HUMAN RESOURCE
MANAGEMENT
CHAPTER 3:
STRATEGIC HUMAN RESOURCE
MANAGEMENT
Gary Dessler
WHERE WE ARE NOW…
LEARNING OUTCOMES
1. Outline the basic steps in the management planning
process.
2. Explain and give examples each of companywide and
competitive strategy.
3. Explain what a strategy-oriented human resource
management system is and why it is important.
The Strategic Management Process
• Strategy
 A course of action the organization intends to pursue to achieve
its strategic aims.
• Strategic Plan
 How an organization intends to match its internal strengths and
weaknesses with its external opportunities and threats to
maintain a competitive advantage over the long term.
• Strategic Management
 The process of identifying and executing the organization’s
mission by matching its capabilities with the demands of its
environment.
Business Vision and Mission
• Leveraging
 Capitalizing on a firm’s unique competitive strength while
underplaying its weaknesses.
• Vision
 A general statement of an organization’s intended direction that
evokes emotional feelings in organization members.
• Mission
 Spells out who the firm is, what it does, and where it’s headed.
FIGURE 3–5
The Strategic Management Process
The Strategic Management Process
• Step 1: Define the Current Business
 Every company must choose the terrain on which it will compete
–in particular, what products it will sell, where it will sell them,
and how its products and services will differ from its competitors.

Rolex and Seiko
 Managers sometimes use vision and mission statements.
 Whereas visions usually lay out in very broad terms what the
business should be, the mission lays out in broad terms what our
main tasks are now.
– ‘Saving Private Ryan’
The Strategic Management Process
• Step 2: Perform External and Internal Audits
 Ideally, managers begin their strategic planning by
methodologically analyzing their external and internal situations.
 To facilitate this strategic external/internal audit, many managers
use SWOT analysis.

This involves a SWOT chart to compile and organize the process of
identifying company Strengths, Weaknesses, Opportunities and
Threats.
FIGURE 3–7
SWOT Matrix, with Generic Examples
The Strategic Management Process
• Step 3: Formulate New Business and Mission
Statements
 Based on the situation analysis, what should our new business
be?
 What is our new mission and vision?
• Step 4: Translate the Mission into Strategic Goals
 Saying the mission is “to make quality job one thing;
operationalizing that mission for your managers is another.
• Step 5: Formulate Strategies to Achieve the Strategic
Goals
 The strategies bridge where the company is now, with where it
wants to be tomorrow.
 The best strategies are concise enough for the manager to
express in an easily communicated phrase that resonates with
employees.
The Strategic Management Process
The Strategic Management Process
• Step 6: Implement Strategies
 Strategy implementation means translating strategies into
actions and results –by actually hiring (or firing) people, building
(or closing) plants, and adding (or eliminating) products and
product lines.
• Step 7: Evaluate Performance
 Strategies do not always succeed.
 Managing strategy is an ongoing process.
 Strategic evaluation addresses several important questions:
 For example: Are all the resources of our firm contributing as
planned to achieving our strategic goals?
 What is reason for any discrepancies?
 Do changes in our situation suggest that we should revise our
strategic plan?
FIGURE 3–8
Type of Strategy at Each Company Level
Types of Corporate Strategies
Corporate Strategy Possibilities
Diversification
Concentration
Vertical
integration
Consolidation
Geographic
expansion
Types of Corporate Strategies
• A company’s corporate level strategy identifies the portfolio of
businesses that, in total, comprise the company and the ways in
which these businesses relate to each other
• Concentration (single business)
 The firm offers one product or product line, usually in one
market.
• Diversification
 The firm will expand by adding new product lines.
 Related and unrelated (conglomerate)
Types of Corporate Strategies
• Vertical Integration
 The firm expands by, perhaps, producing its own raw materials,
or selling its products direct.
• Consolidation
 Reducing a firm’s size.
• Geographic Expansion
 Taking business abroad
Types of Competitive Strategies
Business-Level
Competitive Strategies
Cost leadership
Differentiation
Focus/Niche
Types of Competitive Strategies
• A competitive strategy identifies how to build and strengthen the
business’s long term competitive position in the marketplace.
• Cost leadership
 A firm is seeking to become the overall low-cost leader in an
industry.
 Dell
• Differentiation
 The firm seeks to be unique in their industry along competitive
dimensions that are widely valued by buyers.
 Volvo (safety), Mercedes- Benz (reliability and quality)
• Focus
 The firms that attempt to compete in a narrow market segment
(niche) through the provision of a product or service that specify
customers can get in no other way. (Ferrari)
Functional Strategy
• A functional strategies identify the basic courses of action that each
department will pursue in order to help the business attain its
competitive goals.
 Dell’s human resource strategies
Achieving Strategic Fit
• The “Fit” Point of View (Porter)
 All of the firm’s activities must be tailored to or fit the chosen
strategy such that the firm’s functional strategies support its
corporate and competitive strategies.
 Southwest Airlines’ a low-cost leader strategy
• Leveraging (Hamel and Prahalad)
 “Stretch” in leveraging resources—supplementing what you have
and doing more with what you have—can be more important
than just fitting the strategic plan to current resources.
FIGURE 3–9
Southwest Airlines’ Activity System
HRM’s Role in Creating Competitive
Advantage
 Competitive advantages are “factors that allow an organization
to differentiate its product or service”.
 To have an effective competitive strategy, the company must
have one or more competitive advantages.

