Chapter 3: Strategic Human Resource Management and the HR Scorecard

Multiple Choice

1. A ________ is the company’s plan for how it will match its internal
strengths and weaknesses with external opportunities and threats to
maintain a competitive advantage.
a. strategic plan
b. situation analysis
c. environmental scan
d. SWOT analysis
e. tactical plan
(a; easy; p. 78)

2. Which of the following is not part of strategic planning?

a. evaluating the firm’s internal and external situation
b. defining the business and developing a mission
c. translating the mission into strategic goals
d. crafting a course of action
e. implementing strategies
(e; moderate; p. 78)

3. The purpose of a strategic plan it to identify ways to create or maintain

a(n) ________.
a. differential advantage
b. competitive advantage
c. instrumental advantage
d. success factor
e. all of the above
(b; moderate; p. 79)

4. What is the first step in the strategic management process?

a. perform external and internal audits
b. define the business and its mission
c. translate the mission into strategic goals
d. formulate a strategy
e. implement the strategy
(b; easy; p. 79)

5. A ________ is a general statement of intended direction that evokes

emotional feelings in organization members.
a. mission
b. strategic plan
c. code of ethics
d. vision
e. none of the above
(d; easy; p. 79)

43
6. Vision statements focus on the ________.
a. past
b. present
c. future
d. all of the above
e. none of the above
(c; easy; p. 79)

7. A ________ lays out what a business strives to be while the ________

lays out what it should be now.
a. mission; vision
b. vision; mission
c. dream; vision
d. goal; accomplishment
e. CEO; CFO
(b; easy; p. 80)

8. Defining the business is the ________ step in the strategic management

process.
a. first
b. second
c. third
d. fourth
e. fifth
(a; moderate; p. 79)

9. Performing external and internal audits is the ________ step in the

strategic management process.
a. first
b. second
c. third
d. fourth
e. fifth
(b; moderate; p. 80)

10. The third step in the strategic management process is ________.

a. perform external and internal audits
b. define the business and its mission
c. formulate new business and mission statements
d. formulate a strategy
e. implement the strategy
(c; easy; p. 80)

44
11. The sales director at WebMD is developing goals regarding sales revenue
targets and the number of new medical-related content providers like
hospitals and HMOs it must sign up per year. Which step of the strategic
management process is WebMD working on?
a. perform external and internal audits
b. define the business and its mission
c. translate the mission into strategic goals
d. formulate a strategy
e. implement the strategy
(c; moderate; p. 80)

12. Last year, General Motors began a company-wide strategy to improve

product quality and customer satisfaction. Recent reports show that GM’s
product recalls for the first half of the year are higher than for the entire
previous year. GM explains that the figures support the corporate
commitment to quality and satisfaction. Which step of the strategic
management process is GM currently dealing with?
a. perform external and internal audits
b. define the business and its mission
c. translate the mission into strategic goals
d. formulate a strategy
e. evaluate performance
(e; moderate; p. 81)

13. A ________ serves to communicate who a company is and what it does.

a. mission
b. strategic plan
c. code of ethics
d. vision
e. none of the above
(a; easy; p. 79; AACSB: communication)

14. The ________ of the California Energy Commission is to assess and act
through public and private partnerships to improve energy systems that
promote a strong economy and a healthy environment.
a. mission
b. strategic plan
c. code of ethics
d. vision
e. none of the above
(a; moderate; p. 79; AACSB: communication)

45
15. The ________ of the California Energy Commission is for Californians to
have energy choices that are affordable, reliable, diverse, safe, and
environmentally acceptable.
a. mission
b. strategic plan
c. vision
d. code of ethics
e. none of the above
(c; moderate; p. 79)

16. The primary tool used in step two of strategic planning, external and
internal audits, is the ________.
a. BCG matrix
b. QSPM matrix
c. SWOT analysis
d. EPS/EBIT analysis
e. all are tools used in step two
(c; moderate; p. 80)

17. SWOT is an acronym for ________.

a. success will overcome threats
b. strengths, weaknesses, opportunities, and threats
c. strategic worldwide opportunities terms
d. system-wide organizational tactics
e. none of the above
(b; easy; p. 80)

