Strategic management(SHRM Perspective)


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The central idea behind SHRM is that all initiatives involving how people are managed need to be aligned with and in the support of the Organizational overall strategy. No Management is successful if its people is diverted from the vision and mission of the organization.

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  • These are the key HR processes in an organization. You will note that these processes do not function in isolation: HR management functions within the culture of the organization .
    And of course, the organization is impacted by its environment. By paying careful attention to these facts, an organization can recruit competent, high-performing employees who are capable of sustaining their performance over the long term. You will also see that many factors introduced for example, globalization, technology, and demographics, directly affect all management practices, but their effect is probably greatest in the management of human resources. This is because that whatever happens to an organization ultimately influences what happens to its employees.
  • Strategic management(SHRM Perspective)

    1. 1. STRATEGIC MANAGEMENT In this chapter we will study the following : Models of Strategy The Process of Strategic Management Corporate Strategies
    2. 2. Strategic Human Resource Management HR planning Recruitment Selection Organizational and work design Training and development Performance review Compensation Labour relations
    3. 3. Introduction  The central idea behind SHRM is that all initiatives involving how people are managed need to be aligned with and in the support of the Organizational overall strategy.  No Management is successful if its people is diverted from the vision and mission of the organization.
    4. 4. Definition of Strategic Management  Strategic management is a Process by which organizations attempt to determine what needs to be done to achieve corporate objectives and ,more important, how these objectives are to be met. STRATEGIC MANAGEMENT Process by which Org attempts to detm what has to be done to achieve Corporate Objectives
    5. 5. It means that the Strategic management is directly related to the Corporate objectives Strategic planning: Also called as Strategy Formulation Process, It is usually done over 3-5 year time horizons by the senior management ,with a major review of strategic plan on annual basis.
    6. 6. The steps involved in strategic planning are: 1. 2. 3. 4. 5. 6. Development of organizational philosophy and mission statement. Environmental Scanning SWOT Analysis Formulation of Strategic Objectives Generation of alternative strategies for achieving objectives. Evaluation and selection of strategies.
    7. 7. Importance Of Human Resources to Strategy Human resource management has become more important to general management, largely as a result of its role in providing Competitive Advantage. According to the strategist Michael Porter “Human Resource Management is a key to obtain competitive advantage” In a growing number of organization Human Resources are now viewed as a source of competitive advantage. It has been found that COMPETITIVE ADVANTAGE can be obtained with High Quality Work Force. For Eg. : TECHNOLOGICAL DIVISIONS are established by the companies undergoing automation which requires high quality work force.
    8. 8. MODELS OF STRATEGY There are basically two(2) models framed for strategy that outlined the process of strategy and how it should be developed. First model: Industrial Organization Model (I/O). Second Model: Resource based View (RBV).
    9. 9. Industrial Organization Model (I/O). This is traditional model formed on the basis of strategic management through the 1980s. According to I/O model the primary determinant of an organization should be the external environment in which the organization operates and that such considerations have the greater impact on the performance than internal decisions made by managers.
    10. 10. I/O MODEL EXTERNAL ENVIORNMENT Organization HR planning Recruitment Selection Organizational and work design Training and development Performance review Compensation Labour relations
    11. 11. • I/O model assumes that the External Environment produce Opportunities as well as Threats to the organization. • That Organizations, within an industry control or have equal access to the resources, and these resources are highly mobile between the firms.
    12. 12. • The I/O model argues that organizations should choose to locate themselves in industries that present the greatest opportunities and learn to utilize their resources to suit the needs of the environment. • This model further suggest that an organization can be more successful by offering goods and service at a lower cost than its competitors or by differentiating its products from those competitors such that consumers are willing to pay premium price.
    13. 13. RESOURCE BASED VIEW (RBV) MODEL  RBV is also referred as Resource Based View Model of the Firm.  RBV model says that Organizations resources and capabilities should be the basis of organizational decisions rather than environmental conditions as said in I/O model.  The resources above referred are Organization’s Human Resources
    14. 14. Organizations gains competitive advantage on Investing over their Human Resources through the acquisition and value of their resources. RBV VS I/O Model The RBV Challenges the assumptions of the I/O model. The resource based view assumes that an organization will identify and locate key valuable resources and over time acquire them. Hence under this model(RBV) the resources may not be highly mobile across organizations as once they are acquired by a particular organization and that organization will attempt to retain those resources that are of value.
