Strategic Management & HRM

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This article focuses on two topics: Strategic Management and Human Resource Management (HRM). [1]Strategic management is essentially what managers do to develop the strategy of a company, that is the decisions and actions that determine the long run performance of an organisation. It is the management of how an organisation will compete successfully, attract and satisfy customers. [2]By contrast, HRM is the management of recruiting, developing and training employees as well as the policies, practices and systems that influence employees' behaviour and attitudes. Both are crucial elements of any manager's job and this article explores how each is carried out.

This article is a topic within the subject Managing Organisations and People.

Contents

Required Reading

Robbins et all, Managing Organisations and People MGMT1001, compiled from Management (6th ed) and Organisational Behaviour (6th ed), (3rd ed, Sydney, Pearson Australia, 2012), pp. 119-145 (Chapter 4) and 221-257 (Chapter 7).

Strategic Management

[3]Strategic management is important for three reasons:

  1. Strategy leads to higher performance
  2. Strategy helps coordinate diverse organisational units' work
  3. Strategy helps organisations cope with continual changing situations

In general there are three levels of strategy that organisations implement:

  1. Corporate level strategies- top management's overall plan for the entire organisation
  2. Business level strategies- strategy that determines how an organisation should compete in each of its strategic business unit
  3. Functional level strategies- startgey that determines how to support the business level strategies

Corporate Level Strategies

[4]There are three main types of corporate strategies: Growth, Stability and Renewal.

Growth Strategies

[5]Growth strategy is used when an organisation wants to expand the number of markets served or products offered. Organisations can grow through:

  1. Concentration - the focus on the primary line of business and the increase in the number of products offered or markets served by increasing business operations
  2. Vertical Integration - the decision to become one's own supplier or distributor as a means of better controlling inputs and outputs
  3. Horizontal Integration - the decision to ally with competitors or other organisations in the same industry. Since this reduces competition, any decisions are overseen by commissions to make sure a monopoly isn't achieved
  4. Diversification - the decision to merge with or acquire firms in the same industry ("related diversification") or in other industries ("unrelated diversification")

Stability Strategies

[6]Stability strategy is the decision to continue doing what the organisation is already doing. It is often used when an organisation's resources capabilities and core competencies are stretched to their limit and expansion may jeopardise future success. Other situations might be when the industry is rapidly changing and the future is uncertain so that it is unclear what to change, or when the market is slowing and managers need time to analyse their strategic options. Otherwise managers might feel that their organisation is operating well and do not want to expand any further.

Renewal Strategies

[7]Renewal Strategy is one that is used when organisations are faced with poor performance and require change. There are two main types of renewal strategies:

  1. Retrenchment Strategy - short run strategy to improve minor performance issues. It helps o stabilise operations, revitalise organisational resources and prepare to compete again
  2. Turnaround Strategy - used when an organisation is in very poor shape (such as when it continually makes losses) and it may include complete change of business model and cutting costs

Business Level Strategies

[8]Business level strategies involve creating a competitive advantage to set it apart from competitors. This may be done through increasing product quality, by creating new products, having an efficient business model amongst other ways. Competitive advantage is generally achieved after considering the forces acting on an organisations, summarised by Porter's Five Forces Model. [9]The five forces are:

  1. Threat of new entrants
  2. Threat of substitutes (competitors in other, similar industries)
  3. Buyers' bargaining power
  4. Suppliers' bargaining power
  5. Existing rivalry (competitors in the same industry)

Strategic Management Process

[10]There are six steps in strategic management:

  1. Identifying current goals and objectives- this includes identifying what goals are being pursued currently against the goals that the organisation wants to pursue
  2. External analysis - understanding the limitations on a business caused by the external environment such as legal systems, allies and partners, technology trends and competitors as well as identifying opportunities and threats
  3. Internal analysis - an understanding of the limitations caused by the organisation's structure, resources and capabilities. This includes an analysis of all assets (tangible and intangible) and the skills/procedures in place and of the organisation's core competencies. This teases out the organisation's strengths and weaknesses.
  4. Formulating strategies - the combination of the external and internal analysis comprises the SWOT (strengths, weaknesses, opportunities and threats) analysis and helps give direction for organisations to try exploit their strengths, defend against threats and correct weaknesses
  5. Implementing strategy - this may include hiring new employees, firing old ones, and training promoting or demoting others
  6. Evaluating results - this often includes changing the strategies to perform better

HRM

[11]HRM is important because while competitive advantage in terms of business models or products is easy to lose (as competitors can copy these) but competitive advantage due to employees is difficult to match. HRM is an important part of organisational strategies as it is the employees that implement the strategies but also because HRM affect job satisfaction which is directly linked to performance.

HRM Process

[12]HRM involves three main tasks: human resource planning, recruitment/decruitment and selection.

Human Resource Planning

[13]Human resource planning is process by which managers ensure that the organisation has the right employees with the necessary skills and the right amount so that overlap does not occur but at the same time that skills shortages don't occur. HR planning entails two parts:

  1. Current assessment of employees in the organisation. This usually involves creating a human resource inventory which is a list of all employees and their backgrounds, education skills and capabilities. In addition, job analysis is carried out to evaluate what necessary skills and training is required to complete tasks to achieve the organisation goals. This then leads to job descriptions (a statement about what a job holder does, how and why) and job specifications (a statement of the minimum requirements to hold the job).

Reruitment and Decruitment

[14]Once planning is achieved, management can make decisions about changing the HR inventory as required. This can involve publishing ads to try and attract new employees or reducing the HR inventory by firing employees.

Selection

[15]After publishing ads and attracting candidates, management needs to select the correct employees for the job(s). Selection methods include:

  • Interviews
  • Reference Checks
  • Biographical Information
  • Physical Ability Tests
  • Cognitive Ability Tests
  • Personality Inventories
  • Work Sample Tests

Employee Training and Development

[16]Once selection has taken place, organisations typically provide training to employees so that their skills and knowledge are kept updated. The first kind of training employees receive when entering a new organisation is orientation. There are two types of orientation:

  1. Work unit orientation - familiarises the employee with the goals of the work unit , how their job contributes to the organisation's goals and introduces them to coworkers
  2. Organisation orientation - informs employee of the organisation's mission, history, philosophy, procedures and rules. It also provides insight into overtime and other work benefits

Other training is provided to update skills and knowledge and sometimes even for interpersonal skills such as communication and conflict resolution.

Performance Management

[17]Once employees are at an organisation, it is common for performance appraisals to occur where the organisation determines how effective an employee is. This information is usually communicated to the employee through a performance feedback. So methods of performing appraisals are:

  1. Written essays
  2. Critical incident (focusing on one particular occurrence)
  3. Graphic rating scales
  4. BARS (combination of critical incident and rating scales where critical incident is an example that explains the scores of the rating scale results)
  5. Multi person comparison
  6. MBO (management by objectives)
  7. 360 degree appraisal (feedback from supervisor, employees and coworkers)

End

This is the end of this topic. Click here to go back to the main subject page for Managing Organisations and People.

References

"Textbook" refers to Robbins et all, Managing Organisations and People MGMT1001, compiled from Management (6th ed) and Organisational Behaviour (6th ed), (3rd ed, Sydney, Pearson Australia, 2012).

  1. Textbook p. 122
  2. Textbook p.224
  3. Textbook p.123
  4. Textbook p. 130
  5. Textbook p. 131
  6. Textbook p. 132
  7. Textbook p. 133
  8. Textbook p. 134
  9. Textbook p. 137
  10. Textbook p.125
  11. Textbook p. 224
  12. Tetbook p. 231
  13. Textbook p.231
  14. Textbook p.233
  15. Textbok p.235
  16. Textbook p. 239
  17. Textbook p. 242
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