18. A strategy can also be called a ________.

a. plan
b. goal
c. course of action
d. tactic
e. mission
(c; moderate; p. 78)

19. A ________ answers the question, “how do we get from here to there?”
a. goal
b. tactic
c. strategy
d. mission
e. vision
(c; easy; p. 78)

46
20. Translating strategy into action is the essence of the ________ step in the
strategic management process.
a. perform external and internal audits
b. define the business and its mission
c. translate the mission into strategic goals
d. formulate a strategy to achieve strategic goals
e. implement the strategy
(e; moderate; p. 81)

21. A company’s ________ strategy identifies the portfolio of businesses that

comprise the company and ways in which these businesses relate to each
other.
a. functional
b. business-level
c. corporate-level
d. vertical integration
e. competitive
(c; moderate; p. 82)

22. ________ is the process of assessing progress toward strategic goals and
taking corrective action as needed.
a. Strategic management
b. Strategic planning
c. Consolidation
d. Strategic control
e. Diversification
(d; moderate; p. 81)

23. What does a company’s corporate-level strategy identify?

a. how to build and strengthen the business’s long-term competitive
position in the marketplace
b. the portfolio of businesses that comprise the company
c. the basic courses of action that each department will pursue in order to
help the business attain its competitive goals
d. the possibility of becoming a low-cost leader
e. the sources of uniqueness in the industry
(b; moderate; p. 82)

24. A company’s ________ strategy identifies the how to build and strengthen
the business’s long-term competitive position in the marketplace.
a. functional
b. business-level
c. corporate-level
d. vertical integration
e. competitive
(b; moderate; p. 82)

47
25. What does a company’s business-level strategy identify?
a. how to build and strengthen the business’s long-term competitive
position in the marketplace
b. the portfolio of businesses that comprise the company
c. the basic courses of action that each department will pursue in order to
help the business attain its competitive goals
d. the possibility of becoming a low-cost leader
e. the sources of uniqueness in the industry
(a; moderate; p. 82)

26. A company’s ________ strategy identifies the basic courses of action that
each department will pursue in order to help the business attain its
competitive goals.
a. functional
b. business-level
c. corporate-level
d. vertical integration
e. competitive
(a; moderate; p. 82)

27. What does a company’s functional-level strategy identify?

a. how to build and strengthen the business’s long-term competitive
position in the marketplace
b. the portfolio of businesses that comprise the company
c. the basic courses of action that each department will pursue in order to
help the business attain its competitive goals
d. the possibility of becoming a low-cost leader
e. the sources of uniqueness in the industry
(c; moderate; p. 82)

28. A ________ strategy implies that the firm will expand by adding new
product lines.
a. consolidation
b. diversification
c. geographic expansion
d. integration
e. competitive
(b; moderate; p. 82)

48
29. Marriott may acquire a furniture-making business. What type of strategy
is Marriott pursuing?
a. consolidation
b. diversification
c. geographic expansion
d. integration
e. competitive
(b; moderate; p. 82)

30. Harley-Davidson also owns a line of recreational vehicles. What type of

strategy is Harley-Davidson pursuing?
a. consolidation
b. diversification
c. geographic expansion
d. integration
e. competitive
(b; moderate; p. 82)

31. Winchester Rugs operates a website called www.buyrugsdirect.com.

Winchester is following a ________ strategy.
a. consolidation
b. diversification
c. geographic expansion
d. vertical integration
e. competitive
(d; moderate; p. 82)

32. ________ means the firm is expanding by producing its own materials or
acquiring a retail outlet to sell its own products.
a. Consolidation
b. Diversification
c. Geographic expansion
d. Vertical integration
e. Competitive
(d; moderate; p. 82)

33. FedEx recently acquired Kinko’s. FedEx stations have long existed in
Kinko’s stores to provide customers a convenient location. The acquisition
illustrates that FedEx is following a ________ strategy.
a. vertical integration
b. diversification
c. geographic expansion
d. horizontal integration
e. competitive
(a; moderate; p. 82)

