STRATEGIC HUMAN RESOURCE

MANAGEMENT

CHAPTER TWO
HR STRATEGIES

Course Instructor:
Dr. Mohammed Abdullah Mamun
Professor
Department of Management University
of Chittagong
 LEARNING OUTCOMES

After reading this chapter, you should be able to:

 What are HR strategies?

 What is the purpose of HR strategies?
 What are the main types of overall HR strategies?
 What are the main areas in which specific HR strategies are
developed?
 What are the criteria for an effective HR strategy?
 How should HR strategies be developed?
 How should HR strategies be implemented?
 WHAT ARE HR STRATEGIES?

HR STRATEGIES

 Internally consistent bundles of human resource practices.

Dyer and Reeves (1995)

 A framework of critical ends and means.

Peter Boxall (1996)

 A strategy, whether it is an HR strategy or any other kind of

management strategy, must have two key elements: there must be
strategic objectives (i.e. things the strategy is supposed to achieve), and
there must be a plan of action (i.e. the means by which it is proposed that
the objectives will be met).
Richardson and Thompson (1999)
 WHAT ARE HR STRATEGIES?

ELEMENTS OF HR STRATEGY/MANAGEMENT STRATEGY

• Strategic Objectives
— What the strategy aims to achieve.

• Plan of Action
— The methods to achieve these objectives.
 WHAT ARE HR STRATEGIES?

Types of HR Strategies

 Overall Strategies

— Broad strategies like high-performance working.

 Specific Strategies

— Focused strategies on specific HR areas like learning,

development, and rewards.

 WHAT IS THE PURPOSE OF HR STRATEGIES?

“HR strategies articulate an organization's intentions

regarding its human resource management policies
and practices for both the present and the long term.”

ACCRODING TO
• The view of Fombrun et al. (1984),
— HR strategies emphasize the need for organizations to
perform effectively in the present to ensure future success.
• Lynda Gratton (2000)
— Successful strategies rely on effective execution rather than
just their conceptualization or design.
 OVERALL HR STRATEGIES

 Overall HR strategies outline an organization's general

intentions regarding the management and development of its
people, aiming to attract, retain, and engage employees
effectively
 Focus on ensuring organizational success by fostering
commitment, motivation, and engagement among employees.
 OVERALL HR STRATEGIES

Categories of overall strategy

• Emergent and Evolutionary • Broad-Brush

Understanding Statements

— Informal and evolving — High-level declarations of

approach to HRM, shaped by purpose aimed at

the business strategy, organizational

organizational life cycle, and effectiveness, emphasizing

leadership styles (chief hiring "better people" and

executives, HR heads, senior creating "a great place to

managers). work"
 OVERALL HR STRATEGIES

Categories of overall strategy

• Specific and Articulated

Plans • Conscious Introduction of

— Focused strategies to create Management Approaches

"bundles" of HR practices — Adoption of comprehensive

that form a coherent HR HR methods like high-

system. performance, high-

involvement, or high-

commitment management.
 OVERALL HR STRATEGIES

High-performance management

 The approach emphasizes aligning human resources with

organizational goals to drive better outcomes.
 High-performance management aims to enhance organizational
performance in areas such as productivity, quality, customer
service, growth, profits, and shareholder value.
 Key practices include:
— Rigorous recruitment and selection processes.
— Comprehensive training and management
development.
— Incentive pay systems and Performance
management processes.
 OVERALL HR STRATEGIES

High-involvement management

 High-involvement practices as one of three components of a high-

performance work system (HPWS), alongside HR practices and
reward/commitment practices.
 Focuses on giving employees opportunities to control and
understand their work.
 High-involvement practices create synergy, producing a
multiplicative effect on outcomes.
 Employees are treated as partners with a voice in matters
affecting them.
 The goal is to align organizational mission, values, and objectives
with employee efforts
 OVERALL HR STRATEGIES

High-commitment management

• High-commitment management , A form of management

which is aimed at eliciting a commitment so that behavior is
primarily self regulated rather than controlled by sanctions
and pressures external to the individual, and relations within
the organization are based on high levels of trust.
-Wood (1996)
• Building a culture of partnership and engagement between
employees and the organization
 OVERALL HR STRATEGIES
High-commitment management

The approaches to achieving high commitment are:

• Career ladders: Development opportunities emphasizing trainability and long-term
commitment.
• Functional flexibility: Avoid rigid job descriptions to promote adaptability.
• Flattened hierarchies: Reduce hierarchies and status differentials.
• Team-based structures: Teams for communication (briefings), work (teamwork), and
problem-solving (quality circles).
-Beer et al(1984) and Walton (1985)
• Job design: Focused on intrinsic satisfaction.
• Employment guarantees: Policies like no compulsory layoffs or using temporary
workers to manage labor fluctuations.
• New assessment and reward systems: Including merit pay and profit-sharing.
• Quality management: High employee involvement in quality initiatives.

