Krishnan, Rishikesha T. “Linking Corporate Strategy and HR Strategy: Implications for HR Professionals,” In R. Padaki, N.M. Agrawal, C. Balaji and G. Mahapatra (eds.) Emerging Asia: An HR Agenda, New Delhi: Tata McGraw-Hill, 2005, pp. 215-223.
Linking Corporate Strategy and HR Strategy Rishikesha T. Krishnan Associate Professor of Corporate Strategy Indian Institute of Management Bangalore Recognition of the link between corporate and business strategies and strategies related to the people function is not new. McKinsey’s 7-S framework that emphasised the need for the alignment of seven organisational variables (superordinate goals, strategy, structure, systems, staff, skills, and style) ...view middle of the document...
There are two generic routes to competitive advantage – through being the lowest cost producer, or through differentiation and a price premium. 2 The four generic building blocks of building a competitive advantage are superior efficiency, superior quality, superior customer responsiveness and superior innovation. 3 Companies achieve these drivers of competitive advantage through the creation of distinctive competencies. Distinctive competencies are built through resources and capabilities. Most resources are created by deliberate actions by the organisation. This is true of tangible resources like buildings, plant and machinery, as well as intangibles such as brands, patents and technological know-how. Capabilities are a company’s skill at coordinating its resources and using them productively. These capabilities get embedded in an organisation’s routines and processes. By their vary nature, capabilities are more difficult to copy or imitate as they are often the result of a complex interaction between the structure, systems and values of an organisation. Though it is sometimes difficult to explain post facto how exactly a capability was created, or for an organisation to re-trace the path traversed by another organisation that enabled the latter to create certain capabilities, it is possible for an
Krishnan, Rishikesha T. “Linking Corporate Strategy and HR Strategy: Implications for HR Professionals,” In R. Padaki, N.M. Agrawal, C. Balaji and G. Mahapatra (eds.) Emerging Asia: An HR Agenda, New Delhi: Tata McGraw-Hill, 2005, pp. 215-223.
organisation to take deliberate actions to create capabilities. 4 The deliberate actions taken to create resources and capabilities spring from the functional strategies adopted by an organisation. Business Strategy and HR Strategy The American steel manufacturer, Nucor, is an excellent example of a company that has integrated its human resource strategy tightly with other functional strategies to create inimitable capabilities and drive competitive advantage. Nucor’s competitive advantage is based on cost leadership. It achieves this through all the four building blocks – efficiency, quality, innovation and responsiveness. At the base is a well-matched human resource strategy. Nucor hires goal-oriented, self -reliant people who are motivated by striving for continuous improvement that yields them increasing monetary compensation. 5 Since the production of quality steel depends on teamwork, workers within the plant are eligible for substantial incentives based on the output of their group. But, plant managers’ compensation depends not only on the performance of the plant they are managing, but of the company as a whole – this is to provide an incentive to transfer best practices and innovations to other parts of the organisation. To keep costs down, it has very few layers, all managers travel by economy class, and even frequent flier miles are used by the company. Nucor builds small plants, close to...
