What is Strategic Approach to HRM
The strategic approach to human resource management applies the concept of strategy to managing a firm’s human resources. This approach has six key elements as shown below:
- Explicitly recognizes the impact of the outside environment.
- Explicitly recognizes the impact of competition and the dynamics of the labor market.
- Has a long range focus (three to five years).
- Focuses on the issue of choice and decision making
- Considers all personnel, not just hourly or operational employees.
- Is integrated with overall corporate strategy and functional strategies.
The Dynamics of Labor Market
Employees compete for employees just as they do for customers. The forces of competition in attracting , rewarding, and using employees has a major effect on corporate human resource strategy. Forces play out in local, regional, and national labour markets.
Labour market dynamics of wage rates, unemployment rates, working conditions, benefit levels, minimum wage legislation, and competitor reputation all have an impact on and are affected by strategic human resource decisions.
Long Range Focus
A strategic focus tends to set the long range direction of a company’s human resource style and basic approach. Strategy can be changed but it is not always easy. It depends on the inertia, flexibility, and management philosophy of the firm. The intent is however to develop a consistent strategy to guide the firm into its future. Sometimes the word vision is used to capture this idea.
Choice and Decision-Making Focus
Strategy implies choosing among alternatives, and making major decisions about human resources that commit the organization’s resources toward a particular direction. For example, when Ford established its management labour worker participation program in the mid-1980s, it did so because of a major decision to increase employee involvement. Ford’s strategy of employee involvement, based on its “Quality is Job 1” campaign, was adopted because of a perceived need to resolve issues or prevent new ones from forming, specifically to improve product quality.
Integration with Corporate Strategy
The particular human resource strategy adopted by a firm should be integrated with the firm’s corporate strategy. In other words, corporate strategy should drive human resource strategy. Tom Kelley, former chairman of Society of Human Resource Management, said “human resource managers are involved in the strategic planning of global issues, rather than the day-to-day personnel transactions of the previous personnel administrator and along with that strategic planning process. It is imperative the Human Resource Professional establish goals and objectives that support the corporate goals.”
If corporate strategy is to grow and dominate a market, such as Apple Computer’s strategy in the early 1980s or Intel’s in the 1990s, then human resource strategy should focus on the rapid acquisition and placement of employees. If retrenchment is the strategy, then low or no hiring plus layoffs and termination of employees is the strategy.
Excellent coordination and combination of functions often result in a very special phenomenon known as synergy, the extra benefit or value realized when resources have been combined and coordinated effectively. This concept, known as economies of scope,makes the combined whole of the company more valuable than the sum of its parts.
Strategy Formulation, Decision Making, and Problem Solving
The strategy formulation process is not a neat and clean process. It advances in fits and starts and is much subject to much revision and ad hoc interpretation. Strategic formulation is a dynamic process. It is evolutionary in nature and is subject to change as outside environmental conditions, competition, or internal conditions change. This flexibility in strategy formulation and implementation is essential to the process. Since strategy formulation deals with the future, and since no one can predict the future with certainty, the process must be kept flexible. The firm must be able to respond to changes as they occur, in spite of the plans.
The ability to redirect strategy formulation is sometimes called logical incrementalism. This concept refers to the additional measured change or reaction to a particular event. Actions appear to be taken in a step by step fashion without the appearance of an overall plan.
A particular environmental pressure or a competitive threat could cause a firm to take a calculated course of action that was not originally planned as part of the strategy. A series of these actions might make it appear that the strategy is simply one of reaction rather than pro-action, that is, the company is reacting to the latest threat.
Another way to view this phenomenon is to make a distinction between intended strategy and realized strategy. The intended strategy is one which is formulated during the planning period. The realized strategy is that which the organization actually follows.
Political Influences in Human Resource Management
In keeping the dominant coalition, the members in an organization influence the human resource information system. They influence not only who will be hired and promoted but also the criteria used in hiring and job evaluation decisions. Not all behavior is political, but it becomes political when it attempts to manage or control the meanings, norms, and behavior of employees in an organization.
Political influence, like any other behavior in the organizations, does not operate in a vacuum. People answer for their actions. This accountability to others can have a substantial impact on their behavior, including political influence behavior. Politics is not bad per se, it is a fact of life in most organizations.
Managers may hire employees based on political influence. Although, at the time, they may say that the person hired ‘fit’ better in the organization, the definition of ‘fit’ may be a political one based on whom the managers think they can influence or control. If they hire enough employees who fit their world, then they can create a powerful political base in the organization, and the consequences of such behavior will soon become apparent.
Role of the Human Resource Unit in Strategic Decisions
Human resource professionals are in the best position to advise and otherwise influence the decision process. To become true business partners, human resource managers must focus their attention on issues that are of concern to the company’s chief executive.
Today companies have vice-presidents of human resources both at the corporate and divisional level. This enhances their membership in the dominant coalition. Yet because human resources is essentially staff oriented, the models of influence on decisions tend to fall along the continuum of staff involvement in decision making
Levels of Staff Involvement in Decisions
The organization’s human resource unit can have anywhere from a minimal to a maximum role to play in strategic decisions. At the far left of the continuum, the human resource unit simply provides raw data and information to the dominant coalition. For example if a company were considering closing a plant, the human resource would simply provide the decision maker with information on the number of people affected, severance (the end of a relationship or employment) costs, early retirement costs, and so on, with no analysis.
In the next position to the right, the human resource unit would analyze the data. Graphs and trends may be developed. Interpretive paragraphs would be written and implications would be spelled out regarding the plant closing.
In the middle position, the staff role of human resources is carried a step further. Here specific recommendations as to what the company should do with respect to the human resource issues raised in the closing would be developed but would be unranked. In other words, human resources would simply lay out the options with the associated costs and benefits of each option, but the decision makers would choose the option.
