Chapter 1: Establishing a Human Resource Strategy
Attracting and retaining competent employees has become a precondition for business success
“The better the fit between the requirements of a job and competencies of the jobholder, the higher the
performance and job satisfaction will be.”
The lack of aptitude, skills, or motivation on the part of new hired has caused problems for many
employers. The cost of such poor decisions is also high. Costs: x% of employee’s salary for each year of
tenure, additional training expenses, the cost of recruiting new hires, and potential litigation expenses. Lost
time, the inefficiency of new recruits, the inferior performance of their work teams/units, and lost customers
due to inferior service/product ?quality.
The presence of qualifies and motivated employees can generate superior organisational and team
performance, high morale, superior customer satisfaction, and better organisational agility to meet future
Formulating a Human Resource Strategy
A strategy deals with a number of basic issues (techno advancements, changes in customer preferences,
and new govt regulations) and is oriented towards the many elements of an organisation’s environments
(competitors, governments, and employees).
Strategy – comprehensive and integrates plan with relatively long-term implications designed to achieve
the basic objectives of an organisation.
- Examples: Competing in specific product-market segments, to diversify, to expand, or to close
down specific operations.
Strategic Human Resource Management (HRM) – links HR Mgmt practices to the strategic needs of an
organisation and aims to provide it with an effective workforce while meeting the needs of its members and
other constituents of society. Also, the HR function must play a key role in formulating organisational
strategy if the strategy is to succeed.
- It helps organisations differentiate themselves from their competitors and achieve a sustainable
- To be effective, a human resource strategy should be formulated on the basis of an organisation’s
environment, mission, and objectives and its strategic posture and internal strengths and weaknesses,
including its culture.
Steps to formulate HR Strategy: Environmental Analysis, Analysis of Organisational Strengths and Culture,
Analysis of Organisational Mission and Goals.
1. Environmental Analysis – Continuous monitoring of economic, legal, social, and labour-market trends,
a human resource manager can identify environmental threats and opportunities, which help formulate
new strategies and tactics.
Environmental trend 1: Globalization and the push for productivity
• 1 in 4 jobs dependent on exports. Canada’s share of world trade has been dropping – 3rd in
world. Trend explained through the emergence of several low-cost trading nations (Korea,
Thailand, China, and India), which took away market shares in traditional strongholds. At the
same time, Canada’s traditional exports have been adversely affected by the slow growth of our
productivity compare to that of the US.
• Productivity improvement is a solution to challenges of global competition. Productivity – a ratio
of outputs (g&s) to inputs (people, capital, materials, energy), increases as an organisation finds
new ways to use fewer resources to produce its output. Can reduce costs, save scarce
resources, and enhance profits.
Environmental trend 2: Importance of human capital
• HC is a strategic source of value creation; a company’s most valued asset in today’s knowledge-
based economy. Depth and breadth of their employers’ talents, education, experience,
knowledge, and skills- assets. Must have elaborate systems to attract and retain highly
competent and motivated employees; must also continually invest in HC through training and
development. • Development especially critical for knowledge workers (scientists, programmers, and
consultants) since they’re required to develop ideas and expert opinions.
Must make significant investments in recruitment and selection systems and development –
provides high return to employer.
Environmental trend 3: Shifting demographic characteristics and workforce diversity
- 5 major developments in Canada’s demo and pop are significant when formulating HR strategy.
1. Increasing participation by women – steady. 82% of women aged 25-44 are in labour force.
More work in mgmt, law, engineering, and medicine. However most CEOs, board members, and senior
execs are still men; Pay equity also a problem.
2. Coexistence of highly skilled and semi-literate employees – Compared to other developed
nations low levels of literacy continue to be high. While formal educational attainment among workforce
entrants is at an all-time high, the skills of these indivis are not well matched to org needs.
3. Workforce diversity – in addition to contributing to cultural diversity, immigrants can also
encourage economic growth. Allophones- “ other speaking”. Still prevalent are culturally biased tools
and unwilling employers not recognizing foreign credentials. Ignorance about other cultures fosters
stereotypes about immigrants. 1/6 adults have been victims of racism. Selection procedures that are
valid for the mainstream white community may not be valid for members of minority groups; may have
to alter assumptions about appropriate behaviour when meeting potential employees.
4. An aging and declining population – Declining pop growth. Require more immigrants to keep
pop at current level. Tight labour markets will result in employers competing more aggressively to find the
needed labour to make their operations successful; which will necessitate more innovative recruiting
practices and more attractive rewards, making the years to come “the decade of the employee”.
5. Changing priorities of employees – The expectations and work attitudes of employees can
vary markedly, depending on their age, family status, and other socioeconomic and demographic
variables. Gen Y – pragmatic, savvy, socially and environmentally aware, and open to new experiences.
