Strategic Human Resource Management Chapter-2 CORPORATE & HUMAN RESOURCE STRATEGY

Chapter-2

CORPORATE & HUMAN RESOURCE STRATEGY

Strategic Choices   

With a view to formulating a corporate strategy, managers must consider several strategic choices. To make the appropriate choice, the following should he addressed:

1. Adoptable Strategy: Choosing the strategy that the company should adopt to maintain or improve its position in the market place.
2. Improve Sales Growth: Ensuring continued sales growth and maintenance of its workforce to avoid retrenchment and layoff.
3. Adapting Environment: To make the appropriate choices adapting to its ever changing environment.
4. Collecting Information: Collecting the information it needs to understand and influence its environment.
5. Changing Environment: Determining whether to change operating environments.

Definition of Corporate Strategy

Corporate strategy is a managerial game plan of a company. This strategy is formulated at the corporation level. Top managers formulate this strategy. It is the set of strategic alternatives that are selected by the top executive for all industries under the corporation for the attainment of overall human resource goa1s. In all industries, executing this strategy is mandatory. But the way may be different. Because the nature of production may vary from organization to organization under the same corporation. For example, Bangladesh Steel and Engineering Corporation (BSEC) has many industries. Some are producing ships, some are manufacturing electric meters, lights, bulbs etc. And some are assembling motor vehicles. Therefore, their strategic human resource activities are different in nature. Though they are bound to follow the strategies of BSEC, but they may have various options to formulate and execute strategies. Corporate strategy has been defined by some authors as follows:

1. R. W. Griffin : Corporate level strategy may be defined as “the set of strategic alternatives that organization chooses from as it manages its operations simultaneously across several industries and several markets.”
2. Thompson and Strickland: “Corporate strategy consists of the moves made to establish business positions in different industries and the approaches used to manage the company’s group of business.”

Corporate strategy may be made for diversified companies as well as for a single business unit.

Meaning of Human Resource Strategy

Human resource strategy is the set of some alternatives regarding HR activities of an organization. When usual and common human resource activities cannot achieve desired goals of an organization, there may be a need for adopting some strategic approaches. These strategic approaches are adopted to overcome the barriers on the path of performing HR activities by using conventional means. Human resource managers formulate the strategies for smoothing the ways recruiting, selection, training and development and other activities.

Under the above circumstance we can define HR strategy as a set of some action plans for implementing the plans and decisions taken regarding human resource.

Adopting a HR strategy involves considering employees as human assets and developing approaches, policies and programs as investments in these assets to increase their value to the organization. Strategic approach to HR is the demand of the present age. For proper utilization of human resources in the organization the intelligent managers are trying to innovate new techniques and adopting new weapons.

Importance of Corporate and Human Resource Strategy

Corporate and human resource strategy is important for an organization. Their importance may be discussed in the following points:

1. Environmental scanning: Corporate and human resource strategy can help in scanning the environment for proper formulating the strategies.
2. Proper functioning: If corporate and human resource strategy is adopted, proper functioning of human resources can take place.
3. Proper Discipline: Proper discipline may be established over the organizational human resource activities.
4. Cooperation: Without cooperation management can not do any thing properly. If organization follows corporate policy it may get cooperation from top management.
5. Fund allocation: Timely implementation of any strategy needs funds. Top management allocates the funds to execute the strategy.
6. Ensured control: If corporate HR strategy is followed by the business units, they must abide try the rules also. Thus control is ensured.
7. Unity: Corporate and human resource strategy encourages people to be united for the plans and polices.

Objectives of Corporate and Human Resource Strategy

Corporate and human resource strategy is adopted with a view to achieve some objectives. These objectives may be classified into many points. In the following paragraphs points of objectives are discussed:

1. To ensure uniformity: With a view to formulate a uniform strategy, top management gives some directions to the unit management.
2. To maintain discipline: If all organizations under the corporation follow the strategy formulated by the corporate office, discipline may be maintained.
3. To ensure fairness: By formulating corporate and human resource strategy fairness in regard to all HR activities may be ensured and discrimination be reduced.
4. To assure good investment: Investment for the development of human capital be assured by the corporate and human resource strategy.
5. To coordinate the activities: Coordination of human resource activities at the unit level may be strengthened with the help of corporate and human resource strategies.
6. To utilize funds allocated: With the formulation of corporate and human resource strategies, top management allocates some funds also. Organization tries to use these funds properly.
7. To implement timely: Business organization tries to make it sure that every strategy would be implemented timely the result of which ensures attainment of overall goals.
8. To ensure proper control: Through corporate and human resource strategy, top management ensures proper control over the activities of business organizations.

