The General Principles of Design for an HR Strategy
From what we have studied so far, it is clear that there is no overall single human resource strategy or series of strategies that can be considered ideal or prescriptive for all
organisations.
Boxall, writing in the Journal of Human Resource Management in 1993, listed the following basic propositions about the formulation of human resource strategy:
There is typically no single human resource strategy in an organisation. From his research, Boxall found that successful organisations did have an overall strategic approach within which there were specific human resource strategies.
Business strategy may be an important influence on human resource strategy, but it is only one of several factors. In the last chapter, we identified that there is a range of corporate strategies that have an influence on HR strategy.
Implicit (if not explicit) in the mix of factors that influence the shape of human resource strategies is a set of historical compromises and trade-offs from stakeholders.
Management may seek to shift the historical pattern of human resource strategy significantly, in response to major contextual change, but not all managements will respond and not all in the same way. In other words, human resource strategies may be used as a method of effecting change.
The strategy formation process is complex and excessively rationalistic models that advocate formalistic linkages between strategic planning and human resource planning are not particularly helpful. In reality, therefore, there is no magic formula which will lead to adoption of a logical collection of human resource strategies to support a given set of business strategies.
Descriptions of the dimensions that underpin human resource strategies are critical to the development of useful typologies but remain controversial, as no one set of constructs have established an intellectual superiority over others.
Armstrong suggests preparing a plan for implementing a strategy in a formal manner. This is a useful discipline to ensure matters are not forgotten and a useful tool for your examination!
The strategy should be set out under the following headings:
Basis
(a) Business needs in terms of the key elements of the business strategy (b) Analysis of the environmental factors (using techniques such as a SWOT
analysis and/or PEST analysis) (c) An analysis of the cultural factors.
Content
(a) Details of the proposed strategy.
Rationale
(a) The business case for the strategy against the background of business needs and environmental/cultural factors.
Implementation plan (a) Action plan
(b) Responsibility for each stage (c) Resources required
(d) Proposed arrangements for communication, consultation, involvement and training
(e) Project-management arrangements.
Costs and benefits analysis
(a) An analysis of the resource implications of the plan (costs, people and facilities) and the benefits that will accrue, for the organisation as a whole, for managers and for individual employees.
This approach is summarised diagrammatically on the next page.
Gap Analysis and the Techniques of Human Resource Planning
The traditional (sometimes called the rational) approach to HR planning involves assessing the gap between the current and the desired levels of human resources and selecting
strategies to close that gap – usually through recruitment, efforts to retain staff or a reduction in numbers through redundancy. A sophisticated approach to this process might involve complex models of likely labour demand and supply, with computers enabling a range of variables to be taken into consideration. However, it is essentially a statistical analysis and one that may look impressive on paper or on a computer screen, but one that often proves inaccurate. The more likely real life situation is one of continuous imbalance as a result of the dynamic conditions facing any organisation, the behaviour of people and the
imperfections of planning models. Hence, the diagnostic approach was developed in the mid 1980s to try to find a more realistic method of analysing staffing levels.
The diagnostic approach requires managers to identify the reason behind any apparent imbalance, rather than simply try to resolve an imbalance by recruitment, retention or redundancy. An example may help to explain this more clearly.
If a telephone sales organisation faces a problem of retaining staff, the rational approach would be to step up recruitment or try to retain staff by increasing pay. However, a diagnostic approach would mean becoming aware of this problem by monitoring such statistics such as wastage and stability and obtaining qualitative data by interviewing staff. The interviews might reveal concerns with job satisfaction and career paths open to staff, reflecting their aspirations that are not being met by current practices. Rather than express these aspirations openly for fear of conflict with management, many staff prefer to seek
employment elsewhere. The loss of skilled labour has important cost implications and in the face of continuing shortages of skilled workers, a diagnostic approach to retention can provide a significant pay-off.
The diagnostic approach enables strategies to be targeted that are more specifically aligned to the needs of the organisation, rather than attempt a general approach. For example, in the telesales example above, the organisation could attempt to improve the work
environment and work practices, to provide avenues for greater job satisfaction and personal growth. This may have implications for job design, departmental structure and management style, creating a tension that will have to be resolved. In this way, HR planning becomes integrated into the whole process of the management of the employment relationship.
The Sequence of Human Resource Strategy Formulation
Analyse – What is happening?
– What is good and not so good about it?
– What are the issues?
– What are the problems?
– What is the business need?
Diagnose – Why do these issues exist?
– What are the causes of the problems?
– What factors are influencing the situation (competition, environmental, political, etc.)
Conclusions and recommendations
– What are our conclusions from the analysis/diagnosis?
– What alternative strategies are available?
– Which alternative is recommended and why?
Action planning
– What actions do we need to take to implement the proposals?
– What problems may we meet and how will we overcome them?
– Who takes the action and when?
Resource planning
– What resources will we need (money, people, time)?
– How will we obtain these resources?
– How do we convince management that these resources are required?
Benefits
– What are the benefits to the organisation of implementing these proposals?
– How do they benefit individual employees?
– How do they satisfy business needs?
Source: Armstrong, Strategic Human Resource Management: A Guide to Action
"Hard" and "Soft" Human Resource Strategies
The "hard" approach to HRM sees employees as a measurable commodity, human capital, to be managed in a detached way, much as any other resource (such as land, buildings, plant or equipment) would be managed. This usually results in a close vertical integration between the business and the HR strategies. The human resource is considered as relatively easily disposable and the emphasis is upon employee compliance. This is the mechanistic approach.