    15. 15.  In contrasting of the two approaches the I/O model suggests that an organization’s strategy is driven by external considerations.  The RBV argues that the strategy should be driven by the internal conditions.  The I/O model argues that achievement ;The RBV determined by resources. strategy argues will drive resource that strategy is
    16. 16. RBV VS I/O Model RBV I/O 1) Organization’s strategy should be driven by the internal conditions. 1) Organization’s strategy is driven by external considerations 2) Strategy is determined by resources. 2) Strategy will drive resource acquisition
    17. 17. The Process of Strategic Management To understand the Process of Strategic Management we will consider both the Strategic model i.e. I/O & RBV . In this line, the process of Strategic Management is presented as a series of Five(5) distinct steps, as outlined in the diagram:
    18. 18. The Process of Strategic Management Environmental Analysis Competition / Industry Structure Govt.Regulations MISSION STATEMENT Technology Market Trends Economic Trends Organization Self-Assessment Resources Financial Physical Human Technological Capital Goals & Objectives Strategy Management Systems Culture Structure Power Dynamics/Politics Decision-Making Process Past Strategy & Performance Work Systems Identify Assumptions
    19. 19. (I)Missions Statement ….contd  This is the First Stage of any organization to establish an mission statements . Although all the organizations have mission statements that in very simple terms explains the Organizations Purpose and reason for its existence.  Mission statement are usually very Broad and generally limited to no more than a couple of sentences.
    20. 20.  As the mission statement looks very simple but it is often very difficult to construct because it serves as the foundation for everything that the organization does.  It requires clear cut picture and understanding and vision of the organization and also on what the organization is all about & why it exist in the first place.
    21. 21. (II) Analysis of Environment or Environmental Analysis  After establishing the Mission Statement the next step is to analyze the External Environment in which the organization operates consistent with the I/O model of Strategic Management.  Decision makers need to analyze variety of different components of the external environment ,identify key players for those components and also be very cognizant(aware) of both threats and opportunities within the environment.
    22. 22.  The environmental analysis includes the following: 1. Competition/Industry Structure 2. Govt. Regulations 3. Technology 4. Market Trends 5. Economic Trends These are all the components of the External Environment where the organization is present.
    23. 23. In examining competition and industry structure, critical issues that need to be identified includes : 1. 2. 3. 4. 5. Who are the chief Competitors? By what means they are competing? Where Power is centered in the industry? What are the Barriers to Entry? Where is the Opportunities? In addition to this the industries should produce complementary or substitute goods or services that they may impact the demand for the organizational output.
    24. 24. In examining government regulations issues related to the scope of laws regulations that may impact what organization does are identified. the and the This involves everything from Corporate law/Industrial relations regulating the industries and the employment relationship to provide employment to the local persons . A strategic Human Resource Management decisions that must be made have to be done within the context of National, State and Local Labor Laws.
    25. 25. A Technological Environment includes looking at automation processes, new equipments, machinery ,new techniques for producing goods and services and other special features. It involves assessment of how to obtain new technology and the decision to adopt new technology and be a pioneer to new technology or allow others to do so and then attempt to copy it.
    26. 26. Analyzing Market trends involves examining: 1. Who existing Customers are? 2. What is their needs and wants? 3. How well they are satisfied? It also involves looking the potential customers. It also involves examining demographic, psychographic, and life style issues among the customers such as family status, age ,interest, residence, education ,and income level.
    27. 27. Analyzing the ECONOMIC TRENDS involves forecasting the condition and direction of national and local economy. It is very much clear that the future cannot be predicted accurately, Organizations need to plan in advance that what may happen in the economy that can have a significant impact on the operations Interest rates, levels of inflation, recession, fiscal and monetary policy, unemployment etc. are the serious economic issues that is to be studied in depth to do any assessment of the future direction of the firm .
    28. 28. PORTERS GENERIC STRATEGIES In order to cope up with the competition the firms adopt three generic strategic approaches to gain competitive advantages:1. 2. 3. Overall Cost Leadership Focus. Differentiation.