49
34. Gateway is closing its retail stores nationwide to reduce its company size.
This is an example of a ________ strategy.
a. consolidation
b. diversification
c. geographic expansion
d. integration
e. competitive
(a; moderate; p. 82)

35. Oracle recently purchased Hyperion Solutions. Both companies offered

software sales and support to organizations. The purchase can be classified
as execution of a ________ strategy.
a. consolidation
b. integration
c. geographic expansion
d. diversification
e. competitive
(a; moderate; p. 82)

36. Strayer University offers courses in a variety of cities and states across the
country and continues to open new facilities. It is pursuing a ________
strategy.
a. consolidation
b. integration
c. geographic expansion
d. diversification
e. competitive
(c; moderate; p. 82)

37. Krispy Kreme Doughnuts plans to open stores in Europe in the coming
months. This is an example of ________.
a. consolidation
b. diversification
c. geographic expansion
d. integration
e. competitive
(c; moderate; p. 82)

38. Wal-Mart differentiates its business by offering the lowest prices. Offering
the lowest prices is Wal-Mart’s ________.
a. functional strategy
b. competitive advantage
c. distinctive competence
d. corporate strategy
e. all of the above
(b; moderate; p. 82)

50
39. K-Mart competes on price, while Target competes on style. K-Mart
follows a competitive strategy based on ________ while Target’s strategy
is based on ________.
a. cost leadership, differentiation
b. differentiation, cost leadership
c. geographic location, cost leadership
d. vertical integration, differentiation
e. differentiation, niche leadership
(a; moderate; p. 82)

40. A(n) ________ is anything that allows an organization to differentiate its

products or service from those of its competitors to increase market share.
a. functional strategy
b. competitive advantage
c. distinctive competence
d. corporate strategy
e. all of the above
(b; moderate; p. 82)

41. Companies like Ferrari can be called ________ because they carve out a
market niche and compete by providing a product that customers can get
in no other way.
a. market leaders
b. focusers
c. carvers
d. unique offerings
e. complementary competitors
(b; easy; p. 83)

42. Volvo stresses the safety of its cars. Volvo is following a ________
competitive strategy.
a. cost leadership
b. focus
c. differentiation
d. functional
e. integration
(c; moderate; p. 82)

43. Which of the following is a type of competitive strategy?

a. cost leadership
b. vertical integration
c. consolidation
d. horizontal integration
e. expansion
(a; moderate; p. 82)

51
44. Which of the following illustrates a focus strategy?
a. K-Mart seeks to offer prices as low as Wal-Mart
b. Target sells upscale brands
c. Mercedes Benz emphasizes status and quality
d. Enterprise Rent-a-Car targets referrals through car dealerships and
insurance agents
e. Charmin toilet paper claims to be the softest on the market
(d; difficult; p. 83)

45. Which of the following illustrates a cost leadership strategy?

a. K-Mart seeks to offer prices as low as Wal-Mart
b. Target sells upscale brands
c. Mercedes Benz emphasizes status and quality
d. Enterprise Rent-a-Car targets referrals through car dealerships and
insurance agents
e. Charmin toilet paper claims to be the softest on the market
(a; moderate; p. 82)

46. Which of the following illustrates a differentiation strategy?

a. K-Mart seeks to offer prices as low as Wal-Mart
b. Big Lots promotes itself as a way to save
c. Mercedes Benz emphasizes status and quality
d. Enterprise Rent-a-Car targets referrals through car dealerships and
insurance agents
e. Food Lion promises to cut shoppers’ grocery bills
(c; difficult; p. 82)

47. Michael Porter emphasizes that all a firm’s activities should be tailored to
its strategy by ensuring that a firm’s functional strategies support its
corporate and competitive strategies. This is called ________.
a. match
b. leverage
c. fit
d. stretch
e. height
(c; moderate; p. 83)

