1

Chapter

16
Strategically Managing the
HRM Function
After reading this chapter, you should be able to:
Describe the roles that HR plays in firms today and the
categories of HRM activities.
Discuss how the HR function can define its mission and
market.
Explain the approaches to evaluating the effectiveness of
HR practices.

Chapter

16
Strategically Managing the
HRM Function
Describe

the new structures for the HR function.

Relate how process reengineering is used to review and
redesign the HR practices.
Discuss the types of new technologies that can improve
the efficiency and effectiveness of HR.
Describe how outsourcing HR activities can improve
service delivery efficiency and effectiveness.

Introduction
Human

resource management
practices can help companies
gain a competitive advantage.
Virtually every HR function in
top companies is going through a
transformation process to create
a function that can play this new
strategic role while fulfilling its
other roles.

Categories of HRM Activities

Transformational
Knowledge management
Cultural Change
Strategic redirection and renewal
Management development
Traditional
Recruitment and selection
Training
Performance management
Compensation
Employee relations
Transactional
Benefits administration
Record keeping
Employee services

Categories of HRM Activities

Transactional

activities are the day-to-day transactions a

company makes.
Low

in their strategic value.

Traditional

activities are the nuts and bolts of HR such as

performance management, training, recruiting, selection,
compensation, and employee relations.
Moderate

strategic value.

Transformational

activities create long-term capability

and adaptability for the firm. Activities include knowledge
management, management development, cultural change,
and strategic redirection and renewal.
Comprise

the greatest strategic value for the firm

Strategic Management of the HRM

Function
For

the HR function to become truly strategic in its

orientation, it must view itself as being a separate business
entity.
A customer orientation is one of the most important
changes in the HR functions attempts to become strategic.
The products of the HR department must be identified.
The technologies through which HR meets customer needs
vary depending on the need being satisfied.

Customer-Oriented Perspective
Customers
Line managers
Strategic planners
Employees

HRM function

Technology
Staffing
Performance management
Rewards
Training and development

Customers Needs
Committed employees
Competent employees

Basic Process for HR Strategy

Scan the
external
environment

Identify
strategic
business
issues

Identify
people
issues

Develop
HR
strategy

Communicate
the HR
strategy

Involving Line Executives

Involving

those in charge of running the business can

increase the quality of information from which the HR
strategy is created.
Involvement can occur in a few ways:
Line

executives could simply provide input.

Line executives could be members of a team that develops HR
strategy.
Once strategy is developed, line managers could receive
communications with the HR strategy information.
Line managers could formally approve a strategy.

Categorizing HR Strategies
HR-Focused
People issues/
outcomes

HR strategy

People-Linked
People issues/
outcomes

HR strategy

Business-Linked
Business issues/
outcomes

People issues/
outcomes

HR strategy

People issues/
outcomes

HR strategy

Business-Driven
Business issues/
outcomes

Measuring HRM Effectiveness

the function evaluation
is a sign that the HR function cares
about the organization as a whole
and is trying to support operations,
production, marketing, and other
functions in the company.
Providing accountability
evaluation helps determine whether
the HRM function is meeting its
objectives and effectively using its
budget.
Marketing

Approaches to Evaluating HRM

Effectiveness
Audit Approach
Focuses on reviewing the
various outcomes of the HR
functional areas.
Both key indicators and
customer satisfaction measures
are typically collected.
Employee assessment.
Surveys of top-line executives.

Analytic Approach
Focuses on either:
(1) determining whether the
introduction of a program or
practice has the intended
effect or
(2) estimating the financial
costs and benefits resulting
from an HR practice.
More demanding than the audit
approach because it requires
the detailed use of statistics and
finance

Restructuring to Improve HRM

Effectiveness
The

HRM function effectively is divided into three

divisions:
The

Centers for Expertise - Consist of functional specialists in

the traditional areas of HR. These individuals ideally act as
consultants in the development of state-of-the-art systems and
processes for use in the organization.
The Field Generalists - Consist of the HRM generalists who
are assigned to a business unit within the firm.
The Service Center - Consists of individuals who ensure that
the transactional activities are delivered throughout the
organization.

Outsourcing
Outsourcing

- Contracting with an outside

vendor to provide a product or service to the
firm.
Usually this is done for one of two reasons:
The

outsourcing partner can provide the

service more cheaply
The partner can provide it more effectively.

Firms primarily outsource transactional

activities and services of HR such as payroll,
pension, and benefits administration.

Reengineering
Reengineering

is a complete review of critical work

processes and redesign to make them more efficient and
able to deliver higher quality.
The reengineering process has four steps:

Identify the
process to be
reengineered

Understand
the process

Redesign
the process

Implement
the process

Feedback

Improving HRM Effectiveness

through New Technologies
New

technologies - Applications of knowledge,

procedures, and equipment that have not previously been
used.
Transaction

ProcessingComputations and calculations used

to review and document HRM decisions and practices. These
include documenting employee relocation, payroll expenses, and
training course enrollments.
Decision Support SystemsThese are systems designed to help
managers solve problems. They usually include a "what if"
feature.
Expert systems are computer systems incorporating the decision
rules of people deemed to have expertise in a certain area.

Network and Client Server

Architecture
A

Network is a combination of desktop

computers, computer terminals, and
mainframes or minicomputers that share
access to databases and a means to
transmit information throughout the
system.
Client-server architecture is a
common form of network that provides
the means of consolidating data and
applications into a single system.

Relational Database, Imaging, and

Groupware
database Information is stored in
separate files that look like tables and can be linked by
common elements such as name.
Imaging The process for scanning documents,
storing them electronically, and retrieving them.
Groupware (or electronic meeting software) A
software application that enables multiple users to
track, share, and organize information and to work on
the same document simultaneously.
Relational

Software Applications for HRM

Improving

HRM Effectiveness through New TechnologiesEHRM - The speed requirements of e-business force HRM
managers to explore how to leverage technology for the delivery
of traditional and transformational HRM activities.
Recruitment and Selection - Technology has enabled firms to
monitor hiring processes to minimize the potential for
discriminatory hiring decisions.
Compensation and Rewards - Leveraging technology may allow
firms to better achive their compensation goals with considerably
less effort.
Training and Development - Technology allows firms to deliver
training and development for at least some skills or knowledge
faster, more efficiently, and possibly more effectively.

The Future for HR Professionals

The

future for careers in HR seems brighter

than ever.
Firms need to seek balance between
attracting, motivating, and retaining the very
best talent and keeping costs as low as
possible.
Finding such a balance requires HR leaders
who have a deep knowledge of the business
combined with knowledge of HR issues,
tools, processes, and technology.