In conclusion, we can say that if all business units follow corporate and human resource strategies, a number of HR objectives as per desire may be achieved. Volume of success depends on the compliance of strategies formulated.

Corporate Strategy for a Diversified Company

A member of initiatives may be taken to crafting corporate strategy for diversified company. These initiatives are listed out as follows:

1. Based narrowly: Whether diversification is based narrowly in a few industries or broadly in many industrial organizations.
2. Types of diversification: Whether the business organization belongs to related or unrelated diversification or mixture of both.
3. Geographic location: Whether the company operations scope is domestic, multinational or global.
4. Strengthening positions: Moves to strengthen the positions in present businesses formed by merger or acquisitions.
5. Build positions: Moves to build positions in new industrial concerns via merger, acquisition, alliances or internal-start up.
6. Divestiture: Moves to divest weak, crisis ridden or unattractive industrial organizations.
7. Cross-business strategic fits: Effects to capture cross business strategic fits. It helps utilize capacities of all businesses.
8. Capital investment: Approach to allocating investment capital and resources across business units.

Corporate strategy is crafted at the highest level of management. Major strategic decisions are usually appraised and approved by the company’s Board of Directors.

Corporate Strategy for a Single Business

For the identification of corporate strategy for a single business organization a number of initiatives may be taken. These initiatives are mentioned in the following points:

1. Planned moves: Planned, proactive moves to out compete rivals.
2. Respond to change: Moves to respond and react to changing conditions in the macro environment and in industry and competitive conditions.
3. Geographic coverage: Scope of local, regional, national, multinational or global coverage.
4. Partnerships: Collaborative partnerships and strategic alliances with others.
5. Financial strategy: Moves to collect funds and use funds as per strategy crafted.
6. Manpower strategy: Moves to formulate appropriate manpower strategy.
7. Marketing strategy: Initiatives to craft sales, marketing, promotion and distribution strategies.
8. Production strategy: Another move to be made for crafting suitable production strategy.
9. Supply chain management: Top management moves for crafting appropriate supply chain management strategy.
10. R & D etc: Initiatives to formulate research and development, technological and engineering strategy for the business units.
11. Competitive advantage: Moves to build competitive advantage by lowering costs, differentiation or customer satisfaction.

Definition of Staff-Line Conflict

Staff-line conflict can be defined as the disagreements and jealousy between operating managers /units and staff/support managers and units. Human resource managers have long suffered from the staff line conflict that tends to arise in many organizations. For many reasons staff-line difference in opinions may occur. Sometimes this conflict is latent and sometimes it may be expressed. Both the conditions are detrimental to the organization. Due to difference in academic qualification, status, ego feeling or realization of problems may be attributable to the staff-line conflict.

Reasons for Staff -Line Conflict

Reasons of conflict between human resource managers and line managers include many aspects. In most of the small or big companies suffer from this conflict. These reasons are summarized below:

1. Top- down relationships: Line managers have top — down relationships unit HR managers. They relies on HR managers to carry out the strategies.
2. Functional differences: In the absence of HR department, line authority performs hiring, training, paying and other HR functions. When HR department is created line managers do not agree to delegate these activities to HR managers.
3. Specialized department: HR is a specialized department and the managers may have specialization which may create jealousy with line managers.
4. Wide latitude: In the organizations, where HR managers enjoy wide latitude to carry out many activities, line managers may consider it as ‘taking to much authority’ which may lead to conflict.
5. Police unit: In some organizations HR departments act as police units and they impose many bindings on some activities. At this line authority may be annoyed.
6. Distant relationships: HR managers help the line managers to implement plans, rather taking part in production or marketing of goods. This may create distant and authoritarian relationships among the levels.
7. Lack of orientation: Lack of goal —orientation & training also contribute to conflict between line and HR managers in an organization.

Nature of Line-Staff Conflict

There are a few nature and characteristics of staff-line conflict. Though their activities are closely interrelated and both can not work smoothly without the assistance and support of others. How ever we will consider some nature and characteristics of staff-line conflict. We review six aspects of this issue and how this conflict affects the strategic role for human resources.

First, Reliance: It is important to remember that all managers are human resource managers. That is all managers have subordinates on whom they rely to carry out work.

