2. HRM and strategy
2.2 What is strategy?
Strategy outlines an organization’s goals, including different performance indicators and the means to
achieve those goals.
Corporate strategy – deals with the overarching strategy in large organizations, which are composed
of various business units operating indifferent markets, each with their own business strategy.
Business strategy – most important for achieving competitive advantage as this is focused on a
specific market, which requires different goals and resources in order to achieve competitive
positioning.
HRM strategy – the processes, decisions and choices the organization makes regarding its human
resources and how they are organized.
Strategy is about achieving a fit between an organization and its environment, or developing a course
of action for achieving an organization’s purpose.
Classical approach – military background. Relies heavily on the readiness and capacity of managers
to adopt profit-maximizing strategies through rational long-term planning.
Strategic HRM – HRM activities being matched to some explicit strategy; and the people of the
organization being seen as a strategic resource for achieving competitive advantage.
Mintzberg – five meanings of strategy
• Strategy as a plan (intended): a direction, a guide, or course of action into the future,
focused on looking ahead.
• Strategy as a pattern (realized): consistency in behaviour over time, focused on looking at
the past;
• Strategy as a ploy: a specific manoeuvre intended to outwit an opponent or competitor;
• Strategy as a position: the way in which the organization positions its products and or
services in particular markets in order to achieve a competitive advantage.
• Strategy as a perspective: an organization’s fundamental way of doing things, including the
way in which the members of the organization perceive their environment and their customers.
Three prescriptive schools of strategy
• Design school: strategy formation as a deliberate process of conscious thought. SWOT.
• Planning school: strategy as a formal process, stepwise approach to creating an all-
encompassing strategy. Formalized and detailed version of design school.
• Positioning school: perceives strategy mainly from an industrial economics perspective using
economic models and techniques. Porter.
The environment is more or less stable and can
be studied objectively in order to distil changes
and opportunities for strategy. Outside-in
approach. The positioning school contributed
to linking HRM policies and practices to a
certain strategic positioning in order to achieve
the required (role) behaviours.
Six descriptive schools of strategy
• Entrepreneurial school: visionary leader who is actively engaged in a search for new
opportunities in order to speed up the company’ growth.
• Cognitive school: strategies emerge as perspectives (frames, maps, schemes) that shape how
people deal with inputs from the environment.
• Learning school: stepwise incremental process. Collective learning process over time, in
which it is hard to distinguish between formulation and implementation.
• Power or political school: use of power and politics to negotiate strategies.
, • Cultural school: social interaction, based on the beliefs and shared understandings of the
members of the organization.
• Environmental school: the organization must respond to the forces of the environment,
otherwise it will be ‘selected out’.
The tenth school
(configurational) emphasizes
that there is no one best way of
organizing and strategy
formulation, but that specific
circumstances will make a
certain configuration of
context, strategy, structure, and
process effective.
2.3 Implications for HRM and performance
The different schools highlight the importance of taking multiple factors into account, including the
role of the entrepreneur, cognitive processes, incrementalism, power, culture, and institutional forces.
• Role of the entrepreneur – founder and owner of the company. Plays an important role in
shaping HRM policies and creating a related culture.
• Cognitive/framing processes – cognitive processes distort filters and (de)coding processes,
resulting in differences in the mental maps of the participants involved, which in turn may
give rise to divergent opinions on how to shape HRM strategies, policies, and practices.
• Incrementalism/learning – formulating HRM strategy can be considered an emergent and
stepwise iterative process with feedback loops. Research must be aimed at describing change
processes longitudinally.
• Power and resources – power positions and resources are crucial in shaping both collective
bargaining agreement outcomes and HRM policies.
• Culture/ideology – the way in which collective perspectives and intentions develop over time
affect the way in which the effectiveness of both HRM and employees themselves are
perceived by other members of the organization, and the degree to which related values and
perceptions are shared.
• Environmental and institutional forces – these forces are sources of societal pressure to
which management must react in order to achieve legitimacy and not be selected out.