52
48. Southwest Airlines pursues a low-cost leader strategy and then tailors its
activities to that strategy. For instance, it has 15-minute turnarounds at the
gate which results in more flying time for each plane and more departures
with fewer planes. Southwest is an example of the ________ point of
view.
a. match
b. leverage
c. fit
d. stretch
e. height
(c; moderate; p. 85)

49. Leveraging resources by supplementing what a company has and doing

more with what it has to take advantage of an opportunity means that the
company has a ________ point of view.
a. match
b. leverage
c. fit
d. stretch
e. height
(d; moderate; p. 84)

50. ________ refers to the process by which human resource managers design
strategies, policies, and practices that make sense in terms of the
company’s corporate and competitive strategies.
a. Strategy formulation
b. Strategy execution
c. Strategy development
d. Planning
e. Management
(b; easy; p. 89)

51. ________ refers to the process by which human resource managers

identify, analyze, and balance the company’s external opportunities and
threats with its internal strengths and weaknesses.
a. Strategy formulation
b. Strategy execution
c. Strategy development
d. Planning
e. Management
(a; easy; p. 91)

53
52. Which of the following basic strategic planning roles is fulfilled by HR
managers?
a. perform external and internal audits
b. execute strategy
c. translate the mission into strategic goals
d. formulate strategy
e. both b and d
(e; moderate; p. 90)

53. A company’s ________ is made up of HR professionals, the HR system,

and the resulting employee behaviors.
a. strategic human resource management system
b. structure
c. corporate strategy
d. high performance work system
e. functional strategy
(a; easy; p. 92)

54. Human resource policies and practices are part of the _________.
a. HR function
b. HR system
c. HR architecture
d. employee culture
e. company norms
(b; difficult; p. 92)

55. The employee behaviors aspect of a company’s strategic human resource

system includes ________.
a. HR policies
b. HR practices
c. HR architecture
d. employee competencies
e. all of the above
(d; easy; p. 92)

56. Factors related to employee behavior which affect a company’s ability to

pursue its strategic plan include all but ________.
a. values
b. HR practices
c. motivation
d. competencies
e. all of the above are employee behavior components
(b; moderate; p. 92)

54
57. High-performance work organizations are associated with all of the
following except ________.
a. multi-skilled work teams
b. empowered front-line workers
c. extensive training
d. labor management cooperation
e. commitment to high production rates
(e; moderate; p. 92)

58. The aim of high-performance work organizations is to ________.

a. maximize employee competencies, commitment, and abilities
b. minimize turnover
c. maximize employee compensation
d. improve market share
e. decrease competitive advantage
(a; difficult; p. 92)

59. High-performance work organizations have become necessary due to

________.
a. inflation
b. consumer confidence
c. decreased work force size
d. global competition
e. cost leadership
(d; moderate; p. 92)

60. Which of the following practices is likely to be used by companies using

high-performance systems?
a. hire using validated selection tests
b. fill jobs from internal candidates
c. utilize self-managing work teams
d. train employees extensively
e. all of the above
(e; moderate; p. 93)

61. Reese Enterprises seeks to fill upper-level positions from within whenever
possible and uses validated selection tests when considering external hires.
This suggests the company is developing a ________.
a. high-performance work system
b. scorecard management system
c. benchmark
d. management by objectives strategy
e. selection metric
(a; easy; p. 93)

55
62. Which of the following is true of companies with high-performance HR
systems compared to low-performance companies?
a. percentage of workers in union is higher
b. sales per employee is higher
c. employee turnover is higher
d. percentage of workers eligible for incentive pay is lower
e. market value to book value is lower
(b; easy; p. 93; AACSB: reflective thinking)

63. Managers use a(n) ________ to measure the HR function’s effectiveness

and efficiency in producing employee behaviors the company needs to
achieve its strategic goals.
a. metric
b. HR Scorecard
c. benchmark
d. high performance work system
e. MBO format
(b; easy; p. 95)

64. Which of the following questions is not associated with the basic model of
how to align human resource strategy and actions with business strategy?
a. What employee competencies and behaviors must HR deliver to
enable the business to reach its goals?
b. What are the strategic goals of the business?
c. How can HR measure whether it is executing well for the business?
d. Which HR strategies and practices will produce employee
competencies and behaviors?
e. What goals exist for reducing turnover and increasing the size of the
applicant pool?
(e; moderate; p. 95; AACSB: reflective thinking)