To meet the needs of Gen X and Y workforce, employers may need to radically alter work practices and
systems. Gen Y turned off by inflexible hours, nasty bosses, and a not fun work atmosphere.
Fundamental changes in work-related attitudes, including notions of fairness and equity at the
workplace, must change to attract and retain the new gen.
Environmental Trend 4: Computerization and changing work requirements
• Computers have become an integral part of life (work and play). Internet has helped break
temporal and geographic barriers. One can have universal access to documents, faster decision
making, and telecommuting possible (work at home using internet, fax, telephone etc.)
• Telecommuting cute employee stress, boosts productivity, and reduces operating costs, it also
requires changes in HR practices.
• Thorough job analysis and careful identification of needed competencies can be invaluable to an
organisation’s efforts to take full advantage of emerging technology.
Environmental trend 5: Ever-increasing legal requirements
• Most applicable laws and regulations relate to CCRF, CHRA, the Canada Labour Code, the
Hazardous Products Act, the Canada Pension Plan, provincial minimum wages acts, and the
provincial workers’ compensation acts.
• None of the grounds for discrimination can be used for selection purposes unless the employer
can prove that they are related to performance. Onus is on employer to show that with
reasonable accommodation, persons who score low on that attribute or behaviour cannot
perform satisfactorily. In all instances, the employer should clearly define and accurately
measure performance requirements in order to avoid possible litigation.
2. Analysis of Organisational Mission and Goals
• Mission Statement – specifies the activities the org intends to pursue and its future course;
concise statement of “who we are, what we do, and where we are headed” and gives an org its
own special identity, character, and path of development.
• Similar firms can pursue different goals, which are reflected in their mission statements. 3. Analysis of Organisational Strengths and Culture
• Must carefully examine SWOT. Avoid goals that cannot be attained within its HR capabilities.
Every org is unique.
• Organisational Culture – the distinctive pattern of behaviour and the underlying values, beliefs,
meanings, and knowledge shared by the members of an org. Shaped by: employees, objectives,
policies, technology, size, age, unions, and views of successes and failures.
• HR specialists should be familiar with and adjust to the character of the org. It is sometimes
overlooked that objective can be achieved in several acceptable ways – Equifinality – many
paths to any given objective. The key to success is picking the path that best fits the org’s
4. Analysis of Organisational Strategy
• Org and HR strategies are intricately intertwined. The members of each org rep a unique set of
skills and capabilities.
• Organizational Core Competencies are the skills/capabilities in value-creating activities (mfr’g,
marketing, or research and development) that allow an org to achieve superior quality, product
innovation, low cost, or better customer responsiveness, and thus to outperform its competitors.
• Core competencies permit and org to enter new market segments faster than its rivals through
strategies that capitalize on those strengths. The quality of core competencies depends on
specialised resources and organizational ability. Specialised resources – technical skills of
employees, skills of top mgrs, the vision of the CEO, and access to valuable and scarce
resources. Organizational ability – firm’s ability to manage these resources to create max value,
through the creation of an appropriate internal structure and culture; internal comm. System and
control systems for motivating and coordinating member behaviour also related to org ability.
• Three major generic organisational strategies for a firm to pursue: cost leadership,
differentiation, or focus.
1. Cost Leadership – gain a competitive advantage though lower costs. Aggressively seeks
efficiencies in production and uses tight controls (esp in managing costs) to gain an
advantage over its competitors. E.g. Walmart’s “everyday low prices”
2. Product Differentiation – creating a distinctive/unique product unsurpassed by competitors
in quality, innovative design, or other feature, which can be accomplished through product
design, unique technology, or through carefully planned advertising and promotion. May
even be able to charge a higher price for product as a result. E.g. Ipod, Bose, or CK.
3. Focus – concentrating on a segment of the market and satisfying that niche with a highly
distinctive product. Niche may be defined by geographic boundaries or special consumer
FORMULATION OF THE HR STRATEGY
- Depending on the overall strategies employed by organisations, the priorities of human resource
department’s strategies will vary substantially.
Popular Human Resource Strategies
Identifying the HR strategy is a complex task; not unusual to see the same org adopting somewhat different
employment practices for different employee groups or in different regions.
There tends to be a dominant HR strategy, however on a operational level multiple bundles of HR practices
unique to particular org subgroups are likely to develop.
Four archetypical HR strategies:
1. Commitment Strategy – forging a common interest between the org (mgmt) and its
employees. Done through emphasizing employee training and development, internal
staffing, and career development, and formulating compensation levels on the basis of
internal equity norms rather than market rates.
2. Compliance Strategy – achieving labour efficiencies through controlling labour costs,