-Wood and Albanese (1995)

 OVERALL HR STRATEGIES
High-commitment management
Examples of HR Strategy Statements

1. AEGON:HR aims for an integrated approach linking pay,

performance, career development, and rewards.
2. B&Q:Goals to enhance employee commitment and position as a
top UK employer.
3. Egg:HR aligned with customer-centric principles, focusing on
culture and employee experience.
4. GlaxoSmithKline (GSK):Aspires to be a workplace where the best
people achieve their best work.
5. Insurance Company: People are central to strategy execution; HR
is focused on having the right people, training, and culture.
 OVERALL HR STRATEGIES

High-commitment management

[Link]’ End: Believes happy, supported, respected employees

provide the best customer service.
[Link] Authority:HR strategy emphasizes organizational
effectiveness and individual respect and commitment.
[Link] Utility: Values-driven HR strategy; getting human resource
values right is critical to success.
9. Manufacturing Company:HR focuses on broad changes to achieve
competitive advantage through people.
10. Retail Stores Group: People are the key differentiator; HR
strategy ties training and manpower planning to business
improvement.
 SPECIFIC HR STRATEGIES

• Specific HR strategies outline what an organization intends to do to

enhance its people management efforts and align them with business
objectives.
• Specific HR strategies set out what the organization intends to
do in area such as:
1. Human Capital Management: Collecting and analyzing data to guide
value-adding HR decisions.
2. High-Performance Management: Developing and implementing systems
to improve performance organization-wide.
3. Corporate Social Responsibility (CSR):Managing the business ethically to
positively impact society and the environment.
 SPECIFIC HR STRATEGIES

5. Engagement: Creating policies to boost employee engagement with their

work and the organization.
6. Knowledge Management: Managing knowledge to improve learning and
organizational performance.
7. Resourcing: Attracting and retaining top talent.
8. Talent Management: Ensuring the organization has the skills and talent
needed for success.
9. Learning and Development: Encouraging and supporting employee growth
and skill development.
10. Reward: Crafting long-term reward policies to align with business goals
and stakeholder needs.
[Link] Relations: Managing relationships with employees and unions
effectively.
 SPECIFIC HR STRATEGIES
Examples of Specific HR Strategies

The Children’s Society

Implement rewards strategies to support recruitment, retention, and
motivation. Develop HR information systems to improve administrative
productivity. Enhance performance management processes for managers and
staff. Provide training to improve work quality with children and young
people.
Diageo
• Reward and Recognition: Stimulate team and individual performance.
• Talent Management: Attract, retain, and develop a diverse talent pool.
• Organizational Effectiveness: Adapt organizational structures to maximize
employee contribution.
 SPECIFIC HR STRATEGIES

Examples of Specific HR Strategies

A Government Agency
Focus on investing in people to improve intellectual capital. Integrate
HR values into performance management processes. Emphasize job
design and rewards aligned with business demands.
 SPECIFIC HR STRATEGIES

Examples of Specific HR Strategies

Higher Education Institutions

1. Address recruitment and retention challenges cost-effectively.
2. Equip staff with skills for current and future needs, including
management development.
3. Implement equal opportunities and ensure equal pay for equal
work.
4. Regularly review staffing needs based on market and
technological changes.
5. Conduct annual performance reviews tied to rewards.
6. Address poor performance effectively.
 CRITERIA FOR AN EFFECTIVE HR
STRATEGY

An effective HR strategy achieves its intended goals by meeting

the following criteria:
1. Alignment with Business Needs:
The strategy should address and fulfill the organization's
overarching business objectives.
2. Data-Driven Foundation:
Based on detailed analysis and study, not on assumptions
or wishful thinking.
3. Actionable Programs:
It must translate into clear, implementable actions that
anticipate challenges during execution.
 CRITERIA FOR AN EFFECTIVE HR
STRATEGY

[Link] and Integration:

The strategy should consist of interconnected components
that align with and support one another.
[Link] Consideration:
It must cater to the needs of line managers, employees, and
other key stakeholders, ensuring balanced value for all
parties.
 CRITERIA FOR AN EFFECTIVE HR
STRATEGY

what makes a good HR strategy?