Second, HR Functions: The functions of hiring, training, placing, paying, and otherwise dealing with the workforce must be performed by somebody in organization. If a human resource unit does not exist, then line managers must perform all of these actions themselves.

Third, Separate Department: Human resource units are set up as specialized departments to help line managers in their role as human resource managers.

Fourth, Wide Latitude: In some organizations, human resource units are given wide latitude to do some of the hiring, benefit determination, training, and so on. In these organizations the human resource unit may be criticized for “taking on too much” or “taking too much authority away from line managers.”

Fifth, Police Units: In many organizations, human resource units serve as police units. They enforce the myriad of laws in human resources that a company must abide by, wage and hour, social security, discrimination, benefits, and safety and health policies for example.

Sixth, Real World Link: Human resource units do not have primary authority to produce or market a product or service but line managers do. Line managers often view human resource people as “out of touch” with the real world.

All of these factors cause line-staff conflict and credibility issues. This conflict and credibility gap can be so serious as to prevent human resources from playing an important role in strategy formulation. Therefore, conflict must be reduced and credibility enhanced if the human resources function is to be fully involved in strategy formulation.

Ways to Reduce Staff-Line Conflict

A number of actions that a company can take to reduce line- staff conflict and enhance the credibility of the human resource unit. As a human resource manager, he should follow the following steps to reduce staff -line conflict.

1. Competence: Human resource manger should ensure that people who staff the human unit are competent, well trained, and experienced in the various human resource functions.
2. Clear Role: Human resource manager’s role should be clearly spelled out in corporate policy vis-à-vis line roles. Both line managers and human resource professionals should play a role in determining this responsibility.
3. Support: Human resource people should view their role as supporting line staff the human resource unit exists to help line managers do a better job as human resource managers.
4. Relationship: The human resource unit and line managers should work together in formulating human resource policies, programs and actions.
5. Managing by Wandering: The human resource unit should practice ‘managing by wandering around as Peters and Austin call it in A Passion for Excellence.
6. Understanding Role: Line managers need to understand the important and significant role that the human resource unit plays in today’s environment. It takes many burdensome chores away from line managers, which actually makes their jobs much easier.

Line- staff conflict can seldom be completely eliminated. These points noted here should serve to enhance the human resource unit’s credibility and reduce line-staff conflict, thereby opening the door for greater participation of human resource professionals in the strategy formulation process.

Role of Human Resources in Strategy Formulation

Up to this point, we have argued that overall corporate strategy should drive functional, including human resource strategies. That is a company should first decide what as a whole, it needs to do to achieve a strategic area —marketing, finance, operations/ productions, human resources —to carry it out. We have stated that in “formulating overall strategy, the company should consider various aspects of each functional strategy.

The formulation of corporate strategy is really interactive with the formulation of functional strategy. In other words, by considering its capabilities in each functional area, the company is actually using its existing functional strategy and capabilities to help shape its future corporate strategy.

This interactive effect is an important notion, particularly with respect to human resource strategy. Strategic Human Resource Management that reciprocal interdependence between a firm’s business strategy and its human resources strategy underlies the proposed approach to the strategic management of human resources. Formation of corporate competitive advantage not only, influences, but also influenced by human resource strategy. Certainly, economic conditions, industry structure, the labor market and other factors must be considered in the light of interactive effect of competitive strategy and human resource strategy.

 

          Demand for Skills and Employees         Organizational Availabilityand       Readiness

Figure 2.1 Role of HR Manager in Strategy Formulation

Human resource strategy is now considered to be closely allied or linked to overall corporate strategy; the two go hand- in-hand. The results indicated that human resource professionals are extremely concerned with strategic, long-term issues that reflect the concerns of top strategic managers. Among the issues dominating the agendas of human resource professionals are improving overall quality, controlling costs associated with employees, and improving overall productivity of workers. We must recognize that human resources integrally affect the overall strategy of a company and therefore, overall strategy must incorporate human resource considerations.

Human resources play an expanded role under the strategic human resource approach. No longer is human resource strategy simply personnel management strategy with operative employees driven by overall corporate strategy. In short, no longer is personnel management simply left out of the strategic competitive arena. As Michael argues in competitive advantage human resource management can help a firm achieve a competitive advantage. By involving human resource considerations when overall strategy is formulated, human resources can help achieve a strategic advantage.

Definition of Stakeholder

Stakeholders are groups of people who have a major interest in or claim on the operations or output of the organization. They are also referred to as constituent groups. While the specific stakeholder groups for a particular organization are unique organization.