2.4 In search of synthesis
Volberda and Elfring (2001) discuss the causes of
fragmentation, presenting a synthesis
distinguishing three schools, including
configurational. Each school has a related set of
theories, a cluster of challenges, and
accompanying problem-solving tools.
Mainardi and Kleiner (2010) summarize the
different schools of thought regarding how to
achieve competitive advantage through corporate
strategy. Based on a matrix that balances a present
or future orientation with whether few or many are
involved in making major strategy decisions, they
suggest four options.
, Position-based strategy
(future-oriented, top-down
formulation) refers to
organizations undertaking
a comprehensive analysis
of internal capabilities and
external markets/needs to
position themselves
appropriately to take
advantage of both. Data
collection and formal
strategic planning
processes (costly and slow)
Execution-based strategy (present-oriented, collective decision-making) focuses more on operational
excellence than strategic planning, redesigning processes to be more quality-focused or to reduce
costs. Drawback is that it focuses on current processes and not on deciding the future business.
Adaption-based strategy (future-oriented, collective decision-making) refers to continual
experimentation ad renewal of ideas, rather than focusing on analysis and planning. Highly
unstructured and can lead to diversity in products and processes.
Concentration-based strategy (present-oriented, top-down formulation) focuses on developing the
core competencies of the firm to achieve success. Only current competencies are developed.
Inherent tension of business realities: that competitive advantage is transient but, simultaneously, the
need to change is not easily met due to corporate inertia.
Tension: between markets and resources, related to the outside-in versus inside-out strategy
perspectives:
• Inside-out perspective – resource-based view (RBV) of the firm, in which the (internal)
resources are presumed to be the key to organizational success. Unique organizational
resources.
• Outside-in perspective – HRM is dependent on the strategic positioning of the firm as it
attempts to fit with the market environment, though resources can be cultivated and developed
in order to enable strategies that will result in a sustainable competitive advantage (inside-out).
Tension: between profitability and responsibility, related to the strategy perspectives of shareholder
value versus stakeholder values.
• Shareholder perspective – HRM strategies, policies and practices serve only one goal, which is
to increase shareholder value.
• Stakeholder perspective – balancing the needs, interests, and aspirations of various
stakeholders both inside and outside the organization.
Both tensions and related perspectives also relate to coevolution: evolutionary theorists have coined
the term coevolution to describe situations in which organizations and populations not only respond to
influence from their environments, but
also affect their environments.
, Coevolution assumes that change may occur in all interacting populations of organizations.
Coevolution research has become increasingly focused at the industry level of analysis, exploring
populations of organizations interacting with their ecosystems.
2.5 Classical strategic approaches in HRM
Process of strategy – the way strategies come about. Considering the consequences of a firm’s chosen
strategic direction. Analyzation with cost constraints and staff requirements.
Content of strategy – the product or ‘what’ of strategy.
Context of strategy – the set of circumstances in which both the process and content of strategy are
shaped, developed, or simply emerge.
The Harvard model of strategic HRM (Beer and colleagues, 1984)
The model outcomes do not focus solely on performance in its strict economic sense, but also pay
attention to individual well-being and societal consequences. Both descriptive and prescriptive.
The human resource cycle (Fombrun, Tihy, and
Devanna (1984)
Achieving a tight fit between strategy, structure,
and HRM policies takes place amidst economic,
political, and cultural forces. ‘Content’ model.
Performance is dependent upon selection, appraisal,
rewards, and development.
Employee role behaviour for competitive strategies (Schuler and Jackson, 1987)
Role behaviours for each type of strategy (cost-effectiveness, innovation, and quality). The role
behaviours required for each distinct competitive strategy differ. The relationship between competitive
strategy, required role behaviours, and related HRM policies and practices.
In order to realize the business strategy, a firm needs to have specific organizational capabilities or
core competences (such as speed, logistics, design, marketing, innovation) at the level of the
organization.
