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STRATEGIC HUMAN RESOURCE MANAGEMENT

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CHAPTER 2 STRATEGIC HUMAN RESOURCE MANAGEMENT Contents of Chapter 2 Understanding the business context Approaches to the strategy-making process The rise of strategic ... – PowerPoint PPT presentation

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Title: STRATEGIC HUMAN RESOURCE MANAGEMENT


1
CHAPTER 2
  • STRATEGIC HUMAN RESOURCE MANAGEMENT

2
Contents of Chapter 2
  • Understanding the business context
  • Approaches to the strategy-making process
  • The rise of strategic human resource management
  • Exploring the relationship between strategic
    management and SHRM
  • The configurational approach
  • The resource-based view of SHRM
  • Best-practice SHRM

3
Understanding the business context
  • The nature of business strategy
  • What is Strategy ? -gt Content
  • How is strategy formed? -gt Process

4
Approaches to the strategy-making process
  • The classical-rational-planning approach
  • The evolutionary approach
  • The processual approach
  • The systemic approach

5
The classical or rational-planning approach
  • Common elements in successful strategies

6
The classical or rational-planning approach
  • Three level is viewed in the classical
    perspective
  • Corporate level it relates to the overall scope
    of the organization, its structures, financing
    and distribution of key resources
  • Business level it relates to its competitive
    positioning in markets/products/services
  • Operational level relates to the methods used by
    the various functions marketing, finance,
    production and of course human resources to meet
    the objectives of the higher-level strategies

7
The classical or rational-planning approach
  • Analysing an organization
  • Analyse the external environment
  • Political
  • Legal
  • Technological
  • Economic influences on business
  • Now categories these into opportunities and
    threats

8
The classical or rational-planning approach
  • Analyse the internal environment
  • Resources
  • Structure
  • Leadership
  • Skills
  • Knowledge
  • Culture
  • Now categories these into strengths and
    weaknesses

9
The classical or rational-planning approach
  • Conduct a SWOT analysis
  • Put your analysis of the external and internal
    environment into a SWOT analysis. You might find
    it useful to prioritize the key strengths and
    weaknesses of the business, and the main threats
    and key opportunities available to the business.
    Remember that it is important to be able to
    justify your decisions. You also need to be clear
    about differentiating between business and HR
    issues, although it is likely that certain HR
    strengths could be a core business
    competence/weakness

10
The classical or rational-planning approach
  • Strategic choice
  • Now consider the organizations strategy, review
    its vision statement, mission statement,
    corporate objectives and values. Does a
    comprehensive analysis of the external and
    internal environment of your organization help
    you to understand the reasoning behind the
    organizations strategy?

11
The classical or rational-planning approach
  • Implementation
  • What changes has the organization made in terms
    of culture, structures, leadership and HR
    practices to deliver its strategy? Have these
    changes been effective? Why? Why not?

12
The evolutionary approach
  • The evolutionary approach suggests that markets
    are too competitive for expensive strategizing
    and too unpredictable to outguess. They believe
    that sophisticated strategies can deliver only a
    temporary advantage, and some suggest focusing
    instead on efficiency and managing the
    transaction cost

13
The processual approach
  • This approach recognizes the inherent rivalries
    and conflicting goals present within
    organizations, and the impact this can have on
    strategy implementation.

14
The systemic approach
  • According to this approach, organizations differ
    according to the social and economic systems in
    which they are embedded

15
Approaches to the strategy-making process
  • Whittingtons model

16
The rise of SHRM
  • A good business strategy, one which is likely to
    succeed, is formed by people factors.
  • In the majority of organizations people are now
    the biggest asset. The knowledge, skills and
    abilities have to be deployed and used to the
    maximum effect if the organization is to create
    value

17
Exploring the relationship between strategic and
SHRM the best-fit school of SHRM
  • Best-fit Models of HRM that focus on alignment
    between HRM and business strategy and the
    external context of the firm. Tend to link or
    fit generic type business strategies to generic
    HRM strategies
  • Best-fit was therefore explored in relation to
    life-cycle models and competitive advantage
    models, and the associated difficulties of
    matching generic business-type strategies to
    generic HRM strategies were considered,
    particularly in their inherent assumptions of a
    classical approach to the strategy-making process

18
Exploring the relationship between strategic and
SHRM the best-fit school of SHRM
  • Life-cycle models
  • In the start-up phases Flexibility in HR
  • In the growth stage Grow size of organization,
    development of more formal HR
    policies and procedures
  • In the maturity stage Move to cost control by HR
    strategy
  • In the decline stage
  • How can HR strategy secure and retain the type of
    HR that are necessary for the organizations
    continued viability, as industries and sectors
    develop?
  • Which HR policies and practices are more likely
    to contribute to sustainable competitive
    advantage as organizations go through their
    life-cycle