65. Which of the following questions addresses the “formulate HR strategic

policies and activities” step of the basic model for aligning HR strategy
and actions with business strategy?
a. What employee competencies and behaviors must HR deliver to
enable the business to reach its goals?
b. What are the strategic goals of the business?
c. How can HR measure whether it is executing well for the business?
d. Which HR strategies and practices will produce employee
competencies and behaviors?
e. What goals exist for reducing turnover and increasing the size of the
applicant pool?
(d; moderate; p. 95; AACSB: reflective thinking)

56
66. Which of the following questions addresses the “formulate business
strategy” step of the basic model for aligning HR strategy and actions with
business strategy?
a. What employee competencies and behaviors must HR deliver to
enable the business to reach its goals?
b. What are the strategic goals of the business?
c. How can HR measure whether it is executing well for the business?
d. Which HR strategies and practices will produce employee
competencies and behaviors?
e. What goals exist for reducing turnover and increasing the size of the
applicant pool?
(b; moderate; p. 95; AACSB: reflective thinking)

67. Which of the following questions addresses the “identify workforce

requirements” step of the basic model for aligning HR strategy and actions
with business strategy?
a. What employee competencies and behaviors must HR deliver to
enable the business to reach its goals?
b. What are the strategic goals of the business?
c. How can HR measure whether it is executing well for the business?
d. Which HR strategies and practices will produce employee
competencies and behaviors?
e. What goals exist for reducing turnover and increasing the size of the
applicant pool?
(a; moderate; p. 95; AACSB: reflective thinking)

68. Which of the following questions addresses the “develop detailed HR

scorecard measures” step of the basic model for aligning HR strategy and
actions with business strategy?
a. What employee competencies and behaviors must HR deliver to
enable the business to reach its goals?
b. What are the strategic goals of the business?
c. How can HR measure whether it is executing well for the business?
d. Which HR strategies and practices will produce employee
competencies and behaviors?
e. What goals exist for reducing turnover and increasing the size of the
applicant pool?
(c; moderate; p. 95; AACSB: reflective thinking)

57
69. The concise measurement system used by companies to show the
quantitative standards the firm uses to measure HR activities, employee
behaviors resulting from the activities, and the strategically relevant
organizational outcomes of those employee behaviors is called a(n)
________.
a. evaluation system
b. HR scorecard
c. appraisal system
d. evaluation benchmark
e. annual report
(b; moderate; p. 98)

70. A company’s ________ identifies the primary activities that create value
for customers and the related support activities.
a. value chain
b. HR scorecard
c. strategy
d. tactical approach
e. none of the above
(a; easy; p. 104)

True/ False

71. There are seven steps in the strategic management process. (T; easy; p. 79)
72. HR managers need to support corporate productivity and performance
improvement efforts. (T; moderate; p. 78)
73. Employees play a minimal role in the performance improvement efforts of
their employers. (F; easy; p. 78)
74. HR is only involved in the execution of a company’s strategic plan. (F;
moderate; p. 78)
75. A mission statement is a general statement of a company’s intended
direction that evokes emotional feelings in the organization’s members.
(F; easy; p. 79)
76. A vision statement is broader and more future-oriented than a mission
statement. (T; easy; p. 79)
77. Mission statements tend to focus on past successes. (F; easy; p. 80)
78. Strategy implementation draws more on the leading management function
than on the functions of planning, organizing, staffing, and controlling. (F;
difficult; p. 81)
79. Consolidation keeps the company’s strategy up to date by assessing
progress toward strategic goals and taking corrective action as needed. (F;
moderate; p. 81)
80. Managers engage in three levels of strategic planning. (T; moderate; p. 82)

