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Chapter 2

Chapter 2: Aligning HR with Strategy

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University of Waterloo
Legal Studies
LS 222
Jennifer Schulenberg

Chapter 2: Aligning HR with Strategy TL Carter: Hrm strategy ­ vision, value, strategy, resources, capability, motivation and feedback ­ if you have everything but the vision, there would be a lot of confusion o will lead to more inefficiencies, not knowing where they are going or what they’re doing ­ If you have everything but value, there will be a lot of corruption ­ No feedback will lead to doubt ­ No motivation, you are crawling ­ No strategy, you have no goals and diffusion  ­ No resources, you get frustration   ▯no people you need, you can’t do anything about it Strategic HRM • Umbrella term that encompasses: o Specific HR practices  Recruitment, selection and appraisal o Formal HR policies direct and partially constrain development of specific practices o Overarching HR philosophies  Specify values that inform organization’s policies and practices • Strategic HRM: interrelated practices, policies, and philosophies that facilitate the attainment of organizational strategy o There’s a view that HRM should be split into two  Transactional activities  ▯payroll,  accounting  Decision Science  ▯effective utilization of human capital like finance Theories of the Strategic Management of Human Resources Resource based View • Michael Porter  ▯ organization’s employees can provide a firm with competitive advantage o Employees provide superior performance due to skills or flexibility • The less a resource can be imitated, the more durable the source of competitive advantage o Competition can’t just buy employees • Typical Resources might include: o Human resources o Proprietary knowledge o Reputation • Typical capabilities o Flexibility o Adaptability o Speed of bringing new products to market Behavioural Perspective • Effective HR system identifies behaviours needed to implement strategy o Provides opportunity for employees to exhibit behaviours o Ensure they have knowledge and skills o Motivation • What behaviours would be necessary to achieve innovation, speed and accountability? • This theory suggests that different HR strategies are required to influence the diverse behaviours of employees. • HR’s role is to reinforce certain behaviours via the HR practices such as recruitment,  selection, training, compensation, and performance Human Capital Theory • 3 types of resources:  land, capital and labour Chapter 2: Aligning HR with Strategy • Human capital:  sum of employees’ knowledge, skills, experience, and commitment invested in the organization o Intangible = knowledge, education, vocational qualifications, professional certifications, experience and competence • Classical economists view the firm as having control over three types of resources in the production of goods and services  including: o Land o Labour (or Human Capital) o Capital • Human capital also includes the: o knowledge,  o education,  o vocational qualifications,  o professional certifications,  o work­related experience, and  o competence of an organization’s employees Strategic HRM • Issues are often cited as threats to ability to execute strategy • Goal: determine ksa’s required within broad organizational outcomes for growth or decline o Emphasis on analyzing resource supply and demand forecasting while ignoring managerial realities and support for  the process  Without considering different HR practices by different strategies • HR strategy should tailor HR policies and practices to organizational needs of the future Employees as Strategy • Human resources can deteriorate if skills and knowledge become obsolete • Investment in employees’ skills increases the value of the organization’s human capital • The “value” of this human capital must be captured within the strategic HR plan Human assets offer organizations a competitive advantage: • An organization that manages its human resources strategically is more likely to survive and profit •  Human assets must be managed and matched to the organizational strategy Importance of Strategic HR Planning • Execs demand HR department move from articulating perceived value to demonstrating value • Focus should be on scoring points, not just coaching, training or number of players • 2 important planning o employees help organization achieve success because they are strategic resources o planning process results in improved goal attainment • HR can deteriorate o Skills and knowledge becomes obsolete o Higher investments in training = higher – value human capital • Changing the strategy = diminishing the value of current workforce Improved Goal Attainment • Strategy formulation is important to align strategies with overall strategies and align employees to objectives • Aligns all HR functional strategies with overall strategy • Focuses employees on important missions and goals of the organization • Developing HR practices that support the strategy leads to improved strategy implementation The Risks • Strategic management of HR seems beneficial, but there are costs Chapter 2: Aligning HR with Strategy o Increased time and energy to make decisions, greater potential for info overload, impossible commitments to  employees and incompatibility with industry condition • Companies may become blind to changes in the e
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