Components of Stakeholder

There are some components of stakeholders. These components influence the organizations both from outside and inside the organizations. These components are as follows:

1. Stockholders                       6. Union

2. Dealers                                7. Supplies

3. Customers                           8. Board of Directors

4. Public interest groups          9. Top Management

5. Regulatory agencies            10. Employees

11. Middle managers and supervisors

These components of stakeholders can play significant role in performing the HR activities of an organization.Role of stakeholders are important for every organization .Notice that some of an organization’s stakeholders are actual members of the organization: employees, and boards of directors (except for outside board members unless they are also stockholders). However, notice the range of outside groups that can affect the formulation of an organization’s strategy — unions, suppliers, dealers, and government regulatory agencies. Each of these groups lays claims to part of the organization’s output. Employees want more wages and job s products and services at the lowest possible price.

 

Figure 2.3 Location of HR Development of an Organization

Two Key Strategies for Human Resource Management

Two gross generic categories of strategy seem to have had the greatest impact human resource management in recent years. Following a review of the Cynthia Fisher classified strategies into two categories.

1. Growth-prospector-high-tech entrepreneurial strategies: Human resource management strategies under each mode are substantially different in terms of function. Human resource management units in growth firms typically recruit at all levels from the external labor market in order to obtain enough employees at all skill levels to meet growth needs. They tend to assess based on the results they achieve rather than the process employ or their personal traits. They also tend to look to the long term for success and usually do not pursue innovative efforts that fail. Performance incentives serve as the basis for compensation; when bonuses and profit-sharing and stock options are common, base salaries are modest. For this strategies organization must be-

a. Growth oriented

b. Prospector oriented and

c. High tech entrepreneurial oriented

2. Mature-defender-cost efficiency strategies: Mature-defender-cost competitors follow opposite personnel actions. They tend to recruit primarily at the entry level and promote from within. They emphasize doing things the right way in assessing performance and focus on quantifiable short-term results. Compensation is based on hierarchical wage structures determined in job evaluation. Length of services loyalty and other rewarded rather than performance. Financial incentives may be present but tend to be available only too few select employee groups. Often time retrenchment and restructuring strategies which result in layoffs and reductions in force (RIF) occur. Under this strategy industry must be

a. Matured

b. Cost efficiency and

c. Defender.

Management Guidelines

Some guidelines to be followed by the strategic human resource managers for the formulation of corporate strategy and its proper implementation. These management guidelines may be explained in the following paragraphs.

1. Back tracking & revision: Strategy formulation is a difficult process. It needs bench marking and revision. Very often it is more evolutionary rather than revolutionary.
2. Flexible & adaptable: Strategy formulation process should be flexible and always adaptable so that SHR manager can face the challenges of its competitors boldly.
3. Future orientation: Corporate human resource strategy must be future oriented. Thus managers can achieve long term goals with the strategy. Short term orientation of strategy costs more.
4. Competitive advantage: SHR manager should take care of competitive advantage of the organization. Because survival in the competition is a prime objective of every organization.
5. Role of Stakeholders: In formulating strategy, stakeholders play a very significant role. Therefore, their role should be carefully designed and utilized for better achievement of goals.
6. Functional strategy: Every corporate strategy should be functional. It helps implement the strategy as per desire of the management as well as employer.
7. Key considerations: Strategy formulation demands the role of human resources as vital. This is the key consideration of all concerned.
8. Role maximization: Maximization of role helps achieve the goal promptly and timely. So the role of human resources should be maximized and thus they may be motivated.
9. Human resource audit: It is a new term and regular activity of SHR manager. HR audit ensures proper control and other activities including discipline.
10. Unique situation: All strategies are situational. Effective of any strategy depends on the unique situation. Therefore, management should retain that unique situation.

Questions

1. What are the strategic choices to be made by SHR Managers?
2. Define corporate strategy. Discuss the objectives of corporate strategy.
3. Discuss the importance of corporate strategy.
4. Explain the corporate strategy of a diversified company.
5. Describe the corporate strategy of a single business.
6. What is staff-line conflict? Discuss the reasons for staff –line conflict in a big company.
7. As a SHR manager of a company, how can you reduce staff-line conflict?
8. Discuss the two-key strategies for strategic human resource manager.
9. What role can a SHR manager play in making a strategy?
10. Discuss the management guidelines for making a corporate  and human resource strategy.