    29. 29. Overall Cost Leadership  It entails the firms to make all possible attempts to achieve the lowest cost in production & marketing.  Main objective is to increase market share.  The basic component of this approach is to increase efficiency at all level so that costs could be lowered  Examples are automobile manufactures.
    30. 30. Focus  The attempt to serve narrow strategic target effectively and efficiently.  The firms achieves better differentiation by meeting the target customer needs.  For example: as per Indian climate conditions the soaps with moisturizers are best to target the customers.
    31. 31. Differentiation  To achieve class leadership by providing unique characteristics to the products/service.  In other words it aims to create highly different products and marketing program like design or brand image.  If a firm has strengths in R&D,design,quality,control & marketing ,this could be one of the strategic approach routes.
    32. 32. (III) Organizational SelfAssessment  Resources  Management Systems Financial Physical Human Technological Capital Culture Structure Power Dynamics/Politics Decision Making Process Past Strategy & Performance Work Systems
    33. 33. Once an organization has scanned and external environment and identified Opportunities, it then turns into the third process of strategic management. assessed its Threats & stage of the In this stage the key outcome is for the decision makers to identify the organization’s primary strengths and weakness and find ways to capitalize on strengths and improve or minimize the weakness. This requires for the organization to examine both its RESOURCES and its INTERNAL MANAGEMENT SYSTEMS
    34. 34. RESOURCES 1.Financial Resources: It affects an organizational competitive advantage. An organization that has the ability to generate funds is able to convert these funds to ASSETS. 2.Physical Resources: Includes actual equipments and machinery owned/leased as well as the location of the business and its proximity to customers, labor, raw materials, transportation. 3.Human Resources: This not only includes the sum of the technical knowledge of the employees but also their personal traits including commitment ,loyalty, judgment, & motivation. An organization is only as strong or as week depends upon its employees and the skills, backgrounds and motivation these employees will be a key factor in the organizational overall performance. 4.Technological Resources: Include the process by which an organization produces its goods and services. A technology used by an organization can be a major influence on its cost structures and services. Large no. of organizations go for copyrights, trademark or patents just to leverage its resources. 5.Capital Resources: This includes all other items of value including BRAND NAMES,REPUTATIONS with Customers, goodwill etc.Many items grouped here are intangible and it is more sustainable in nature.
    35. 35. Management Systems  It includes the following Culture Structure Power Dynamics/Politics Decision Making Process Past Strategy & Performance Work Systems
    36. 36. Culture In the assessment of culture an organization needs to understand the core values and philosophies that guide its day to day activities. In many case the culture are not articulated or expressed but assumptions that the individuals organization make about the company. clearly rather in the As a part of strategic planning process the culture should be clearly defined and also identified
    37. 37. Structure There is no standard type of organization structure is present but certain types of structural configurations may be more suited to certain types of conditions then others. An organizational structure acts like a catalyst for achieving certain strategic objectives. Organization structure has significant impact on how work is carried out ,how groups and departments interacts with each other, and it is a place where the accountability of performance lies.
    38. 38. Power Dynamics and Politics Assessing the Power dynamics and politics allows an organization to see who really controls what happens in the organization. Powers is not really related to Hierarchical Position; those in low level positions can often obtain significant amounts of power and influence behavior and activities of others in the organization Politics is a process by which people utilize the power they have in order to influence outcomes in a manner that they desire.
    39. 39. Decision Making Process In assessing decision making one needs to look at 1. Whether decisions are made by individuals or groups? 2. Who gets involved in decision making? 3. How information is collected, distributed, and made available to the individuals? 4. How long it takes for a decision to be make? These assessments can allow the organization to see whether its decision making process promote or inhibit effective performance as defined by the organization’s strategic objectives.
    40. 40. Past strategy & Performance In assessing the past strategy & performance of the organization it is critical to understand its internal environment. By looking at the past strategic initiatives and measuring the organizational success in meeting them, an organization can attempt to determine how & why it was not successful in the past. On this basis the organization can study the causes of failure or success of the past strategies and attempts to capitalize on its successes or take remedial actions for its shortcomings
    41. 41. Work Systems It is critical to examine the work systems,worksystems involves the Design of Jobs & allocation of responsibilities to assist an organization in meeting its objectives. The organization needs to ensure that it has designed work systems in an optimal manner to allow the organization to pursue its current and future objectives.
