Strategic Human Resource

Management

• Chapter 3: Strategic Management

Truss et al: Strategic Human Resource Management

 Learning objectives

By the end of this session you will be able to:

• Define and explain the concepts of strategy,
strategic management, business strategy and
competitive strategy
• Critically evaluate the role of vision and mission
statements
• Understand the relationship between business
strategy and competitive strategy
• Appreciate the importance of competitive advantage
and the different ways in which this can be achieved
• Define and explain the concept of strategic
alignment
• Critically analyse key trends in strategic
management
Truss et al: Strategic Human Resource Management
 What is strategy?

• Strategy is a plan that integrates an

organization’s vision, mission, goals and
objectives and determines how resources will be
used
• “A strategy is the set of actions through which an
organisation, by accident or design, develops
resources and uses them to deliver services or
products in a way which its users find valuable,
while meeting the financial and other objectives
and constraints imposed by key stakeholders”
(Haberberg & Rieple, 2008: 6).
Truss et al: Strategic Human Resource Management
 What is strategy?

Truss et al: Strategic Human Resource Management

 A CEO perspective on strategy

“Look, what is strategy but resource

allocation? When you strip away all the noise,
that’s what it comes down to. Strategy means
making clear-cut choices about how to
compete. You can not be everything to
everybody, no matter what the size of your
business or how deep its pockets” (Welch,
2005: 169) (Jack Welch, former CEO of GE)

Truss et al: Strategic Human Resource Management

 A CEO perspective on strategy

“Look, what is strategy but resource

allocation? When you strip away all the noise,
that’s what it comes down to. Strategy means
making clear-cut choices about how to
compete. You can not be everything to
everybody, no matter what the size of your
business or how deep its pockets” (Welch,
2005: 169) (Jack Welch, former CEO of GE)

Truss et al: Strategic Human Resource Management

 Generic perspectives on strategy

Truss et al: Strategic Human Resource Management

 Strategic management

• Strategic management is the process which

enables organisations to turn strategic intent into
action
• It comprises four phases: analysis, selection,
implementation and review
• These phases are inextricably linked
• Each phase represents a different aspect of an
organisation’s business and competitive
strategies

Truss et al: Strategic Human Resource Management

 Business and competitive strategies

• Business strategy sets out an organisation’s

strategic scope or direction; essentially, the
markets it wants to compete in (Grant, 2010)
• It is important to note that business strategy
is often referred to as corporate strategy
• Competitive strategy is about how an
organisation will compete in those markets

Truss et al: Strategic Human Resource Management

 Competitive strategy

“A company’s competitive strategy provides a

kind of template for day-to-day business
decisions but is not itself subject to short-term
alteration...the template provides a framework
for engaging in the market and guiding
operational decisions. It sets forward a view
on how best to compete over the next three,
five, or even ten years” (Cappelli et al, 2010:
118).

Truss et al: Strategic Human Resource Management

 The 4 strategic management phases

• Analysis
• Selection
• Implementation
• Review

Truss et al: Strategic Human Resource Management

 Four phases of strategic management

Truss et al: Strategic Human Resource Management

 Analysis

• Data from external and internal environments

can analysed to provide information which then
informs strategic decisions about business and
competitive strategy
• External sources include: economic forecasts,
market trends, technological changes, labour
market and demographic trends, Government
initiatives
• Internal sources include: business processes,
performance metrics, staffing (and skills) levels,
financial data, attitude surveys
Truss et al: Strategic Human Resource Management
 Analysis (contd.)

• A particular problem with analysing information

for strategic decision-making is ‘bounded
rationality’ (Simon, 1985): it is not possible to
know everything about the external environment
although it is assumed that people will always
choose the best course of action and will make
rational decisions based on that information
• Any search for information is inevitably
incomplete thus resulting in satisfactory rather
than optimal decisions (Simon, 1985).

Truss et al: Strategic Human Resource Management

 Selection

• Involves making choices about what the

strategy should be (i.e. business strategy)
and how it should be achieved (i.e.
competitive strategy)
• Freedman (2003) defines strategy as the
“framework of choices that determine the
nature and direction of an organisation” (page
2 – emphasis added).

Truss et al: Strategic Human Resource Management

 Implementation

• Involves a combination of resource investments

in what can essentially be described as strategic
projects
• These projects lay at the heart of an
organization’s competitive strategy
• However, most strategies fail at the
implementation phase suggesting that it is not
possible to plan for every possible contingency
• It is during this phase that intended strategies
are overtaken by events and replaced with new,
emergent strategies.
Truss et al: Strategic Human Resource Management
 Review

• It is critical that the projects underpinning the

implementation phase are reviewed on an
ongoing basis (Morgan et al, 2007)
• The outputs of the review phase become inputs
for the analysis phase
• Unfortunately, this can be a neglected aspect of
strategic practice
• Many organisations use the balanced scorecard
(Kaplan & Norton, 1996) to measure the
effectiveness of their strategies

Truss et al: Strategic Human Resource Management

 Competitive advantage

• The aim of competitive strategy is to acquire

or sustain competitive advantage
• A common strategy is to be less expensive
than competitors
• Other strategies include differentiation,
innovating new products and/or services, and
occasional cost promotions to undercut
competitors for short periods

Truss et al: Strategic Human Resource Management

 Competitive advantage (contd.)

• The resource based view (RBV) of strategy

(Wernerfelt, 1984) focuses on the role of
organisational capabilities as a source of
competitive advantage
• These capabilities are intangible assets and
represent something an organisation does well
relative to competitors (Ulrich & Brockbank,
20005)
• “only valuable, rare, costly to imitate, and non-
substitutable resources can be a source of
sustained competitive advantage” (Barney &
Clark, 2007: 235).
Truss et al: Strategic Human Resource Management
 Strategic alignment

• Strategic alignment is critical to competitive

advantage
• It combines strategic and operational practices
in such a way that both levels are in effect
intertwined
• Strategic alignment comprises two elements:
• Vertical strategic alignment which is the process by which
HR strategy, policies and plans are aligned with an
organisation’s strategic goals and objectives
• Horizontal strategic alignment which is the process by which
functional strategies, policies, plans and practices are
aligned with each other.

Truss et al: Strategic Human Resource Management

 The principal internal factors
influencing strategic alignment

Truss et al: Strategic Human Resource Management

 International trends

• To date the literature on strategic management

has been dominated by Western perspectives
• This dominance is now being challenged as new
indigenous business models emerge from
developing nations such as China and India
• “Many companies have relied on their strategies
for developed markets to operate in the country.
For most this has failed, and they have been
forced to revise plans to take into account the
idiosyncrasies of the Chinese market” (Torrens,
2010: 1)
Truss et al: Strategic Human Resource Management