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This study of 115 subsidiaries of Fortune 500 companies indicates that a majority had
integrated HRM and strategic planning systems within their organizations. HRM issues
were explicitly discussed in strategic plans; HRM executives were involved in the plan-
ning process as "strategic partners"; and HRM was generally recognized as playing an
important role in implementing business strategies. The degree of integration present was
not related to short-run firm performance, however, time lags may be a factor. Implica-
tions of these findings are drawn. © 1995 by John Wiley & Sons, Inc.
INTRODUCTION
Human Resource Management, Summer 1995, Vol. 34, Number 2, Pp. 253-267
© 1995 by John Wiley & Sons, Inc. CCC 0090-4848/95/020253-15
eludes data on HRM practices in 115 divisions of 89 Fortune 500 compa-
nies, this study seeks to answer the question: "How strategic is HRM?"
Specifically:
THE STUDY
Overview
New linkages between HRM and strategic planning — has emerged as a critical
element in many models of SHRM (Thakur and Calingo, 1992; Golden and
Ramanujam, 1985; Nininger, 1982). One-way linkages focus on the role of HRM
activities in assisting strategy implementation (Devanna et al, 1984), while a two-
way linkage describes a more proactive approach where HRM exerts influence on
strategy formulation as well.
The Sample
Measures
size
Mean: 4792 employees Standard Deviation: 8507
Minimum: 4* Maximum: 50,000
Industry classification
The following conclusions are drawn from our analysis of the data
collected in this survey:
Our data indicate that there is linkage between the HRM and strategy
processes in many Fortune 500 firms. As indicated in Table II, the range
of participation in various linking activities ranged from 44% to 69%.
Sixty-nine percent of companies in our sample include an explicit discus-
sion of human resource issues in their strategic plans. In 68 percent of
the companies surveyed, senior HRM executives contributed to the de-
velopment of strategic goals and plans for the coming 3-5 years. Fifty
three percent of companies based their competitive strategy, in part, on
their human resources. Human resource costs and implications were
explicitly included in the evaluation of the costs and benefits of pro-
posed business strategies in 52% of companies surveyed, and in 44% of
the companies planning documents discussing human resource issues
were distributed to planners to be taken into account when formulating
strategy.
These data, showing a pattern of clear linkage between the HRM
function and strategy formulation, suggest that HRM has become strate-
gic in perhaps the majority of Fortune 500 firms, more so than suggested
previously by other authors. Various authors propose multi-stage charac-
terizations of HRM/strategy integration that range from the traditional
YES NO
The Importance of
Functional Areas In Extremely Not Very
Implementing Strategy: Important Important Important
Shared Complete
Having Advisory Decision- Decision-
Ko Input Only Making Making
Decisions Concernina:
Executives' base salaries 3.5% 4.3% 67.0% 23.5%
Executives' bonuses 4.3% 13.9% 59.1% 20.0%
How executives are selected 1.7% 4.3% 52.2% 40.9%
Hiring executives 2.6% 2.6% 40.9% 53.0%
Firing executives 3.5% 2.6% 52.2% 40.9%
Promoting executives .9% 8.7% 56.5% 33.0%
How executive perfonnance
is evaluated 2.6% 2.6% 34.8% 58.3%
Design of executive
training programs 3.5% 11.3% 57.4% 27.0%
Executive attendance
at training programs 3.5% 3.5% 41.7% 50.4%
APPENDIX A
Organizational Performance
Please indicate (on a 1-7 scale ranging from "of little importance" to
"extremely important") the degree of importance that your superiors
attach to each of the following performance criteria as they relate to your
business unit:
sales growth rate new product development
market share market development
operating profits R&D activities
profit-to-sales ratio cost reduction programs
cash flow from operations personnel development
return on investment political/public affairs
A single weighted average was constructed for each SBU, using the
"importance" rankings as criterion weights.
REFERENCES
ENDNOTES
1. This research was funded by a grant from the Society of Human Resource
Management Foundation.
2. Of course. General Managers face severe time constraints and were expected
to be somewhat less interested in this topic than HRM managers; thus, one
"cost" of our sampling strategy was a modest response rate. However, a
comparison of industry and geographical data indicates that our participating
sample is representative of the polled sample, reducing the possibility of non-
response bias.
3. A single measure of organizational performance was calculated for each SBU
in the sample including the following performance dimensions: sales growth
rate, market share, operating profits, profit to sales ratio, cash flow from
operations, return on investment, new product development, market devel-
opment, R&D activities, cost reduction, personnel development, politi-
cal/public affairs.
4. For a complete listing of all the measures incorporated in this study, please
contact the authors.
5. Authors differ in their characterization of what constitutes a fully strategic
HRM orientation. For example, Schuler and MacMillan (1987) foresee HRM
playing a role in establishing a company's competitive advantage, which is far
more progressive integration than that suggested by Mills (1979) who consid-
ered the evaluation of the strategic implications of various HRM activities and
priorities to constitute full HRM/planning integration.
6. These roles are similar to those proposed by Holder (1986) who characterized
HRM managers either as "Types A" managers, who have a fair amount of
influence in the strategy process, have a good understanding of the firm's
business, and are proactive in serving other functional managers as clients;
and "Type B" managers, who fulfill the traditional role of being a functional
administrator focusing on operational day-to-day HRM issues. Our data indi-
cate that many HRM executives can be classified today as "Type B."