Strategic Management - Role of HRM

Strategic Management Process involves four important stages: Environmental scanning, strategy formulation, strategy implementation and evaluation and control.

Environmental Scanning: Environment needs to be scanned in order to determine trends and projections of factors that will affect fortunes of the organization. Scanning must focus on task environment. Not that elements outside the task environment are ignored, but they receive less attention. Scanning helps identify threats and opportunities prevailing in the environment. In formulating  a strategy, a company seeks to take advantage of the opportunities while minimizing the threats. What might be a threat to one company could be an opportunity for another. HR professionals play key roles in scanning the environment. They are in an advantageous position to give inputs about the rivals- their direction, their strategies, their strengths and their weaknesses. HR executives are the repositories of resumes sent in by the employees of rival firms in the same industry. Perusal of such documents is of great help in knowing the skills of staff in the competing organizations, reasons for their exit, compensation levels, and other similar details. More specifically, human resources can provide the following :

“From public information and legitimate recruiting and interview activities, you ought to be able to construct organization charts, staffing levels and group missions for the various organizational components of each of your major competitors. Your knowledge of how, brands are sorted among sales sub divisions and who reports to whom can give important clues a competitor’s strategic priorities. You may even know the track record and characteristic behavior of the executives”.

Strategy Foundation: Strategies are formulated at three levels:

  • Corporate Level
  • Business unit level
  • Functional level

Corporate Level Strategy:  This is formulated by the top management of an organization made up of more than one line of business. The corporate level strategy of the family-controlled Siyaram companies is to continuously innovate in all its businesses with right technology, relentlessly cut costs and focus on the overseas markets.

In formulating corporate-level strategies, the company should decide where it wants to be - in 10 or 15 years hence, in at least eight areas- market standing, innovation, productivity, physical and financial resources, profitability, managerial performance and development,, worker performance and attitudes, and social responsibility.

Business Level Strategy: A business unit is an organizational subsystem that has a market, a set of competitors, and a goal distinct from those of the other subsystems in the group. The concept of strategic business unit was pioneered by General Electric.

A single company that operates within one industry is also considered a business unit. For instance an independent company that builds and sells swimming pool is considered a business unit. In such an organization, the corporate level strategy and the business-unit strategy are the same.

Functional Level Strategy:  Each business unit will consist of several departments, such as manufacturing sales, finance and HRD. Functional-level strategies identify the basic courses of action that each of the departments must pursue in order to help the business unit to attain its goals. In formulating functional level strategies, managers must be aware that the different functions are interrelated. Each functional area, in pursuing its purpose, must mesh its activities with the activities of other departments. A change in one department will invariably affect way the other departments operate. Hence the strategy of one functional area cannot be viewed in isolation. Rather, the extent to which all functional strategic are integrated determines the effectives of the unit’s strategy.

Strategy Implementation: Strategies formulated need to be implemented. Implementation of strategies is often more difficult than their formulation. Although implementation is the logical step to formulation, the two differ in several ways:

Strategy Formulation:

  • Strategy formulation us positioning forces before the action.
  • It focuses on effectiveness.
  • It is primarily an intellectual process.
  • It requires good initiative and analytical skills.
  • It requires co-ordination among a few individuals.

Strategy Implementation:            

  • Strategy implementation is managing forces during the action.
  • It focuses on efficiency.
  • It is primarily an operational process.
  • It requires special motivation and leadership skills.
  • It requires co-ordination among many persons.

Implementing strategies requires such actions as altering sales territories, adding new departments, closing facilities, hiring new employees, changing an organization’s pricing strategies, developing financial budgets, formulating new employee benefits, establishing cost-control procedures, changing advertising strategies, building new facilities, transferring managers divisions, and building a better computer information system.

Strategy-formulation concepts and tools do not differ vastly for small, large or non-profit organizations. However strategy implementation varies substantially among different types and sizes of organizations.

HRM supplies the company with a competent and willing work force which is responsible for executing strategies.

Additionally, HR function can contribute to strategic plans and actions of the firm the following ways:

  • Encouragement of pro-active rather than reactive behavior.
  • Explicit communication of Goals.
  • Stimulation of critical thinking.
  • Productivity as an HR based strategy.
  • Quality and service are HR based strategy.
  • Proficient strategic management.

Strategy Evaluation: The strategic management process results in decisions that can have significant and long-lasting consequences. Erroneous strategic decision can inflict severe penalties and can be exceedingly difficult, if not impossible, to reverse. Strategy evaluation, therefore assumes greater relevance greater relevance. Strategy relevance. Strategy evaluation helps determine the extent to which the company’s strategies are successful in attaining its objectives. Basic activities involved in strategy evaluation are:

  • Establishing performance targets, standards and tolerance limits for the objectives, strategies and implementation plans.
  • Measuring the performance in relation to the targets at a given time. If outcomes are outside the limits implementation plans.
  • Analyze deviations from acceptable tolerance limits.
  • Executive modifications where necessary and are feasible.