A good HR strategy is one that:
 Values Employees: Makes people feel appreciated for their contributions.
 Builds Knowledge: Informs employees about the organization’s goals and
direction.
 Clarifies Roles: Helps individuals, teams, and groups understand their
roles and how they contribute to the strategy.
 Links Efforts to Rewards: Clearly shows how employee efforts are
recognized and rewarded.
 Promotes Growth: Outlines opportunities for personal and professional
development.
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?

Key Considerations in HR Strategy Formulation

1. Interactive Relationship with Business Strategy:

• HR strategy should not be formulated in isolation but as
part of an interactive process with business strategy,
influenced by internal and external factors.
• It recognizes the dynamic interplay between strategic
business needs and HR capabilities (Hendry & Pettigrew,
1990).
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?

[Link] and Evolving Nature:

• HR strategies may emerge organically rather than being strictly
planned (Tyson, 1997).
• Realization of strategies often occurs through actions, reactions,
and negotiations within the organization.
3. Perspective over Rigidity:
• Strategies should be treated as a perspective rather than rigid
procedural maps (Mintzberg, 1988)
• Strategy formation relies on shared intentions and collective
actions across the organization.
4. Strategic Compromises and Trade-Offs:
• Effective strategies incorporate historical compromises between
stakeholders and balance long-term goals with short-term
demands (e.g., increasing shareholder value).
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Propositions on formulating HR strategy

Boxall (1993) has drawn up the following propositions about the

formulation of HR strategy from the literature:
[Link] Process: Avoid over-reliance on rationalistic, formal linkages
between business and HR strategies.
[Link] Influence: Business strategy is one among many factors shaping
HR strategy, including organizational culture, environment, and stakeholder
expectations.
[Link] Team Engagement: Coherent HR strategies require active involvement
and understanding from the top management team.
[Link] Manager Involvement: Successful implementation depends on the
commitment and capabilities of line managers. formulation of HR strategy from
the literature:
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Schools of Strategy Development

Purcell (2001) has identified three main schools of strategy development

1. Design School:
Focuses on deliberate, rational planning with emphasis on market
opportunities. Characterized by structured, quantitative analysis.
Assumes that "everything is possible.
2. Process School:
Focuses on how strategies evolve through experience and
organizational context. Emphasizes adaptability and reacting to
environmental changes.
3. Configuration School:
Highlights that strategies vary based on an organization's life cycle
and sector. Emphasizes change management and transformation,
where HR plays a key role.
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Levels of strategic decision making

• The formulation of HR strategies is conceived as a process that is

closely aligned to the formulation of business strategies. HR strategy can
influence as well as be influenced by business strategy.
• Research conducted by Wright et al (2004) identified two approaches that
can be adopted by HR to strategy formulation:
1. Inside-Out Approach: Starts with existing HR capabilities, skills, and
resources, adapting them to align with business needs.
2. Outside-In Approach: Begins with business challenges (e.g., customer
demands, competition) and develops HR strategies to address them
directly.
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Levels of strategic decision making
At the extreme, the ‘inside-out’ approach begins with the status quo HR
function
(in terms of skills, processes, technologies etc.) and then attempts (with varying
degrees of success) to identify linkages to the business (usually through
focusing
on ‘people issues’), making minor adjustments to HR activities along the way…
On the other hand, a few firms have made a paradynamic shift to build their HR
strategies from the starting point of the business. Within these ‘outside-in’ HR
functions, the starting point is the business, including the customer, competitor
and business issues they face. The HR strategy then derives directly from these
challenges to create real solutions and add real value.
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Levels of strategic decision making

A distinction is made by Purcell (1989) and Purcell and Ahlstrand (1994)

between:
• upstream’ first-order decisions, which are concerned with the long-term
direction of the enterprise or the scope of its activities;
• Second-Order Decisions (Downstream):Focus on internal processes and
organizational design.
• Third-Order Decisions (HR Focus):Choices regarding HR structures and
approaches, such as employee relations and talent management.

