Chapter 2: HRM & strategy
2.2. What is strategy
Strategy = outlines an organization’s goals, including different performance indicators
(market share, sales, competitive posititioning, goals, growth, and return on investment) and
the means to achieve those goals (finance, technology and human resources).
- Strategy is mostly about achieving a fit between an organization’s purpose and its
environment, or developing a course of action for achieving an organization’s
purpose.
- Classical approach = a controlled and conscious process of thought directly derived
from the notion of rational economic man.
o Most well-known and still dominant in strategic management
o Rational planned approach
o Prime responsibility rests with the CEO; in charge of fully formulated, explicit
and articulated decision-making process (strict distinction between
formulation and implementation).
o Relies heavily on the readiness and capacity of managers to adopt profit-
maximizing strategies through rational long-term planning.
- Enormous variety of approaches
Different kinds of strategy:
- Corporate strategy = overarching strategy in large organizations which are composed
of various business units operating in different markets, each with their own business
strategy
- Business strategy = most important for achieving competitive advantage. Focused on
a specific market, which requires different goals and resources in order to achieve
this competitive advantage and positioning.
- HRM strategy = the processes, decisions and choices the organization makes
regarding its human resources and how they are organized.
5 meanings of strategy by Minzberg (1987)
1. Strategy as a plan (intended)
a. A direction, guide or course of action into the future, focused on looking
ahead
2. Strategy as a pattern (realized)
a. Consistency in behavior over time, focused on looking at the past
3. Strategy as a ploy (list/truc)
a. A specific manoeuvre intended to outwit an opponent or competitor
4. Strategy as a position
a. The way in which the organization positions its products/services in particular
markets in order to achieve a competitive advantage
5. Strategy as a perspective
a. An organization’s fundamental way of doing things + the way in which
members of the organization perceive their environment and their customers
, Ten schools of strategy (Meerveld, 2001)
School Characteristic Key player Environment Strategy Dominant
of the process discipline
Prescriptive Design Conception CEO Opportunities Explicit -
(voorschrijven) /threats perspective
Planning Formal Planners Stable and Explicit plan System theory/
planning controlled cybernetics
Positioning Analysis Analysts Can be Explicit Economics
analyzed generic
position
Descriptive Entrepre- Vision Leader Can be Implicit -
(beschrijven) neurial influenced perspective
Cognitive Mental Mind Hard to Mental Psychology
process understand perspective
Learning Emergent Everyone Demanding Implicit Psychology
who learns patterns
Power Negotiation Everyone Can be Positions, Politics
with power molded, but ploys
difficult
Cultural Collective Collecti- Incidental Collective Anthropology
process vistic perspective
Environ- Reactive Environ- Dominant and Specific Biology
mental process ment, deterministic position
stakeholders
Configura-
tional
Prescriptive schools
1. Design school: sees strategy formation as a deliberate process of conscious thought
a. SWOT analysis
2. Planning school: sees strategy as a formal process and entails a stepwise approach to
creating an all-encompassing strategy.
a. More formalized and detailed version of the design school
3. Positioning school: sees strategy mainly from an industrial economics perspective.
a. Competitive position of an organization in its industry/market is analyzed
using economic models and techniques.
b. Porter made important contributions (five forces model, value chain, etc.), as
well as Boston Consulting Group (growth-share matrix and experience curve)
Underlying assumption prescriptive schools: the environment is more or less table and can
be studied objectively in order to distil changes and opportunities for strategy.
- Outside-in approach = the environment is the starting point for analysis and the
subsequent development of appropriate strategic responses in order to achieve the
desired strategic positioning
- Inside-out approach = Resource based view of the firm > internal resources are
presumed to be the key to organizational success.
,Descriptive schools
4. Entrepreneurial school: emphasizes the important role of a visionary leader, who is
actively engaged in a search for new opportunities in order to speed up the
company’s growth.
5. Cognitive school: considers strategy formulation as a cognitive process that takes
place in the mind of the strategist.
a. Strategies emerge as perspectives that shape how people deal with inputs
from the environment.
b. The inputs are subject to distorting filters before they are decoded by
cognitive maps.
c. The Cognitive School focuses on the creative processes that take place in the
mind of the strategist. It is very individualistic, in that that strategist creates a
strategy based upon her personal knowledge, experiences, and perceptions.
d. Under this perspective, understanding the human mind and the human brain
is important to comprehend strategy formation.
6. Learning school: strategy formulation is seen as a stepwise incremental (toenemend)
process. Change and direction are the result of mutual adjustment between the
different actors involved and between outside events and internal decisions.
a. Strategy making is a collective learning process over time (hard to distinguish
between formulation and implementation)
7. Power (or political) school: the formation of strategy is a bargaining process
between power blocks both inside the organization and between organizations.
a. Emphasis on the use of power and politics to negotiate strategies that favor
particular interests.
