Knowledge of Generic Approaches to Strategy - Case Study Example

KNOWLEDGE OF GENERIC APPROACHES TO STRATEGY Submitted By Introduction 3 Strategy and its Importance 3 Approaches of Strategy 4 Contemporary Developments in Human Resource Management 7 Strategy and Human Resource Management convergence 7 Strategic Human Resource Management 8 Evidence of Convergence of Strategy and HR 9 Conclusion 9 References 10 Introduction With the ever accelerating pace of change on the wake of globalization the need for strategy has increased manifolds. Every business big or small needs to develop a strategy for successfully running the business. Strategy is provides the long term picture and approach to the business and answers the question why business is being done in certain way. For long term sustainable growth organizations need to follow a well charted out business plan which defines the strategy derived from organization’s vision and mission and transforms the strategy into business activities and actions in all departments including HR. Defining and designing strategy is a complex task. It is derived not only from the vision and mission of the company but various internal and external factors also need to be taken into account for developing an appropriate and well designed strategy. There are many different generic approaches to strategy. HR being considered a strategic partner, these approaches to strategy also has its implications on Strategic Human Resource Management (SHRM). This paper aims at studying the different approaches to strategy and their implications on SHRM. For the critical analysis of this issue it will make use of the recent literature as well as any empirical evidence available from the real world. Strategy and its Importance What is strategy? The above discussed definition of strategy is a very broad one. Defining the phenomenon of strategy is a difficult assignment. There are various ways in which the definition of strategy can be approached. Application of different approaches may yield conflicting results about how to act, yet each will be based on a reasoned and possible approach. Strategy itself can be based on four basic conceptions that is rational, fatalistic, pragmatic and relativist. Each concept will be suitable for a given set of internal and external environment (Goldman, 2006) . Only an effective strategy ensures sustained profitability and growth. Approaches of Strategy Today’s highly competitive world demands commitment to change and a clear and well defined direction charted out through strategy. There are four basic approaches to strategy namely Classical, evolutionary, processual and systematic (Whittington, 2001). These four approaches of strategy are mapped against some critical elements of strategy. These critical elements identified are leadership, decisions, planning, innovation, diversification, internationalization, organization and strategic change. Sloan influenced classical approach is driven by policy. It is authoritative and centralized in nature with major focus on economics only. It is rooted in the elitist mentality and hence an authoritative view of the world and the concerned issues. This approach does not encourage involvement by the workers and hence Human capital management is not emphasized. This classical approach sets long term targets and goals and it is believed that managers have the capability and the willingness to adopt and practice those profit maximizing strategies devised by them through rational long term planning. In short it is top down driven strategy with very minimal role or almost no role for SHRM. The concept behind evolutionary approach is that managers are free to adopt any method but in the long run only the top performers will survive. It is based on the theory of survival of the fittest hence named evolutionary approach. It is believed that achieving the best fit between internal and external factors can yield organizations profits in the short run whereas investing in the long range activities can be counterproductive. This theory is strictly against long term strategies and hence SHRM has no role to play according to this approach. This approach views differentiation strategy as vital for business survival. It questions the capability of organizations for sustaining their competitive advantage achieved through differentiation in the long run. It believes that strategy can be a dangerous delusion and can prove to be fatal for companies who tend to overestimate the power of strategy. According to this approach companies tend to stick to their strategy despite the fact that sometimes defined strategies prove to be totally in effective. The theory emphasizes that organizations in this case instead of desperately trying to adapt, should concentrate on the many available opportunities in the environment and should take initiative to choose the best available. According to this approach if managers has to anticipate change in the external environment and adapt accordingly then the most effective policy is to invest in as many as possible different small initiatives instead of investing heavily in one major plan. It will be helpful not only in minimizing risk but will enable the organization to build on its success and eliminating failures. Processual approach is built on the awareness of the biases we have for the interpretation of the data. We have the tendency of not fully utilizing the unlimited search of the relevant data but we just embark on the first reasonable and acceptable option instead of digging for the best option. It is based on the perspective that organizations are not united in their effort of profit maximization. Organizational members bring in their own biases and personal objectives in setting organizational objectives. Such biases lead to compromises in setting organizational objectives which is acceptable for all. Hence organizations instead of profit maximizing only manages to “satisfice”. According to this approach managers use strategy as their security blanket and term the routine procedure and some quantification as their strategic plan instead of trying to comprehend the complex internal and external environment. Strategy instead of a well designed plan, come up only as small successive steps, which combined together from a pattern termed as strategy by managers. Managers are not concerned about the effectiveness of strategy as long as it is giving them the sense of purpose for their actions. Incremental approach to strategy suggests that strategic planning is an ongoing process which should be linked with the process of experimenting and learning. Smart strategist can always plan everything in advance. According to this theory incremental approach can be a strategic and logical one with a clear sense of direction and objective for the organization. This approach is of the view that an organization’s competitive advantage lies in its internal unique capability identified as core competency and not in its ability to chase every opportunity present in the external environment. Strategies based on external environment only instead of core competency leads to vague goals and delusional policies (Grant, 2005). In short this approach defines strategy as building a distinctive internal core competency and