Chapter 2: Aligning HR with Strategy

Human Resource Management encompases the following:
Specific HR Practices- recruitment, selection, appraisal
Formal HR Policies- direct and partially constrain the development of specific practices
Oversearching HR Philosophies- specify the values that inform the organizations policies and practices

Strategic Human Resource Management- interrelated practices, policies, and philosophies that facilitate the attainment of organizational strategy.
Practices, policies and philosophies form a system that attracts, develops, motivates, and trains employees who ensure the survival and effective functioning of the organization and its members.
-Integrating human resource management strategies and systems to achieve overall mission, strategies, and success of the firm while meeting needs of employees and other stakeholders. (Canadian Human Resource Management:A Strategic Approach, Sixth Edition)

Theories of the Strategic Management of Human Resources
Resource-Based View
This theory suggests that the management of resources and capabilities will lead to competitive advantage resulting in superior performance and value creation.
Typical resources might include:
-Human resources
-Proprietary knowledge
Typical capabilities might include:
-Speed of bringing new products to market

The Behavioral Perspective
This theory suggests that different HR strategies are required to influence the diverse behaviors of employees.
HR’s role is to reinforce certain behaviors via the HR practices such as recruitment, selection, training, compensation, and performance
HR department is to define the behaviours necessary to acheieve organizational capabilities of innovation, speed and accountability.

Human Capital Theory – the sum of employees’ knowledge, skills, experience, and commitment invested in the organization.
-Classic economists view the firm as having control over three types of resources in the production of goods and services including:
1. Land
2. Labour (or Human Capital)
3. Capital
The advantages of an organization with effective HR practices may come not from having better resources but from making better use of the resources by achieving higher productivity per worker and be matching the apabilities of employees with the strategy.
Strategic HRM
Despite the apparent link between planning and strategy, there is some concern that HR planning has been preoccupied with resource supply and demand forcasting without considering the different HR practices required by fundementally different strategies. There is a need for HR professionals in formulating policy.
The Importance of Strategic HR Planning
HR is seen as valuable when it can deliver the behaviours needed to enable the organization's strategy. Two key reasons why HR planning is so critical to are:
  1. Employees help an organization achieve success because they are strategic resources
  2. The planning process itself results in improved goal attainment
Skills and knowledge can become obsolete unless either the individual or employer invests in further training. If these investments in training are not made and the skills become obsolete, the value of that company's human resources is decreased. The human capital has to be replenished. This shows the importance of moving employees ahead and keeping them trained will only help in the company's end result.
Additionally, the company's strategy can become obsolete, making the current employee skills obsolete.
"Strategic Workforce Planning is the analytical forecasting and planning process that connects and directs talent management activities to ensure an organization has the right people in the right places at the right time and at the right price to execute the business strategy."
(The Conference Board, Strategic Workforce Planning:Forecasting Human Capital Needs to Execute Business Strategy, 2007)
Organizations with different business units are likely to have different HRM policies for each business unit to optimize employee performance. An organization that manages its human resources strategically is more likely to achieve its goals, survive and profit.
Improved Goal Attainment
Organizations with clear strategies provide direction and meaning to employees and mitigate the need for control by substituting a consistancy of purpose - in other words, a mission. This articulated vision for the future may result in a more effective organization through increased motivation and performance, lowered absenteeism and turnover, and heightened stability, satisfaction, and involvement.
Risks to Strategic HR Planning
  • Costs: Increased time and energy in making decisions, increased potential for information overload, unrealistic commitments to employees, over-concern with employee reactions that may be incompatible with industry conditions
  • False employee expectations: Future plans may raise employee expectations that hey have a job for life and will be trained for that job
  • Loss of Flexibility: Committing to one strategy may cause the organization to become blind to changes in the environment

Strategy Formulation and Implementation "formulating the strategy is easy, implementing it is hard"
- motivating employees to commit to the strategy and implement it is far more difficult
  • HR that plans for the future may raise employee's expectations that they have jobs for life and will be trained for those jobs. "the reality is that conditions change, the plan might change, resulting in those jobs being lost".
  • Organizations that do not actively scan the environment face the danger of being out of touch with reality. "leaving the company's current operations decisions based yesterday's conditions, not for the future".

Aligning HR strategy with business strategy can be done in one of three ways.
1. Start with organizational strategy and then create HR strategy
2. Start with HR competencies and tehn craft corporate strtegies based on these competencies
3. do a combination of both in a form of reciprocal relationship.
"An organization that fails to plan, plans to fail." It's important to optimize your human resources and focus their behaviour on what's important to the organization.

HR as a Business Partner - The Key being concurrent strategy formulation based on environmental analysis.
HR issues do not determine strategy, nor strategy solely HR practices. Senior managers have to be active scanning in order to react or be proactive at adjusting strategy to meet concurrent needs

Employees as Strategic Resources
-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

Link to excellent articles highlighting this chapter:

Discussion question 1 page 50
Investment in human capital is important but all is not lost if some team members leave because sometimes long term employees
may become set in their ways, become lazy and not welcome change. New team members may mean fresh perspectives and new ideas. Some turnover can be prevented if the employees are engaged and "buy in" to corporate strategies, therefore protecting your investment.

Characteristics of an Effective HRM Strategy
Internal Fit
  • There must be a fit between HR and the other departments within the organization
  • Having consistency within the different programs in the HR alignment are also important (training, selection)

External Fit
  • HR programs must align with the overall strategy of theorganization
  • Sometimes called the "best fit" approach to strategic HR

Focus on Results
  • Tracking of the results is an important to be able to measure results in order to see if the goal has been achieved
  • See the following chain that needs to be developed to produce and HR program
HR program --> employee competencies --> organizational strategy --> organizational outcome

This is an interesting article that ties in perfectly with this topic, and inparticular the question that we answered in the FOL Ch. 2 discussion: