantage.
4. Define what an HR Scorecard is & briefly explain the steps
with suitable e.g..
5. Explain the steps of strategic management process
6. Explain the HR strategies for any company of your choice.

Lect.Naziya Lakhani, TNRCMS

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