58
81. Cost leadership, differentiation, and focus strategies all types of corporate-
level strategy. (F; moderate; p. 82)
82. A vertical integration strategy means that the firm will expand by adding
new product lines. (F; easy; p. 82)
83. McDonald’s addressed its lagging profitability by first closing stores
operating below its guidelines. McDonald’s used a consolidation strategy.
(T; moderate; p. 82)
84. Pizza Hut’s strategy for competing against Domino’s is a business-level
strategy. (T; moderate; p. 82)
85. FedEx’s acquisition of Kinko’s is a corporate-level strategic move. (T;
moderate; p. 82)
86. The concept of stretch states that a firm’s activities must be tailored to its
strategy. (F; easy; p. 83)
87. Leveraging resources is a necessary action for companies stretching to
take advantage of an opportunity. (T; moderate; p. 84)
88. Strategic human resource management means formulating and executing
HR systems that produce the employee competencies and behaviors the
company needs to achieve its strategic aims. (T; moderate; p. 86)
89. A company’s HR strategy is a type of competitive strategy. (F; difficult; p.
86)
90. HR managers play two basic strategic planning roles. (T; easy; p. 89)
91. According to the U.S. Department of Labor, high-performance work
organizations include multi-skilled work teams, empowered front-line
workers, and extensive training. (T; moderate; p. 92)
92. “Identify workforce requirements” is the first step in the basic model of
how to align HR strategy and actions with business strategy. (F; moderate;
p. 95)
93. Formulating a strategic plan is the final step in the basic model of how to
align HR strategy and actions with business strategy. (F; easy; p. 95)
94. Human resource systems contribute to a company’s ability to achieve
high-performance levels by utilizing selection tests in hiring, organizing
self-managed teams, and training employees. (T; easy; p. 93)
95. Companies with empowered, highly trained, flexible workforces have a
competitive advantage. (T; easy; p. 93)
96. High-performance work systems rely less on time spent training
employees than do low-performance systems. (F; easy; p. 93)
97. Employees working in a low-performance company are more likely to be
unionized than those in a high-performance company. (T; moderate; p. 93)
98. High-performance companies have a smaller span of control for HR
professionals than do low-performance companies. (T; moderate; p. 95;
AACSB: analytical skills)
99. Low-performance companies are less likely to have a formalized human
resource plan for recruitment, development, and succession. (T; moderate;
p. 95)

59
100. Low-performance companies are more likely to utilize work teams to
manage employee work load than are high-performance companies. (F;
moderate; p. 93)

Essay/ Short Answer

101. What are the three basic challenges HR managers must address in
formulating HR strategies? Which of these is the most difficult for HR?
(moderate; p. 87)

Answer: The three challenges are the need to support corporate

productivity and performance improvement efforts, to encourage
employees to plan an expanded role in employers’ performance
improvement efforts, and to be more involved in the design and execution
of the company’s strategic plan. The final challenge is key as HR has
traditionally been involved more in the execution rather than the design of
strategic plans.

102. What is strategic management? Define the term. List and describe the
seven steps in the strategic management process. (moderate; p. 79)

Answer: Strategic management is the process of identifying and executing

the organization’s mission, by matching the organization’s capabilities
with the demands of its environment. The steps are as follows:
Step 1: Define the Business and Its Mission
Step 2: Perform External and Internal Audits
Step 3: Formulate New Business and Mission Statements
Step 4: Translate the Mission into Strategic Goals
Step 5: Formulate a Strategy to Achieve the Strategic Goals
Step 6: Implement the Strategy
Step 7: Evaluate Performance

103. Explain the difference between a vision and a mission. Are both necessary
for organizations? (moderate; p. 79; AACSB: reflective thinking)

Answer: A company’s vision is a general statement of the company’s

intended direction that evokes emotional feelings in organization
members. It is broader than a mission statement. It is future-oriented while
mission statements are oriented in the present. Mission statements state
what a company is doing right now while vision statements are what a
company strives to become. Both are encouraged for organizations but
some organizations have only a mission statement. Others may have
neither a mission nor a vision.