    42. 42. Measuring Strength & Weakness To measure Strength and Weakness three(3) measures are used for judging the degree of strength or weakness of an organization: 1. 2. 3. Attribute or quality Measures. Effectiveness Measures. Efficiency Measures.
    43. 43. Attribute Measures Attribute means Quality or Characteristics or Traits. This refer to statements developed to identify or list a characteristics or quality an organization possess or likely to possess in the near future. 1. 2. Example : Our key strength is to decentralized system of working we follow Our key weakness is the large work force.
    44. 44.  This represents the presence of characteristics without attaching a unit of measurement i.e. To what extent a strength is genuinely contributing towards competitive advantage.
    45. 45. Effectiveness Measures  Here the characteristics is expressed by a statement that identifies the capability of organization & will help to achieve a specific task or objective.  For example a company might say that induction of Yoga has increased the energy level in our employees.  Weakness statement is that the distance between manufacturing unit and the market is more, leading to an increase in the product cost.
    46. 46. Efficiency Measures  It helps in measuring the productivity of an organization.  Any statement given by the senior management related to rejection of product is related to the quality of product and hence ,this weakness needs rectification.
    47. 47. BATES & ELDREDGE APPROACH B&E have described a conceptual approach for analyzing strength and weakness They suggested three(3) dimensions : FINANCE MANAGEMENT OPERATIONS
    48. 48.  The management Dimension covers top management functions and broader issues in relation to the entire organization. These could be strategic planning process and system , climate, culture, values and so on.  The operations dimension includes resource conversion and functions like production , materials management and marketing.  The finance dimensions include capital resources, working capital and credit policies etc.
    49. 49.  Bates and Elderberg, have suggested the use of the following dimensions for evaluating the strategic planning systems of a firm: 1. Critical factors: These involve the identification of present and future conditions likely to have a bearing on the achievement of objectives. 2. Resources: These entail identifying and providing the resources required both for present and future achievement of objectives. 3. Objectives: These are to be spelt clearly in terms of the results and details used for measurement. 4. Appraisal: This involves comparison of actual and expected performance for possible corrective action. 5. Resource Development: this implies establishment and delegation of responsibilities and authority for critical factors.
    50. 50. The 7-S Framework Dimension Marketing Finance Human Resource Production Strategy Structure System Shared Values/Super ordinate Goals Skills Style Staff The 7-S Frame work can also be used at the corporate level and functional level. The selection of an approach /framework depends on the following conditions/situations: 1. The level at which the exercise is being performed. 2. The characteristics that are being examined i.e. Mgt Culture, Mkt. Mgt. 3. The type of use that the management wants to employ the approach. Depending on the answers to the above ,a single or a combination of frameworks can be used for conducting corporate audit
    51. 51. Establishing Goals & Objectives IV STAGE Once an organization has established and articulated its mission ,assessed its external environment and identified internal resources and management systems that affects its performance, it is then ready to establish its goals and objectives for the next time period. Goals: It should be specific & measurable, decision makers should also identify how performance towards these goals will be measured and evaluated.
    52. 52. Goals also need to be flexible, because the whole process of setting goals involves dealing with the future and anticipating what might or might not happen . Goals can be adjusted upward as well as downward in response to how events in the environment have unfolded
    53. 53. (V) Setting Strategy Once goals have been defined ,an organization is ready to determine its strategy. Strategy ,very simple how the organization intends to achieve goals. It is important to know that there is no model way to manage human resources strategically because every organization is different. Ideally the HR Strategy serve as framework by which an organization can develop a consistent and aligned set of Practices, Policies, and Programs that will allow the employees to achieve the organizational objectives.