It can indeed be argued that HR strategies, like other functional but this need
not imply that HR strategies come third in the pecking
• order
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Strategic options and choices

• The process of developing HR strategies involves generating strategic

HRMoptions and then making appropriate strategic choices.

• Cappelli (1999) stated that ‘The choice of practices that an employer

pursues is heavily contingent on a number of factors at the organizational

level, including their own business and production strategies, support of

HR policies, and cooperative labor relations.

 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Strategic options and choices

The process of developing HR strategies involves:

 Adopt a Contingent Approach:

HR strategies should reflect the organization’s specific environmental,

workforce, cultural, and strategic needs (Baron & Kreps, 1999).

 Generate Practical Solutions:

Based on analysis and realistic organizational capabilities

 Anticipate Implementation Challenges:

Ensure strategies are actionable and address potential resistance

from line managers or operational constraints.

 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Strategic options and choices

The impact of the five forces on HR policy choice identified by Baron and

Kreps (1999):

1. External Environment: Social, political, legal, and economic conditions.

2. Workforce: Skills, demographics, and expectations of employees

3. Organizational Culture: Values and norms shaping behavior.

4. Business Strategy: Goals and direction of the company.

5. Technology and Work Organization: Processes and structures for

achieving objectives.
 DEVELOPING HR STRATEGIES

Five fundamental questions that need to be asked in formulating

HR strategies have been posed by Becker and Huselid (1998):
1. What are the firm’s strategic objectives?
2. How are these translated into unit objectives?
3. What do unit managers consider are the ‘performance drivers’ of those
objectives?
4. How do the skills, motivation and structure of the firm’s workforce
influence these performance drivers?
5. How does the HR system influence the skills, motivation and structure of
the workforce?
 DEVELOPING HR STRATEGIES

Six-step approach proposed by Gratton (2000)

1. Build the guiding coalition:

- Engage stakeholders from all parts of the business.
2. Image the future:
-Develop a shared vision focusing on strategic priorities.
3. Assess current capabilities and gaps:
-Identify differences between aspirations and current reality.
4. Create a map of the system:
-Ensure all components integrate into a cohesive whole.
[Link] system dynamics:
- Account for the dynamic nature of future challenges.
6. Bridge into action:
Define key themes, involve line managers, and set goals and
 DEVELOPING HR STRATEGIES

A methodology for formulating HR strategies

A methodology for formulating HR strategies was developed by Dyer and A
methodology for formulating HR strategies was developed by Dyer and
Holder (1988) as follows:
1. Assess Feasibility
-Determine if the required workforce (numbers and skills) can be
obtained in a timely, cost-effective manner.
-Evaluate if behavioral expectations (e.g., retention and
productivity rates) are realistic.
2. Determine Desirability
-Analyze the strategic implications on core HR policies.
-Ensure alignment with non-negotiable policies (e.g., avoiding
rapid retrenchment in a company with a full-employment policy).
 DEVELOPING HR STRATEGIES

Strategic options and choices

4. Determine Goals
-Identify key issues derived from the business strategy. Translate
business objectives (e.g., cost reduction) into HR goals like higher
performance standards or reduced headcounts.
5. Decide Means of Achieving Goals
-Align HR strategies with business strategies (external fit).Ensure
coherence among HR goals, methods, and environmental conditions (internal
fit).Adapt flexibly to changes while maintaining consistency and synergy in
HR practices.
 DEVELOPING HR STRATEGIES

Achieving vertical fit – integrating business and HR strategies

• Wright and Snell (1998) suggest that seeking fit requires:
 Understand the skills and behaviors needed to execute the
business strategy.
 Identify the HRM practices required to elicit these skills and
behaviors.
 Ensure the capability to implement the necessary HRM system
quickly.
• Business and HR issues influence each other and shape corporate and
business unit strategies. Integration must consider both external
environmental changes (e.g., market trends) and internal organizational
changes (e.g., culture or structure).
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Achieving vertical fit – integrating business and HR strategies

• Fit is temporary as circumstances evolve. Overemphasis on maintaining

alignment with the current status quo can limit flexibility, which is critical
in rapidly changing environments ("temporal" factor per Gratton et al.,
1999).

