Human Resource

Management:
An Asian
Perspective
(Second Edition)

Chapter 3
Strategic HRM
and the HR
Scorecard

Gary Dessler and Chwee Huat Tan

2009 Pearson Education South Asia Pte Ltd.
All rights reserved.
 After studying this chapter,
you should be able to:
1. Outline the steps in the strategic management
process.
2. Explain and give examples of each type of
company-wide strategy.
3. Explain what a high performance work system is
and why it is important.
4. Explain the ten steps in the HR Scorecard
approach on creating the HRM system.

2009 Pearson Education South Asia. All rights reserved. 32

 HRs Strategic Challenges
Strategic plan
A companys plan for how it will match its internal
strengths and weaknesses with external opportunities and
threats in order to maintain a competitive advantage.
Three basic questions in planning
Current business position?
Future business position?
How to reach the future business position?

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 The Strategic Management
Process
Strategic management
The process of identifying and executing the organizations
mission by matching its capabilities with the demands of its
environment.
Strategy
A strategy is a course of action.
The companys long-tem plan for how it will balance its
internal strengths and weaknesses with its external
opportunities and threats to maintain a competitive
advantage.

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 The Strategic Management
Process
Strategic management tasks
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

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 Overview of Strategic
Management

Figure 3.1
The Strategic Management Process
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 Step 1: Define the Current
Business
Decisions on:

Products and services to provide

Where to sell them

Product/Services differences from competitors

Example: Rolex sells high-priced quality watches vs.

Seiko sells inexpensive but innovative watches

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 Step 2: Perform Internal and
External Audits
Analyze external and internal situations

Usage of SWOT (Strengths, Weaknesses,

Opportunities and Threats) analysis through the
usage of a SWOT chart

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 Step 2: Perform Internal and
External Audits

Figure 3.2
A SWOT Chart
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 Step 3: Formulate a New
Business Mission and Its
VisionVision

A general statement of its intended direction that

evokes emotional feelings in organization members.
Mission

Spells out who the company is, what it does, and where
it is headed.

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 Step 4: Translate Mission into
Strategic Goals
If the companys mission is

to make quality products,

what does this mission mean, for each department,

in terms of how to improve quality?

2009 Pearson Education South Asia. All rights reserved. 311

 Step 5: Formulate Strategies
to Achieve Strategic Goals
Strategy: A course of action

Shows how company will move from the present

business to the new business
Simple to understand

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 Step 6: Implement the
Strategies
Implementation = putting into action
Hiring people
Building plants adding new product lines
Involves management functions:
Plan
Organize
Staff
Lead
Control

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 Step 7: Evaluate
Performance
Success of strategies dependent on changes in external
factors
E.g. New trends may reduce demand in one product
and increase the demand for another
Strategic Control necessary
Process of accessing progress towards strategic goals
and taking corrective actions
Managers study new situations and make adjustments

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 Strategies in Brief
Company Strategic Principle

Dell Be direct
eBay Focus on trading communities
General Electric Be number one or number two in every
industry in which we compete, or get out
Southwest Airlines Meet customers short-haul travel needs
at fares competitive with the cost of
automobile travel
Vanguard Unmatchable value for the investor-owner
Wal-Mart Low prices, every day
Source: Arit Gadiesh and James Gilbert, Frontline Action, Harvard Business Review, May 2001, p. 74.
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 Types of Strategic Planning

Three types of strategies:

Corporate strategy
Competitive strategy
Functional strategy

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 Types of Strategic Planning

Figure 3.3
Relationships Among Strategies in Multi-Business Firms
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 Types of Strategic Planning

Corporate strategy

Company-wide

Identifies the portfolio of businesses that, in total,

comprise the company and the ways in which

these businesses relate to each other.

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 Types of Strategic Planning
Four possible corporate strategies:
Diversification strategy implies that the firm will expand
by adding new product lines.
Vertical integration strategy means the firm expands by,
perhaps, producing its own raw materials, or selling its
products direct.
Consolidation strategy reduces the companys size
Geographic expansion strategy takes the company abroad.

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 Types of Strategic Planning

Figure 3.4
Corporate Strategies Company-wide
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 Types of Strategic Planning

Business-level/competitive strategy
Identifies how to build and strengthen the
businesss long-term competitive position in the
marketplace.

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 Types of Strategic Planning
Three possible competitive strategies:
Cost leadership: the enterprise aims to become the low-
cost leader in an industry.
Differentiation: a firm seeks to be unique in its industry
along dimensions that are widely valued by buyers.
Focus: a firm seeks to carve out a market niche, and
compete by providing a product or service customers can
get in no other way.

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 Types of Strategic Planning

Figure 3.5
Corporate Strategies Business level

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 Types of Strategic Planning

Functional strategies
Identify the basic courses of action that each
department will pursue in order to help the
business attain its competitive goals.

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 HR and Competitive
Advantage
Competitive advantage
Any factor that allows an organization to differentiate its
product or service from those of its competitors to
increase market share.
Superior human resources are an important source of
competitive advantage
E.g. Toyotas self-managed teams

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 Strategic Human Resource
Management
Strategic Human Resource Management
The linking of HRM with strategic goals and objectives
in order to improve business performance and develop
organizational cultures that foster innovation and
flexibility.
Formulating and executing HR systemsHR policies
and activitiesthat produce the employee competencies
and behaviors the company needs to achieve its strategic
aims.
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 Linking Corporate and HR
Strategies

Figure 3.6
Linking Company-Wide and HR Strategies
Source: 2003, Gary Dessler, Ph.D.
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 HRMs Strategic Roles

Effective HR managers are able to:

Handle a larger portfolio
Work closely with top management to formulate and
implement companys strategic plans
Two basic planning roles:
Strategy Execution
Strategy Formulation

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 Strategy Execution Role

The HR departments strategies, policies, and

activities must make sense in terms of the
companys corporate and competitive strategies, and
they must support those strategies.

