A BRIDGE BETWEEN HR AND BUSINESS STRATEGIES
The framework presented can be used by TMTs to first identify the perspective they deem most applicable to their company and its environment. It can then be used to define a corresponding HR strategy. HR management must then decide which HR practices would be most effective in achieving the objectives of the HR strategy. In this section, we show how HR practices can be aligned with (corporate) HR strategy by using subfunctional HR strategies. In addition, the set comprising HR strategy, functional HR strategies, and HR practices, is linked to different business strategies. This provides HR professionals with hands-on action plans that bridge HR and business strategies.
Latticed HR Strategies: Vertical and Horizontal Alignments
Although companies usually have one (corporate) HR strategy, they are likely to have multiple functional HR strategies since the HR department is typically divided into functions such as compensation and staffing. However, a challenge is that it is difficult to find companies that explicitly delineate (corporate) HR strategy, functional HR strategies, and HR practices. We argue that it is important for HR professionals to do so as this facilitates the alignment of practices corresponding to different types of HR strategies. By aligning functional HR strategies with (corporate) HR strategy (i.e., vertical alignment), horizontal alignment among functional HR strategies will naturally follow. We believe this to be one of the benefits of having an explicit (corporate) HR strategy. Moreover, since HR practices are driven by functional HR strategies, the vertical alignment of functional HR strategies with HR strategy is a key to facilitating SHRM. Horizontal consistency among functional HR strategies is also crucial in assisting SHRM since this enables HR practices under each functional HR strategy to be aligned with (corporate) HR strategy, which is linked with to business strategy and the strategic management perspective the TMT deems most applicable to their firm.
Although there might be controversy about how to categorize HR functions, we identify five such functions: training and development, compensation, labor relations, performance management and staffing. A typology of HR strategies and functional HR strategies is presented in Figure 7.2. According to this typology, the agency/transactions cost perspective would, for example, correspond to a functional HR strategy for training and development characterized as follows: "Tailored training and development based on exact job analysis." The compensation strategy might be characterized by the statement, "Hierarchical pay differences based on pay for performance." Moreover, it is likely to lead to "combative" labor relations. For performance management, the strategy might reflect "extensive
Figure 7.2. Blueprint: Bridging HR and Business Strategies
performance management with management by objectives." Finally, a possible strategy for the staffing area might be "promotion based on rules and selection based on skills." The figure also shows how each HR function can be vertically aligned with one of the four strategic perspectives.
This typology offers the TMT latticed HR strategies (corporate HR strategy and functional HR strategies) given strategic management perspectives. In the next section, we show how TMTs can connect the latticed HR strategies into business strategies.
Many management scholars argue that organizations should adopt coherent and distinctive strategies, and adapt their internal characteristics to reflect these strategies.33 This contingent perspective implies that sets of HR strategies and practices should be tailored to the business strategy.34 Although one researcher lamented 20 years ago that there is still no single commonly accepted set of strategies upon which recommendations for "matching" can be based,35 it remains difficult to find generic business strategies with which HR sets should be aligned. We believe this reflects the difficulty inherent in categorizing actual business strategies. In this section, we briefly overview two widely known typologies of generic business strategies, and suggest which strategies match with our framework of strategic management perspectives and HR strategies.