The "soft" approach views employees as "resourceful humans", an invaluable source of competitive advantage. The emphasis is upon employee commitment. This is the organic approach.
The perspective adopted will have a strong influence upon the organisation's treatment of its people. Some organisations take a clear public stance on these issues (international
investment banks for instance will tend to take the hard perspective; creative industries will adopt the softer approach).
As we have seen above, traditional human resource planning largely follows the "hard"
approach, meaning numbers and skills, while contemporary HR planning equates with the
"soft" approach, meaning attitudes, motivation and teamworking.
It is important to note that while modern HR planning has found a firm foot-hold among forward-thinking organisations, one should not assume that it is widespread. Many HR planning specialists are still using traditional systems, largely because their organisations have not adopted the principles and techniques of professional and strategic HRM.
Beardwell and Claydon (2007) argue that consideration needs to be given to both the hard and the soft factors of HRM because it is not just the hard factors alone – numbers – which determine an organisation’s strategic and competitive advantage. In the words of
Leatherbarrow, Fletcher and Currie (2010), “in a world where customer service is king (or queen), the soft issues of planning such as the behaviours and attitudes that staff exhibit … should be at the forefront of the process.”
Flexing HR Strategies for Various Organisational Contingencies
Some of the HRM literature emphasises the fact that one of the major variables affecting an organisation’s choice of HR strategy will be the position of the organisation within its "life-cycle", comprising the four conventional phases of introduction (start-up), growth
(development), maturity, and decline and turnaround. Certainly, research evidence reveals a clear association between a given "life-cycle" stage and specific HRM strategies, policies and practices.
Logically, firms in their introductory and growth life-cycle stages will emphasise a rationalised approach to recruitment in order to acquire best-fit human resources, compensate employees against labour market rates, and actively pursue employee development strategies.
Organisations in the maturity stage are known to recruit enough people to allow for labour turnover and redundancies, and to create new opportunities in order to remain creative to maintain their market position. Such businesses emphasise flexibility via their training/learning and development programmes and pay people in the upper quartiles.
Firms in the decline stage will be likely to minimise costs by reducing overheads and will aspire to maintain harmonious employee relations.
Miles and Snow (1984) classify organisations in four ways as:
“Prospectors” – doing well and regularly looking for more product and market opportunities;
“Defenders” – with a limited and stable product/market domain;
“Analysers” – owning some degree of stability but on the lookout for possible opportunities; and
“Reactors” – mainly responding reactively to market conditions.
These generic strategies may determine each organisation’s HRM policies and practices.
For example, defenders are less concerned about recruiting new employees externally and are more interested in developing current employees, whereas prospectors are growing, so they are concerned about recruiting and using performance appraisal results for evaluation rather than for longer-term development.
Adapting HR Strategies for Special-Case Scenarios
International mergers and acquisitions are increasingly frequent, with 172 cross border deals, worth $1bn, in 2006 alone. It is the international aspect of these mergers that makes them difficult. HR professionals can play a key role in making integration a success for all employees and can lead the transfer of knowledge. According to the CIPD's report,
International Mergers and Acquisitions: How can HR play a strategic role? 60% of overseas-owned organisations growing through acquisition have already made deliberate attempts to share and integrate with the acquired firms' knowledge in the UK.
The CIPD recommends five steps for a smooth transition:
Ensure commitment and a willingness to learn from the new company; from all levels of the organisation.
Integrate staff involved in the acquisition into common processes; give them a voice in the new firm.
Allow the acquired organisation to preserve its positive practices; that's why you chose to buy them in the first instance.
Make sure enough time is allowed to digest and share knowledge.
Case Study
Satish Pradhan, executive vice president of group HR at Indian
conglomerate Tata Sons, acquirer of 98 companies across six continents, says:
"When we begin to think about a potential M&A candidate, we are already thinking about the future combined entity. This has huge implications for the way we approach and address issues right through the whole process – from scanning to integration."
Rather than a challenge, an M&A should be seen as an opportunity for HR.
It's a great chance to bring the function into the strategic heart of a
company, and a means of quickly the company culture in new members of staff.
Another special-case scenario concerns organisations that are deliberately transient and short-lived, coming into existence for a specified purpose and then ceasing to exist when that purpose has been fulfilled. Examples include companies formed to manage the 2012
Olympics in the UK or to plan and administer a country’s national censuses.
In these cases, HR strategies will be quite different from those occurring in organisations that, more conventionally, seek to create a permanent presence for themselves.
HR planning will be based on a requirement that the organisation comes into existence fully formed.
Recruitment and selection strategies will be focused on attracting people who can "hit the ground running", as it were.
There will be virtually no emphasis on training, learning and development, and certainly none on succession planning.
Rewards and performance management systems may have to be structured in such a way that the core workforce is encouraged to remain with the organisation until its final closure – otherwise there may be a gradual dilution of talent as staff members move elsewhere.
Employee relations will receive little attention in any formal sense, but the organisation will want to create a High Performance Working culture characterised by employee engagement and commitment.
The Impact of Globalisation and Multinationalism on HR Strategies
Companies that are operating globally must have a strategy for dealing with the implications of this. Those implications include:
Diversity of language, culture, economics and political process
Decentralisation of power from the "we know best" mother country to local managers who understand their local cultures and can behave sympathetically but need to be controlled
Reward structures need to fit the local culture
Attitudes to risk will vary from country to country
Formality vs. informality of process and behaviour
Loyalty to the organisation and long-term career expectation
Willingness (or unwillingness) to relocate, short term or long term.