• Challenges in Achieving Fit

-Emergent or undefined business strategies can hinder the
alignment process, as HR strategies lack a clear framework to align with.
Continuous adaptability is necessary to maintain relevance in dynamic
conditions.
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Achieving horizontal integration (bundling)

• Horizontal Integration Achieved when various HR strategies are coherent,

mutually supportive, and work together effectively. Accomplished through
bundling, which involves linking complementary HR practices to reinforce
and support one another.

• Bundling Process:
Step 1: Identify appropriate HR practices.
Step 2: Assess and link practices to ensure they are mutually
reinforcing and coherent.
Step 3: Develop these practices through targeted programs,
focusing on their interconnections.
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Achieving horizontal integration (bundling)
Integrative processes,
 The use of high-performance, high-involvement or high-commitment
systems as described earlier in this chapter is an integrating process.
 Links individual performance goals with HR strategies.
 Define required skills and behaviors, helping link recruitment, training,
and performance management.
 Define competencies at each level, support career paths, and align with
pay structures.
 Within these systems, two frequently used integrating processes are
performance management and the use of competencies. The ways in
which they link different HR practices are illustrated in Figures 4.1 and
4.2.
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Achieving horizontal integration (bundling)
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Achieving horizontal integration (bundling)
 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Setting out the strategy

A written HR strategy may include:

 Basis:

-Business needs, environmental analysis (SWOT/PESTLE), and

cultural factors that could support or hinder implementation.

 Content:

-Specific details of the HR strategy.

 Rationale:

-Business case for the strategy, highlighting its alignment with

business needs and context.

 HOW SHOULD HR STRATEGIES BE
DEVELOPED?
Setting out the strategy

 Implementation Plan:

-Action steps and responsibilities.

-Resource allocation (people, budget, and facilities).

-Communication, consultation, involvement, and training.

-Project management arrangements.

 Costs and Benefits Analysis:

-Resource implications and expected benefits, quantified where

possible (e.g., ROI or value added).

 IMPLEMENTING HR STRATEGIES

• HR strategies must be translated into programs with clear objectives and

deliverables. Avoid vague approaches, such as planning without specifying
how to achieve goals.
• Challenges in Implementation
-HR strategies are often seen as abstract or generalized ideas rather
than actionable plans.
-Piecemeal or isolated initiatives are insufficient;
-strategy requires comprehensive alignment and integration.
-There is frequently a disconnect between stated strategy goals and
actual outcomes.
 IMPLEMENTING HR STRATEGIES

Factors Creating the Strategy-Action Gap:

-Relevance perception: Employees may only accept initiatives that align
with their specific roles.
-Resistance to change: Long-serving employees may prefer the status
quo.
-Complexity: Ambiguous or non-routine initiatives are harder to
understand and accept.
-Cultural conflicts: Initiatives opposing organizational identity or values
(e.g., downsizing in a "job-for-life" culture) may face resistance.
 IMPLEMENTING HR STRATEGIES

-Threat perception: Initiatives viewed as threatening create hostility.

-Trust and fairness: Success depends on how much employees trust senior

management and perceive initiatives as fair.

-Inertia: Bureaucratic cultures often resist change.

 IMPLEMENTING HR STRATEGIES

Barriers to Successful Implementation

 Failure to align HR strategies with the strategic needs of the

business.

 Ignoring environmental and cultural factors affecting strategy

content.

 Launching initiatives based on fads or misaligned best practices.

 Lack of focus on line managers' roles and supporting processes

like performance management.

 IMPLEMENTING HR STRATEGIES

Steps to Overcome Barriers

 Preliminary Analysis: Conduct thorough needs

assessments and understand organizational requirements.

 Strategy Formulation: Develop relevant and well-

conceived strategies aligned with business goals.

 Stakeholder Support: Secure buy-in from employees,

line managers, and senior leaders.

 IMPLEMENTING HR STRATEGIES

 Barriers Assessment: Identify potential challenges in advance.

 Action Planning: Develop detailed implementation plans with

responsibilities and timelines.

 Project Management: Use structured approaches to guide

execution.

 Follow-up and Evaluation: Regularly monitor progress, address

issues, and adjust strategies as necessary.

THANK YOU