Strategic HRM for Organizational Effectiveness
Strategic Approach to HRM for Organizational Effectiveness
Research suggests that a major key for long-term profitability is a clear strategy for being better than competitors, along with a highly effective workforce that carries out that strategy.
Consider Herb Kelleher, who stated that Southwest’s order of top priorities is employees, customers, and then shareholders. In short, Southwest Airlines uses human resource practices to find and keep a large number of loyal employees who concentrate on reducing costs. One way that Southwest reduces cost is by encouraging each employee to pitch in and help finish tasks, even if those tasks are not part of that person’s normal job. Southwest has also developed a culture that makes it fun to work here, which reduces employee turnover.
The Southwest Airlines example illustrates how a strategic approach to human resource management increases organizational effectiveness. For Southwest, employees are a critical resource in meeting the needs of customers.
Organizations with clear strategies for effectively meeting the needs of customers, and clear human resource practices that match those strategies, simply get better results than other organizations.
The Strategy Formulation Process
Strategy: Coordinated choices and actions that provide direction for people and organizations. From an HR perspective, there are two types of strategy:
- Competitive business strategy: Strategy that focuses on different ways to provide goods and services that meet customer needs.
- Human resource strategy: Strategy that focuses on different ways of managing employees of an organization.
The Strategy Formulation process:
Step 1: Gather Information
- Scan the organizational environment to assess opportunities and threats.
- Assess internal capabilities and resources to determine strengths and weaknesses.
- Focus on human resources as a rare resource that is difficult to imitate.
Step 2: Analyze Information and Make Decisions
- Form a group that meets together to develop collective intuition.
- Encourage quick conflict.
- Set flexible timetables that keep the group moving toward decisions.
- Diffuse politics and create a culture of cooperation.
Step 3: Implement the Decision
- Take action and make specific plans for action.
- Assign specific areas of responsibility and hold people accountable for results.
- Develop procedures to measure success in carrying out decisions.
Two Generic Competitive Business Strategies
1. Cost Leadership Strategy: A business-level strategy that seeks to produce goods and services inexpensively.
2. Differentiation Strategy: A business-level strategy that seeks to produce goods and services that are in some manner superior to what is produced by competitors.
Organizations trying to pursue both strategies often end up doing neither very well; they are stuck in the middle with no real competitive advantage. Their desire to add unique features creates a cost structure that does not allow them to produce goods and services at the lowest cost. Most organizations must therefore choose one or the other approach and make strategic decisions accordingly.