8. Cultural school: considers strategy formulation as a process of social interaction,
based on the beliefs and shared understandings of the members of the organization.
a. Results in a perspective that is reflected in the patterns by which deeply
embedded resources are protected and used for achieving competitive
advantage.
9. Environmental school: focuses on the environment as the central actor to the
strategy making process.
a. The organization must respond to the forces of the environment, otherwise it
will be “selected out”
b. Roots in contingency theory
10. Configurational school: emphasizes that there is no one best way of organizing and
strategy formulation, but that specific circumstances will make a certain
configuration of context, strategy, structure and process effective.
The ten schools reveal that there is no universally agreed best way of strategy formulation
and subsequent organizing (also regarding HR policies).
, 2.3. Implications for HRM and performance
The different schools highlight the importance of different factors to be taken into account,
including the coming ones:
1. The role of the entrepreneur
a. Often the founder/owner of the company
b. Plays an important role in shaping HRM policies and creating a related culture
c. Example: founder with dislike for specialist staff departments > no HR
department > lack of explicit HRM practices (more flexibility, also more
favoritism and unclearness)
2. Cognitive/framing processes
a. Due to bounded rationality, cognitive processes distort filters and (de)coding
processes, resulting in differences in the mental maps of the participants
involved > different mental maps = divergent opinions on how to shape HRM
b. Example: economic slowdown & factory must close > divergent opinions
among the main stakeholders concerning the severity of the problem and the
kind of measures to be taken.
3. Incrementalism/learning
a. Different parties involved > HRM strategy is an emergent and stepwise
iterative (herhalend) process with feedback loops > difficult to understand
cause-effect linkages & distinguish formulation and implementation
b. Research can best be aimed at describing change processes longitudinally.
4. Power and resources
a. Power is neglected > this includes resources that parties can mobilize through
their networks in order to enforce and strengthen their HRM demands.
b. Power positions and resources are crucial in shaping both collective
bargaining agreement outcomes and HRM policies.
5. Culture/ideology
a. The way in which collective perspectives and intentions develop over time will
have an effect upon the shaping of HRM policies (also unconsciously).
b. It will also affect the way in which the effectiveness of HRM and employees
are perceived by other members of the organization, and the degree to which
related values and perceptions are shared.
c. Example: top-management values shareholder values as the final criterion,
but employees’ values are based upon stakeholder conception of the firm.
6. Environmental and institutional forces
a. Environmental forces: trade unions, tripartite and bipartite (how many
parties are in the coalition of a government) consultative bodies at the
national level
b. These forces can have a large impact upon an organization’s HRM strategy
and policies.
2.2. What is strategy
Strategy = outlines an organization’s goals, including different performance indicators
(market share, sales, competitive posititioning, goals, growth, and return on investment) and
the means to achieve those goals (finance, technology and human resources).
- Strategy is mostly about achieving a fit between an organization’s purpose and its
environment, or developing a course of action for achieving an organization’s
purpose.
- Classical approach = a controlled and conscious process of thought directly derived
from the notion of rational economic man.
o Most well-known and still dominant in strategic management
o Rational planned approach
o Prime responsibility rests with the CEO; in charge of fully formulated, explicit
and articulated decision-making process (strict distinction between
formulation and implementation).
o Relies heavily on the readiness and capacity of managers to adopt profit-
maximizing strategies through rational long-term planning.
- Enormous variety of approaches
Different kinds of strategy:
- Corporate strategy = overarching strategy in large organizations which are composed
of various business units operating in different markets, each with their own business
strategy
- Business strategy = most important for achieving competitive advantage. Focused on
a specific market, which requires different goals and resources in order to achieve
this competitive advantage and positioning.
- HRM strategy = the processes, decisions and choices the organization makes
regarding its human resources and how they are organized.
5 meanings of strategy by Minzberg (1987)
1. Strategy as a plan (intended)
a. A direction, guide or course of action into the future, focused on looking
ahead
2. Strategy as a pattern (realized)
a. Consistency in behavior over time, focused on looking at the past
3. Strategy as a ploy (list/truc)
a. A specific manoeuvre intended to outwit an opponent or competitor
4. Strategy as a position
a. The way in which the organization positions its products/services in particular
markets in order to achieve a competitive advantage
5. Strategy as a perspective
a. An organization’s fundamental way of doing things + the way in which
members of the organization perceive their environment and their customers
, Ten schools of strategy (Meerveld, 2001)
School Characteristic Key player Environment Strategy Dominant
of the process discipline
Prescriptive Design Conception CEO Opportunities Explicit -
(voorschrijven) /threats perspective
Planning Formal Planners Stable and Explicit plan System theory/
planning controlled cybernetics
Positioning Analysis Analysts Can be Explicit Economics
analyzed generic
position
Descriptive Entrepre- Vision Leader Can be Implicit -
(beschrijven) neurial influenced perspective
Cognitive Mental Mind Hard to Mental Psychology
process understand perspective
Learning Emergent Everyone Demanding Implicit Psychology
who learns patterns
Power Negotiation Everyone Can be Positions, Politics
with power molded, but ploys
difficult
Cultural Collective Collecti- Incidental Collective Anthropology
process vistic perspective
Environ- Reactive Environ- Dominant and Specific Biology
mental process ment, deterministic position
stakeholders
Configura-
tional
Prescriptive schools
1. Design school: sees strategy formation as a deliberate process of conscious thought
a. SWOT analysis
2. Planning school: sees strategy as a formal process and entails a stepwise approach to
creating an all-encompassing strategy.