Southwest Airlines achieves a low-cost leader status partly through
employment policies.
 The competitive advantage can take many forms.
 For a pharmaceuticals company, it may be the quality of its
research team, and its patents.
 Ford and Toyota (same technology)
 Toyota’s HR strategies:
– A full week of employee screening testing
– Three weeks per year of training
– Team-based rewards
Strategic Human Resource Management
• Strategic Human Resource Management
 The linking of HRM with strategic goals and objectives in order
to improve business performance and develop organizational
cultures that foster innovation and flexibility.
 Involves formulating and executing HR systems—HR policies
and activities—that produce the employee competencies and
behaviors that the company needs to achieve its strategic aims.
 FedEx’s strategic aims is to achieve superior levels of customer
service and high profitability through

A highly committed workforce, preferably in a nonunion
environment.
FIGURE 3–10 Linking Company-Wide and HR Strategies
FIGURE 3–13 Strategy Map for Southwest Airlines
HRM’s Strategic Roles
• HR Managers can play two basic strategic planning roles, in
strategy execution and in strategy formulation.
• The Strategy Execution Role
 Strategy execution is traditionally the heart of the Hr managers’
strategic job.
 Top management formulates the company’s corporate and
competitive strategies.
 Then, hr manager designs strategies, policies, and practices that
make sense in terms of company’s corporate and competitive
strategies.

Dell’s ‘Web-based help desk’ help the firm better execute its lowcost strategy
HRM’s Strategic Roles
• The Strategy Formulation Role
 HRM’s traditional role in executing strategy has expanded to
include working with top management to formulate the
company’s strategic plans.
 This expanded strategy formulation role reflects the reality
employers face today.
 Globalization means more competition, more competition
means more performance and most employers are pursuing
improved performance

By boosting the competence and commitment levels of their
employees.
 ‘How can we boost employee productivity?’ is crucial to the
strategy formulation process.
Creating the Strategic HRM System
Building A High-Performance Work System
• High-Performance Work System (HPWS)
 A set of human resource management policies and practices
that promote organizational effectiveness.
• High-Performance Human Resource Policies
and Practices
 Emphasize the use of relevant HR metrics.
 Set out the things that HR systems must do to become an
HPWS.
 Foster practices that encourage employee self-management.
 Practice benchmarking to set goals and measure the notable
performance differences required of an HPWS.
TABLE 3–1
Comparison of Selected Human Resource Practices in
High-Performance and Low-Performance Companies
KEY TERMS
strategic plan
Off shoring
strategy
strategic human resource
strategic management
management
vision statement
strategy map
mission statement
high-performance work system
corporate-level strategy
human resource metric
competitive strategy
value chain
competitive advantage
HR audit
functional strategies