Chapter 2 – Aligning HR with Strategy Strategic Human Resources Planning, 5e CHAPTER 2 Aligning HR with Strategy

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  Chapter 2 Ð Aligning HR with Strategy Strategic Human Resources Planning, 5e   Copyright © 2013 by Nelson Education Ltd. 13 CHAPTER 2 Aligning HR with Strategy Chapter Learning Outcomes After reading this chapter, you should be able to: ¥   Understand the importance of strategic HR planning. ¥   Identify the risks associated with not planning. ¥   Discuss approaches to linking strategy and HR, including the barriers to becoming a strategic partner. ¥   List the characteristics of an effective HR strategy. Chapter Summary Strategic HRM is a set of distinct but interrelated philosophies, policies, and practices with the goal of enabling the organization to achieve its strategy. HR strategy is embedded in theories of the resource-based view of the firm, the behavioural perspective, and the human capital approach. By involving HR in the discussion of strategic policies, an organization has a better chance of being effective in the implementation of these policies. There are various approaches to linking HRM strategies to organizational strategies. We can start with the corporate strategy that leads to the HR strategy, or start with the HR competencies that lead to business strategy, or use a blend of the interrelationship of the HR strategy and the corporate strategy. Aligning HR strategy with the corporate strategy and with other functional strategies is important. Lecture Outline Comments Activity A. What Is Strategic HRM? Strategic HRM is a set of distinct but interrelated practices, policies, and  philosophies whose goal is to enable the attainment of the organizational strategy. Strategic HRM is an umbrella that includes: ¥   Overarching HR  philosophiesÑ  Specify the values that inform the organizationÕs  policies and practices.   Discussion Questions: What does strategy mean? How can HR be strategic? What does human capital mean? Case Study: Have students review Exercise 2 on  page 52 of the textbook regarding the Sabermetrics process used by the Oakland Athletics baseball team. (Watch the movie  Moneyball   for more input). How did the Oakland Athletics deviate from the normal hiring strategy? What risks were associated with adopting their new strategy? Were the Oakland Full file at Full file at  Chapter 2 Ð Aligning HR with Strategy Strategic Human Resources Planning, 5e   Copyright © 2013 by Nelson Education Ltd. 14 ¥   HR  policiesÑ  These direct and partially constrain the development of specific  practices.   ¥   HR  practicesÑ  For example, recruitment, selection, and appraisal.   Note:  Historically HRM was called personnel management, where the focus was on its administration function and cost controls. A need for lower costs led HR departments to be outsourced. However, outsourcing reduced costs but created a disconnect with an organizationÕs strategy and best practices. Eventually, employees were viewed as human capital who could contribute to competitive advantage. Athletics successful? How did the Oakland Athletics align its HR practices, policies, and  philosophies with its organizational strategy? B. Theories of the Strategic Management of  Human Resources In order to determine whether an organizationÕs resources will contribute to competitive advantage, they must satisfy four criteria: 1.   valuable 2.   difficult to imitate 3.   rare 4.   non-substitutability  Resource-Based View Michael Porter has argued strongly that the organizationÕs employees can provide a firm with competitive advantage. If an organization manages its resources and capabilities, these distinct advantages will result in competitive advantage. Typical resources  might include human resources, proprietary knowledge, and reputation, whereas typical capabilities  might include organizational adaptability, flexibility, and speed of bringing new products to market. These resources and capabilities will result in superior performance and value creation for the organization. Southwest AirlinesÑA Resource-Based View: How did the culture of this airline provide a competitive advantage? How did employees of the airline contribute to this competitive advantage?  Learning Activity: Panel Discussion Students can benefit greatly by hearing industry HR professionals who are at the senior decision-making level of an organization address the following questions: ¥   How do employees provide your organization with a competitive advantage? ¥   How do HR programs within your organization represent an investment? ¥   What emphasis does your organization place on training and development of existing staff? ¥   How do HRM strategies within your organization assist with improved goal attainment? Full file at Full file at  Chapter 2 Ð Aligning HR with Strategy Strategic Human Resources Planning, 5e   Copyright © 2013 by Nelson Education Ltd. 15  Human Capital Theory Classical economists view the firm as having control over three types of resources in the  production of goods and services: land, capital, and labour.  Human capital refers to the collective sum of the attributes, experience, knowledge, and commitment that employees choose to invest in their work. The textbook authors are suggesting an approach to HR planning that goes beyond the traditional approach to supply and demand. The authors call for an HR strategy that tailors human resource policies and practices to the organizational needs of the future. Human = TotalRev-(OpExp-TotalCompCosts) Capital Total Compensation Costs ROI The Behavioural Perspective Different strategies require different  behaviours from employees, which in turn are influenced by different HR practices. For each organization, an effective HR system is able to accurately identify the behaviours needed to implement a strategy, provides the opportunity for employees to exhibit those behaviours, ensures that they have the knowledge and skills to exhibit those behaviours, and motivates them to do so.  Learning Activity: Ask the students to generate a list of everything that constitutes human capital.  