Hr strategies Key concepts and terms

Criteria for an effective HR strategy
An effective HR strategy is one that works in the sense that it achieves what it sets out to 
achieve. Its particular requirements are set out below.
Criteria for an effective HR strategy
It will satisfy business needs.
•
It is founded on detailed analysis and study, not just wishful thinking.
•
It can be turned into actionable programmes that anticipate implementation 
•
requirements and problems.
It is coherent and integrated, being composed of components that fi t with and 
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support each other.

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54 Human Resource Management
How should HR strategies be formulated?
Propositions about the formulation of HR strategy, Boxall (1993)
The strategy formation process is complex, and excessively rationalistic 
•
models that advocate formalistic linkages between strategic planning 
and HR planning are not particularly helpful to our understanding of 
it.
Business strategy may be an important infl uence on HR strategy but it 
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is only one of several factors.
Implicit (if not explicit) in the mix of factors that infl uence the shape of 
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HR strategies is a set of historical compromises and trade-offs from 
stakeholders.
SOURCE REVIEW
Strategic options and choices
The process of formulating HR strategies involves generating strategic HRM options and then 
making appropriate strategic choices. It has been noted by Cappelli (1999) that: ‘The choice of 
practices that an employer pursues is heavily contingent on a number of factors at the organi-
zational level, including their own business and production strategies, support of HR policies, 
and cooperative labour relations.’ The process of developing HR strategies involves the adop-
tion of a contingent approach in generating strategic HRM options and then making appro-
priate strategic choices. There is seldom if ever one right way forward.
‘Inside-out’ and ‘outside-in’ approaches to formulating HR strategies
Research conducted by Wright et al (2004) identifi ed two approaches that can be adopted by 
HR to strategy formulation: the inside-out approach and the outside-in approach. They made 
the following observations about the HR-strategy linkage:
It takes account of the needs of line managers and employees generally as well 
•
as those of the organization and its other stakeholders. As Boxall and Purcell 
(2003) emphasize: ‘HR planning should aim to meet the needs of the key stake-
holder groups involved in people management in the fi rm.’

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HR Strategies 55
At the extreme, the ‘inside-out’ approach begins with the status quo HR function (in 
terms of skills, processes, technologies, etc) and then attempts (with varying degrees of 
success) to identify linkages to the business (usually through focusing on ‘people issues’), 
making minor adjustments to HR activities along the way… On the other hand, a few 
fi rms have made a paradynamic shift to build their HR strategies from the starting point 
of the business. Within these ‘outside-in’ HR functions, the starting point is the business, 
including the customer, competitor and business issues they face. The HR strategy then 
derives directly from these challenges to create real solutions and add real value.
They suggested that ‘the most advanced linkage was the “integrative” linkage in which the 
senior HR executive was part of the top management team, and was able to sit at the table and 
contribute during development of the business strategy’.
In reality HR strategies are more likely to fl ow from business strategies, which will be domi-
nated by product/market and fi nancial considerations. But there is still room for HR to make 
a useful, even essential contribution at the stage when business strategies are conceived, for 
example, by focusing on resource issues. This contribution may be more signifi cant if strategy 
formulation is an emergent or evolutionary process – HR strategic issues will then be dealt 
with as they arise during the course of formulating and implementing the corporate strategy.