hence it is an inward awareness process rather than the external pursuit of opportunity. The central theme of Systemic approach is that decision makers cannot isolate the role of individuals in the organization and base their decisions only on economic transactions. Densely interwoven social systems define people behavior and human psychology. Organizations differ from each other on the basis of economic and social systems in which they are based. Human psychology defined by social system does play an important role in defining strategy for the organization and determining its effectiveness. With the influence of sociology and the focus on societies this approach of the 90’s provided the platform and the background for the recent approach of SHRM. Contemporary Developments in Human Resource Management There exists a variety of perspectives, arguments and styles in HRM. A critical analysis of the four approaches discussed above give us gives an insight into the contemporary developments in strategy and human resource development. The effects of HRM on organizational performance, leadership, performance evaluation and rewards is the most debated and pressing topics of HRM (Beardwell, 2010). The role of human capital in organizations has increased gradually over the years. Earlier theories were based on personnel management and have gradually shifted to Human resource management with more and more involvement of employees in the decision making of the organization and now Human resource management is not just restricted to human resource managers but is the responsibility of all managers. HRM is considered the strategic partner of the organization and plays an important role in defining strategy for the organization as well as its implementation by aligning its activities and practices with the organizational goals. SHRM the concept of today plays a vital role in helping organization in developing an effective strategy and successful implementation. All HRM activities recruitment and selection, performance evaluation, employee training and development and rewards and benefits etc are directed towards achieving strategic goals. Strategy and Human Resource Management convergence HR strategy has come a long way from the initial role of a supervisor during the industrial revolution. Although the role of HR is still widely debated but today it is the partner in all board meetings along with the top management. The evolution of HR can be divided into three stages. The initial stage during the industrial revolution in the early twentieth century to the era of 1970’s and 80’s which is marked by global diversification to the global competition and differentiated work system of today (Boxall, 2002). The perspective, focus and environmental factors reflected in the approaches of each era have been discussed in the four approaches discussed above. During the early approaches labor was only perceived as cost that needs to be minimized for the organization to meet its strategy. The main emphasis of strategy was efficiency and productivity. With globalization Hr also adapted and a more systematic approach for aligning HR activities with business strategy was developed. The debate at this stage was aligning Hr activities with firm’s strategy or the best practices of HR. many scholars were in favor of universal work system for optimizing performance irrespective of strategy. Strategy implementation and alignment became the main focus. In today’s world however organizations does not look for HR or people on implementing strategy but in formulating strategy. It brought the concept of SHRM. Today strategy and HR are converging. The issue is not for HR to be more strategic but strategy should include more of HR. This change in approach has brought people in the forefront. Now HR and people are viewed as a source of potential competitive advantage (Wilkinson et al. 2010) Strategic Human Resource Management There have been some differences in the academia and the industries upon the role of HR. In the academia some glamorized case studies of HR has been used to emphasize the role of HR but industry did not realized the importance of HR in strategy formulation until recently (Gratton, 1999). There is a strong link between business strategy and human resource strategy. The resultant HR strategy has a strong impact on the daily activities of HR. the outcome of this strategic human resource is not restricted to individuals only but it has strong impact on the organization as well. This strategic human resource strategy influences the behavior of mangers. SHRM concentrates on deliverables, what HR can deliver to the organization through the policies and practices of HR (Prucell, 2007). Evidence of Convergence of Strategy and HR An analysis of Denmark and Norway, the two similar economies reveals the importance of SHRM in contrast to old concepts of HR as personnel management. Most Danish and Norwegian companies although involve HR from outset in corporate strategy development but there is still a lot of room for development (Brewster et al 2004). The HRM in Denmark is less structure and rather informal as compared to Norwegian companies. This is also reflected in the growth of the companies in two countries in the globalised competition. A critical analysis of European countries revealed that organizations are fast converging strategy with HR for long term sustainable growth. Only those companies can survive in the long run whose HR takes the initiative and concentrate on deliverables for optimizing organizational growth (Storey, 2001). Conclusion A study of different approaches of strategy showed the journey of HR from mere personnel management to strategic partner. With growing global competition the strategy and Hr are fast converging and soon the boundaries will diminish. Today’s highly competitive environment demands HR not just play its strategic role but recognizes its importance as a potential source of competitive advantage. The role of Hr is not restricted to strategy alignment with business and its implementation but HR is responsible for taking initiatives and concentrating on deliverables for sustained growth of the organization. References Beardwell, I., Holden, L., T. Claydon (2010) Human Resource Management a contemporary approach, Harlow: Pearson Education (4th edition). Boxall, P., Purcell, J. (2002), Strategy and Human Resource Management, London: Palgrave Brewster, C., Mayrhofer, W., Morely, M. (2004) Human resource management in Europe: evidence of convergence? Oxford: Butter worth Heinemann Gratton, L., Hope Hailey, V., Stiles, P., Truss, C. (1999), Strategic Human Resource Management, Oxford: OUP Grant, Robert M. (2005) Contemporary strategy analysis, Oxford: Blackwell publishing Goldman, G. (2006) Strategy : Sustaining Competitive Advantage in a Globalized Context, Cape town: Juta & Co. Prucell, J., Wright, Patrick M. (2007) The Oxford handbook of human resource management, Oxford: Oxford University Press Whittington, R. (2001) what is Strategy and Does it Matter, London: Thompson Learning Wilkinson, A., Redman T., Snell,S. (2010) The SAGE handbook of human resource management, London: Sage Publications Storey, J. (2001), Human Resource Management, A Critical Text (2nd ed.) London: Thompson Learning Read More