19
Exploring the relationship between strategic and
SHRM the best-fit school of SHRM
  • Competitive advantage models
  • Three key bases of competitive advantage cost
    leadership, differentiation through quality and
    service, and foucus or niche market -gt to fit
    the generic strategies of cost reduction, quality
    enhancement and innovation
  • The cost reduction-led HR strategy is likely to
    focus on the delivery of efficiency through
    mainly hard HR techniques, whereas the quality
    enhancement
  • The innovation-led HR strategies focus on the
    delivery of added value through softer HR
    techniques and policies

20
Exploring the relationship between strategic and
SHRM the best-fit school of SHRM
  • Best-fit approach to strategic HRM explored the
    close relationship between strategic management
    and HRM, by considering the influence and nature
    of vertical integration. Vertical integration,
    where leverage is gained through the close link
    of HR policies and practices to the business
    objectives and therefore the external context of
    the firm, is considered to be a key theme of
    strategic HRM

21
Exploring the relationship between strategic and
SHRM the best-fit school of SHRM
  • Limitations of best-fit models of SHRM
  • The reliance on the classical rational-planning
    approach to strategy-making, its reliance on
    determinism and the resulting lack of
    sophistication in their description of generic
    competitive strategies.
  • Best-fit models tend to ignore employee interests
    in the pursuit of enhanced economic performance.
  • Lack of emphasis on the internal context of
    individual businesses within the same sector, and
    the unique characteristics and practices that
    might provide its main source of sustainable
    competitive advantage.

22
Exploring the relationship between strategic and
SHRM the best-fit school of SHRM
  • Configurational approach An approach that
    identified the benefits of identifying a set of
    horizontally integrated HR practices that were
    aligned to the business strategy, thus fitting
    the internal and external context of the
    business.
  • HR practices are defenders
  • HR practices are prospectors

23
The resouce-based view of SHRM
  • Resource-based view Strategy creation built
    around the further exploitation of core
    competencies and strategic capabilities.
  • Core competences Distinctive skills and
    knowledge, related to product, service or
    technology, that can be used to gain competitive
    advantage.
  • The VRIO framework
  • Value
  • Rarity
  • Inimitability
  • Organization

24
The resouce-based view of SHRM
  • The VRIO framework
  • Value
  • Rarity
  • Inimitability
  • Organization

25
The resouce-based view of SHRM
  • The VRIO framework
  • Value
  • How the HR function can create value to reduce
    cost, such as reduction in headcount and the
    introduction of flexible working practices .
  • How they might increase revenue, as the business
    as effiency, also as customer selection, customer
    retention and customer referral, means through
    enhanced customer service and customer added
    value.
  • Which HR contribute the most to suitainable
    competitive advantage

26
The resouce-based view of SHRM
  • The VRIO framework
  • Rarity
  • The HR Executive needs to consider how to develop
    and exploit rare characteristics of a firms
    human resources to gain competitive advantage

27
The resouce-based view of SHRM
  • The VRIO framework
  • Inimitability
  • If an organizations human resources add value
    and are rare, they can provide competitive
    advantage in the short-term, but if other firms
    can imitate these characteristics, then over time
    competitive advantage may be lost and replaced
    with competitive parity.

28
The resouce-based view of SHRM
  • The VRIO framework
  • Organization
  • To ensure that the HR function can provide
    sustainable competitive advantage, the VRIO
    framework suggests that organizations need to
    ensure that they are organized so that they can
    capitalize on the above, adding value, rarity and
    inimitability.

29
The resouce-based view of SHRM
  • Applying the resource-based view of SHRM
  • The resource-based view of SHRM has recognized
    that both human capital and organizational
    processes can add value to an organization
    however, they are likely to be more powerful when
    they mutually reinforce and support one another.

30
The resouce-based view of SHRM
  • Limitations of the resource-based view
  • The resource-based view represents a paradigm
    shift in strategic HRM thinking by focusing on
    the internal resources of the firm as a key
    source of sustainable competitive advantage,
    rather than focusing on the relationship between
    the firm and the external business context
  • Human resources, as scarce, valuable,
    organization-specific and difficult to imitate
    resources, therefore become key strategic assets.

31
Best-practice SHRMhigh-commitment models
  • Best practice
  • A set' or number of human resource practices
    that have the potential to enhance organizational
    performance when implemented. Usually categorized
    as high commitment', high involvement' or high
    performance'.

32
Best-practice SHRMhigh-commitment models
  • The best-practice approach highlights the
    relationship between sets of good HR practices
    and organizational performance, mostly defined in
    terms of employee commitment and satisfaction.
    These sets of best practice can take many forms
    some have advocated a universal set of practices
    that would enhance the performance of all
    organizations to which they were applied others
    have focused on integrating the practices to the
    specific business context (high-performance work
    practices). A key element of best practice is
    horizontal integration and congruence between
    policies.

33
Best-practice SHRMhigh-commitment models
  • Difficulties arise here, as best-practice models
    vary significantly in their constitution and in
    their relationship to organizational performance,
    which makes generalizations from research and
    empirical data difficult

34
Summary to Chapter 2
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