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 Strategy Formulation Role
HR helps top management formulate strategy in a variety of
ways by:
Supplying competitive intelligence that may be useful in the
strategic planning process.
Supplying information regarding the companys internal
human strengths and weaknesses.
Build a persuasive case that shows howin specific and
measurable termsthe firms HR activities can and do
contribute to creating value for the company.
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 Creating A Strategic
HR System
Components of the HR process
HR professionals who have strategic and other skills
HR policies and activities that comprise the HR system
itself (Recruitment, Selection, Training and Reward)
Employee behaviors and competencies that the
companys strategy requires.

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 Creating A Strategic
HR System

Figure 3.7
Three Main Strategic Human Resource System Components
Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy, and
Performance (Boston: Harvard Business School Press, 2001), p. 12. Copyright 2001 by
the Harvard Business School Publishing Corporation; all rights reserved.

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 The High-Performance Work
System
Companies should create a HR system that fits its needs
Trend towards installing HR systems that broadly share
many characteristics
Aim of these systems is to maximize employees
competencies and commitment
Employers expect HR managers to introduce HR activities
that create value for the company such as more profit and
bigger market share

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 The High-Performance Work
System
High-involvement employee practices
(such as job enrichment and team-based organizations)
High commitment work practices
(such as improved employee development,
communications, and disciplinary practices)
Flexible work assignments
Other practices include those that foster skilled workforces
and expanded opportunities to use those skills

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 The High-Performance Work
System

Figure 3.8
Characteristics of a High-Performance Work Organization
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 Translating Strategy into HR
Policy and Practice
HR managers to translate:
Companys strategy into employee competencies and
behaviors
These employee competencies and behaviors into
specific HR policies and practices to achieve companys
goals.

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 Translating Strategy into HR
Policy and Practice
Formulate
Formulate business
business strategy
strategy
Figure 3.9 What
What are
are the
the strategic
strategic goals
goals of
of the
the business?
business?

A Basic Model of
Identify
Identify workforce
workforce requirements
requirements
How to Align HR What
What employee
employee competencies
competencies and
and behaviors
behaviors must
must HRHR deliver
deliver to
to
enable the business to reach its goals?
enable the business to reach its goals?
Strategy and Actions
with Business Formulate
Formulate HR
HR strategic
strategic policies
policies and
and activities
activities
Which
Which HR
HR strategies
strategies and
and practices
practices will
will produce
produce these
these employee
employee
Strategy competencies and behaviors?
competencies and behaviors?
Source: Adapted from Garrett Walker and J.
Randal MacDonald, Designing and
Develop
Develop detailed
detailed HR
HR Scorecard
Scorecard measures
measures
Implementing an HR Scorecard, Human
How
How can
can HR
HR measure
measure whether
whether itit is
is executing
executing well
well for
for the
the
Resources Management 40, no. 4 (2001), p. 370 . business,
business, in
in terms
terms of
of producing
producing the
competencies and
the required
required workforce
behaviors?
workforce
competencies and behaviors?

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 The HR Scorecard Approach
HR Scorecard
Measures the HR functions effectiveness and efficiency in
producing employee behaviors needed to achieve the
companys strategic goals.
To create an HR scorecard, you:
Must know what the companys strategy is.
Must understand the causal links between HR activities,
employee behaviors, organizational outcomes, and the
organizations performance.
Must have the metrics to measure all the activities and results
involved.
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 Basic HR Scorecard
Relationships
Organization
HR activities
performance

Emergent employee Achieve

behaviors strategic goals

Strategically relevant
organizational
outcomes
Figure 3.10
Basic HR Scorecard Relationships
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 Using the HR Scorecard
Approach
1. Define the Business Strategy
2. Outline the Companys Value Chain
3. Outline a Strategy map
4. Identify the Strategically Required Organizational
Outcomes
5. Identify the Required Workforce Competencies
and Behaviors

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 Using the HR Scorecard
Approach
6. Identify the Strategically Relevant HR System
Policies and Activities
7. Create HR Scorecard
8. Design the HR Scorecard Measurement System
9. Summarize Scorecard Measures in a Digital
Dashboard
10. Periodically Evaluate the Measurement System

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 Outlining the Companys
Value Chain
Value chain analysis
A tool for identifying, isolating, visualizing, and
analyzing the firms most important activities and
strategic costs.
Identifying the primary and crucial activities that create
value for customers and the related support activities.
Each activity is part of the process of designing,
producing, marketing, and delivering the companys
product or service.
Shows the chain of essential activities.
Prompts future questions.
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 A Simple Value Chain for
Hotel International

Source: Copyright Gary Dessler, Ph.D.

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 HR Scorecard for Hotel
International*

Note:*(An abbreviated example

showing selected HR practices and
outcomes aimed at implementing
the competitive strategy, To use
superior guest services to
differentiate the Hotel International
properties and thus increase the
length of stays and the return rate of
guests, and thus boost revenues
and profitability).

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