    54. 54. Step & Ladder Approach to Strategic Management Process Environmental Analysis EXTERNAL Social Environmental Task Environment (Opportunities & Threats) Implementation of Strategy Mission Evaluation & Control Objectives Strategies Policies Programmes Budgets INTERNAL Procedures Strategy Formulation Structure Culture Resources (Strength & Weakness) Performance
    56. 56. Hierarchy of Strategy 1. 2. 3. Business firms usually consider three types of Strategies: Corporate Strategy Corporate Strategy Business Strategy Functional Strategy Business Strategy Hierarchy of Strategy Functional Strategy
    57. 57. Contextual/ Related Factors Hierarchy of Strategic Decision Making Corporate Level Strategy Product Market Corporate Management Capital Market What business we are in? Business Business Business Unit-1 Unit-2 Unit-3 Business Level Strategy How to compete? Labor Market Technology Govt.Policies Trade/ agreement Policies Stakeholders Interest Functional Level Strategy R&D Mkt. HR Mfg. Fin. How we will support the business level competitive strategy? Human Resource Management: philosophy, policies, programs, practice, processes, relationship with managers, non-managers, trade unions, customers & suppliers
    58. 58.  Corporate Strategy: Provides an overall direction of organization in terms of its general attitude towards growth management of business.  the and Typically they fit in three main categories of stability, growth and retrenchment or reduction in expenditure. Example : Infosys Tech. follows a corporate growth strategy of Predictability, Sustainability, Profitability & de-risking (PSPD).  Business Strategy: It is the strategy followed at the business unit or product level. For example: Infosys uses differential strategy in its global service delivery model.  Functional Strategy: It refers to the approach in a functional area to achieve corporate and business unit objectives. It is concerned with the development of a distinctive competence to provide an organization or a business unit with competitive advantage.
    59. 59. Corporate Strategies Various types of organization strategies requires different types of HR programmes. In short, there are three(3) different generic (broad) organizational strategies, and each would require a significant approach to managing people. 1. 2. 3. Growth Strategy Maintaining the status Turnaround or retrenchment strategy
    60. 60. Growth Strategy  The first strategy is Growth. Growth can allow an organization to reap the benefits of economies of scale, to enhance its position in the industry, and to provide more opportunities for professional development and advancement to its employees. GROWTH INTERNAL EXTERNAL
    61. 61. Growth can be achieved internally by further penetrating existing markets ,developing new markets or developing new products or services to sell in existing/ new markets. The strategic HR issues associated to growth strategies involves adequate planning to ensure that new employees are hired and trained in a timely manner to handle market demand, altering current employees about promotion and development opportunities , and also ensuring that the QUALITY & PERFORMACE STANDARDS are maintained during that period of rapid growth.
    62. 62. External Growth is achieved when any other organization is acquired. This is commonly done with the competitors or with the other organization that supply the raw materials .There are two(2)key strategic HR issues associated with external growth: 1. Merging dissimilar HR systems from different organizations.: The process may involve starting from scratch and establishing an entirely new HR strategy for the “new Organization”. 2. Mergers and acquisitions usually results in the dismissal of employees: In this second external growth strategy decisions is to be taken that who will be retained and who will be let go.
    63. 63. THE SECOND ORGANIZATIONAL STRATEGY involves stability or simply “maintaining the status”. 1 2 An organization pursuing this strategy may see very limited opportunities in its environment and decide to continue its operations as is. The HR issue for this type of organization is that The organization is not growing It has limited opportunities to offer to its employees. There may be very less opportunity for upward mobility and hence the employee may decide to leave and search for new avenues with other employer. Hence it is necessary for an Employer to identify key employees and develop a specific retention strategy for them.
    64. 64. Turnaround & Retrenchment Strategy  The organization downsize or streamline its operations in attempt to build-up or maintain its basic competency.  In this particular environment there is more threats then opportunities ,therefore organization tries to retool itself to capitalize on its existing strengths and remain solvent(neutral).
    65. 65. Retrenchment Strategy  In this strategy the main issue is “Cost Cutting". In service organizations the payroll is the chief expense.  At this time the organization also develops the strategy to manage the ‘Survivors’.  Many organizations announce the intention to lay off employees well in advance of the actual notification of individually affected employees.
    66. 66.  As a result ,many of these “Survivors” may have been working for several months in the fear that their employment was in jeopardy or risk.  When their jobs gets retained they found that their co workers whom they have worked for so many years, gone.  They are often asked to take additional responsibilities of those who departed generally without compensation.  This makes them demoralized, depressed etc.. and boosting the moral of these employees is an significant HR challenge.