60
104. During the strategic management process, managers may use a SWOT
analysis. Explain how to use a SWOT analysis and provide an example
using a well-known company. (moderate; p. 80)

Answer: The SWOT analysis is used during the second step of the
strategic management process. It facilitates the audit of external and
internal situations. SWOT stands for strengths, weaknesses, opportunities,
and threats. Managers can create a chart listing the strengths of the
company, the weaknesses, and opportunities in the environment and
threats in the environment. The chart makes it easy to see where strengths
can lead to opportunities or how weaknesses may need to be solved to
avoid threats.

Students should provide an example with this answer.

105. Explain the three levels of strategic planning. What is the purpose or focus
for each level? Which level do HR strategies represent? (easy; p. 82)

Answer: The three levels are corporate-level, business-level, and

functional-level strategies. Corporate-level strategy identifies the portfolio
of businesses that comprise the company and the ways in which these
businesses relate to each other. The business-level strategy is the next
level. It identifies how to build and strengthen the business’s long-term
competitive position in the marketplace. The lowest level is the functional-
level strategies. Functional strategies identify the basic course of action
that each department will pursue in order to help the business attain its
competitive goals. HR strategies are a type of functional strategy.

106. There are three primary forms of business-level or competitive strategies.

Describe them and give an example of each one. (moderate; p. 82)

Answer: The three forms of competitive strategies are cost leadership,

differentiation, and focus. Cost leadership means offering the lowest
prices and/or emphasizing low costs and efficiency as a source of
competitive advantage. Wal-Mart is an example of a company pursuing a
cost leadership strategy. Differentiation means emphasizing a source of
difference between a company and its competitors. The differential
advantage becomes the source of competitive advantage. Target follows a
differentiation strategy. A focus strategy means that a company pursues a
small niche in the market place. Ferrari follows this strategy.

61
107. Some strategic planning experts emphasize fit while others support the use
of stretch. Explain these two opposing concepts. Which do you think is
best? (difficult; p. 83)

Answer: The fit point of view means that all of a firm’s activities must be
tailored to fit its strategy. This ensures that a firm’s functional strategies
support its corporate and competitive strategies. Southwest Airlines is an
example of a firm using the fit approach. On the other hand, stretch means
leveraging resources to take advantage of opportunities. Stretch is the
riskier of the two approaches. Fit is necessary overall to ensure success but
stretch allows a firm to grow and better compete in the market place.
Ultimately, firms should strive to incorporate fit while considering stretch
to take advantage of opportunities.

108. Describe the three main components of a company’s strategic human

resource system. (easy; p. 91)

Answer: A company’s basic strategic human resource system is made up

of three elements: the HR function, the HR system, and the employee
behaviors. The HR function refers to the presence of HR professionals
with strategic management competencies. The HR system is made up of
the HR policies and activities such as how the company recruits, selects,
trains, and rewards employees. The employee behavior component
encompasses employee competencies, values, motivation, and behaviors
that aid the company in accomplishing its strategic plan.

109. What is a High-Performance Work System? Explain the effects of such a

system. (moderate; p. 93)

Answer: A high-performance work system is what managers now expect

from the HR system. It means that the HR system is designed to maximize
the overall quality of human capital throughout the organization. Based on
ongoing research, firms that use HPWS practices perform at a
significantly higher level than those that do not.

62
110. What is the HR Scorecard approach? Identify the ten steps in using the HR
Scorecard approach to create a strategy-oriented HR system. (moderate; p.
102-109)

Answer: The HR Scorecard is a concise measurement system that shows

the quantitative standards, or “metrics” the firm uses to measure HR
activities, and to measure the employee behaviors resulting from these
activities, and to measure the strategically relevant organizational
outcomes of those employee behaviors. The ten steps are as follows:

Step 1: Define the business strategy

Step 2: Outline the company’s value chain
Step 3: Outline a strategy map
Step 4: Identify the strategically required organizational outcomes
Step 5: Identify the required workforce competencies and behaviors
Step 7: Create HR scorecard
Step 8: Choose HR Scorecard measures
Step 9: Summarize the Scorecard measures in a Digital Dashboard
Step 10: Monitor, predict, and evaluate

63