Note:  Human capital is also synonymous with intellectual capital.  Learning Activity: From the chapter-opening vignette on Google, what behaviours does Google search for to help the company innovate? C. The Importance of Strategic HR Planning There are two main reasons that strategic  planning is so important: 1.   Employees help an organization achieve success because they are its  strategic resources . 2.   The planning process itself results in improved goal attainment  .  Learning Activity: Think-Pair-Share  Ñ  Individually, and then in partners, students are asked to consider why it is important to plan for human resources strategically. What are the advantages of planning? What are the risks of  NOT planning?  Note:  ÒHR Planning Today 2.1ÑSears: The Behavioural Link to ProfitsÓ on page 37 of the textbook. Full file at Full file at  Chapter 2 Ð Aligning HR with Strategy Strategic Human Resources Planning, 5e   Copyright © 2013 by Nelson Education Ltd. 16 D. The Risks of Strategic HR Planning Some researchers point out costs to strategic HR planning: ¥   Increased time and energy involved in making decisions. ¥   Greater potential for information overload. ¥   Impossible commitments to employees. ¥   Overconcern with employee reactions that may be incompatible with industry conditions.  Learning Activity: Large group discussion from  previous Think-Pair-Share discussion (under section B). Is there a downside to strategic HR  planning? Being out of touch with reality (see ConsumerÕs Distributing example in the textbook). What other business examples can you think of where the business did not reflect current day reality? (e.g., EatonÕs stores). See ÒHR Planning Today 2.2ÑHSBC Canada: Upfront PlanningÓ on page 39 of the textbook. E.  Linking HR Processes to Strategy 1.   Start with organizational strategy and then create HR strategy. ¥   Corporate strategy drives HR strategy  Ñ  Personnel needs are based on corporate  plans. ¥   Resources are made to ÒfitÓ the corporate and business strategies. HR follows the corporate strategy. ¥   Employees are considered a means to an end, not part of the strategy formulation equation.   2.   Start with HR competencies and then craft corporate strategies based on these competencies. ¥   This view argues that organizations cannot implement a strategy if it does not have the necessary human resources. ¥   Tap into employee capabilities to develop new products and services. 3.   Do a combination of both in a form of reciprocal relationship. ¥   HR strategy contributes to business-level strategy and vice versa. ¥   Senior HR vice-presidents are asked to  provide input to strategic plans based on HR strategy generates the strengths and weaknesses. ¥   HR strategy generates business strategy, and business strategy determines HR strategy ( reciprocal interdependence) .   The basic premise is that every HR policy and  practice must directly support the organizationÕs strategy and objectives.  Discussion Question : Is it easier to change HR to fit the strategy or change the strategy to fit HR? Review ÒHR Planning Today 2.3  Ñ  HR Alignment with Two StrategiesÓ on page 41 of the textbook. This comprehensive exhibit gives the student an idea how two different HR strategies can be used to support a business strategy. Each strategy is subdivided into the following categories: The Employee, HR Planning, Selection, Compensation, Training, Performance Evaluation, and Labour Relations. The first two strategies are polar extremes of how the corporate strategy and HR plans need to interact.  Learning Activity: If there is a panel discussion and/or a guest speaker who is a senior HR  professional, he/she could be asked which of the three models is reflected by his/her organization. Full file at Full file at  Chapter 2 Ð Aligning HR with Strategy Strategic Human Resources Planning, 5e   Copyright © 2013 by Nelson Education Ltd. 17 F.  HR Becomes a Business Partner One of the most important points in this chapter is the concept of concurrent strategy formulation. Concurrent strategy formulationÑ  Strategy development based on environmental analysis is conducted at the same time that HRM. The HR senior management team moves from outsider status to insider status in terms of  business decision making. HR managers must understand the language of  business or the outcome expectations of non- profit organizations. This includes analyses  presented by marketing, financial, and operational managers. Stress this very important HR role to the students. HR must be a full partner in the  business to have full credibility. HR  professionals must develop strong partnerships with line managers in the organization to best achieve business goals.  Learning Activity:  Ask the class to review ÒHR Planning Notebook 2.1ÑAre You A Strategic PartnerÓ on page 47 of the textbook. The facilitator leads this debate to examine views on  both sides. It is important to emphasize that both sets of reasons are current dilemmas within the HR profession. G.  Becoming More Strategic HR departments are restructuring in order to be able to do the basics right (payroll, safety training, and so on) while enhancing the  performance of business units and supporting strategic moves.  Homework Assignment: Review ÒHR Planning  Notebook 2.2ÑA New Vision of HRÓ on page 48 of the textbook. Identify the unique attributes of the following services of a strategic HR department including: Corporate HR, Services Inc., Solutions Inc., and Organization Capability Consultants. What are the advantages of this structure? Would managers and employees of an organization prefer this model to the traditional functional structure? Which structure do you think HR professionals would prefer? And why? H.  HR Strategy Differentiation Firms with more than one business strategy are likely to have more than one approach to their HR strategy. The challenge is to treat employees across  Learning Activity:  How did Walmart differentiate itself from its competitors to achieve high efficiency at low cost? Full file at Full file at
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