a. More formalized and detailed version of the design school
3. Positioning school: sees strategy mainly from an industrial economics perspective.
a. Competitive position of an organization in its industry/market is analyzed
using economic models and techniques.
b. Porter made important contributions (five forces model, value chain, etc.), as
well as Boston Consulting Group (growth-share matrix and experience curve)
Underlying assumption prescriptive schools: the environment is more or less table and can
be studied objectively in order to distil changes and opportunities for strategy.
- Outside-in approach = the environment is the starting point for analysis and the
subsequent development of appropriate strategic responses in order to achieve the
desired strategic positioning
- Inside-out approach = Resource based view of the firm > internal resources are
presumed to be the key to organizational success.
,Descriptive schools
4. Entrepreneurial school: emphasizes the important role of a visionary leader, who is
actively engaged in a search for new opportunities in order to speed up the
company’s growth.
5. Cognitive school: considers strategy formulation as a cognitive process that takes
place in the mind of the strategist.
a. Strategies emerge as perspectives that shape how people deal with inputs
from the environment.
b. The inputs are subject to distorting filters before they are decoded by
cognitive maps.
c. The Cognitive School focuses on the creative processes that take place in the
mind of the strategist. It is very individualistic, in that that strategist creates a
strategy based upon her personal knowledge, experiences, and perceptions.
d. Under this perspective, understanding the human mind and the human brain
is important to comprehend strategy formation.
6. Learning school: strategy formulation is seen as a stepwise incremental (toenemend)
process. Change and direction are the result of mutual adjustment between the
different actors involved and between outside events and internal decisions.
a. Strategy making is a collective learning process over time (hard to distinguish
between formulation and implementation)
7. Power (or political) school: the formation of strategy is a bargaining process
between power blocks both inside the organization and between organizations.
a. Emphasis on the use of power and politics to negotiate strategies that favor
particular interests.
8. Cultural school: considers strategy formulation as a process of social interaction,
based on the beliefs and shared understandings of the members of the organization.
a. Results in a perspective that is reflected in the patterns by which deeply
embedded resources are protected and used for achieving competitive
advantage.
9. Environmental school: focuses on the environment as the central actor to the
strategy making process.
a. The organization must respond to the forces of the environment, otherwise it
will be “selected out”
b. Roots in contingency theory
10. Configurational school: emphasizes that there is no one best way of organizing and
strategy formulation, but that specific circumstances will make a certain
configuration of context, strategy, structure and process effective.
The ten schools reveal that there is no universally agreed best way of strategy formulation
and subsequent organizing (also regarding HR policies).
, 2.3. Implications for HRM and performance
The different schools highlight the importance of different factors to be taken into account,
including the coming ones:
1. The role of the entrepreneur
a. Often the founder/owner of the company
b. Plays an important role in shaping HRM policies and creating a related culture
c. Example: founder with dislike for specialist staff departments > no HR
department > lack of explicit HRM practices (more flexibility, also more
favoritism and unclearness)
2. Cognitive/framing processes
a. Due to bounded rationality, cognitive processes distort filters and (de)coding
processes, resulting in differences in the mental maps of the participants
involved > different mental maps = divergent opinions on how to shape HRM
b. Example: economic slowdown & factory must close > divergent opinions
among the main stakeholders concerning the severity of the problem and the
kind of measures to be taken.
3. Incrementalism/learning
a. Different parties involved > HRM strategy is an emergent and stepwise
iterative (herhalend) process with feedback loops > difficult to understand
cause-effect linkages & distinguish formulation and implementation
b. Research can best be aimed at describing change processes longitudinally.
4. Power and resources
a. Power is neglected > this includes resources that parties can mobilize through
their networks in order to enforce and strengthen their HRM demands.
b. Power positions and resources are crucial in shaping both collective
bargaining agreement outcomes and HRM policies.
5. Culture/ideology
a. The way in which collective perspectives and intentions develop over time will
have an effect upon the shaping of HRM policies (also unconsciously).
b. It will also affect the way in which the effectiveness of HRM and employees
are perceived by other members of the organization, and the degree to which
related values and perceptions are shared.
c. Example: top-management values shareholder values as the final criterion,
but employees’ values are based upon stakeholder conception of the firm.
6. Environmental and institutional forces
a. Environmental forces: trade unions, tripartite and bipartite (how many
parties are in the coalition of a government) consultative bodies at the
national level
b. These forces can have a large impact upon an organization’s HRM strategy
and policies.
