Aligning Business Strategy and Hr Policy

Aligning business strategy and HR policy

Organizations determine their HR policies as per three overall strategic objectives: effectiveness, predictability, and flexibility. However, companies decide on their HR strategy based on the goals matching the overall business strategy, and then implement the HR policies that match these objectives accordingly (Bamberger, Biron & Meshoulam, 2014). Many approaches were presented and developed that focus on the alignment of HR policies and business strategy.

There have been differences in two approaches as part of the Theory-Driven Models: resourced-based and control. In the resource-based approach, employers follow the internal labor market strategy where they see their employees as assets that exchange job security and advancement with acceptance of compensation as per the internal equity instead of the external labor market. This approach focuses on the employment relationship between employers and employees. However, the external labor market is characterized by giving market-based compensation to employees who are seen as a form of expense rather than an asset by using the employee control approach. In this approach, employers focus on organizational control and monitoring employee performance (Bamberger, Biron & Meshoulam, 2014). I think that HR policies are affected by the choice of approach whether resourced-based or control which is reflected in the organization’s strategy in the first place. First, compensation and benefits policies will focus on the external labor market in the control approach whereas policies will concentrate more on retaining internal employees by providing them with tangible and intangible benefits (empowerment, promotions, job enrichment or enlargement)they require. I prefer to use the resource-based approach since employees will be more motivated and will perform better once they feel that they are valued and that company. It all depends on the company’s strategy.  If the company value HR and trust in its function, the strategy will be reflected in HR policies that are relative to the resource-based approach.  Furthermore, there is no correct approach as HR strategies vary among companies and between the two approaches of control and resource-based; therefore, HR strategy should be studied to see if it matches the business strategy and company circumstances (Bamberger, Biron & Meshoulam, 2014).

I can also relate to the Three-Dimensional People Strategy presented by Gratton & Truss (2003).  The three dimensions are represented by vertical alignment, horizontal alignment, and action.  First, the vertical alignment is characterized by the alignment of business goals with people strategy. Second, the horizontal alignment is represented by the alignment between HR policies and people strategy that is happening internally. Third, action is represented by how much the HR policies are being implemented and accepted and reflected by employees and management. Gratton & Truss’s (2003) research showed that there is a lot of difference in choosing and applying the three dimensions as each company has its unique way of determining what approach to follow. I think that all three dimensions complement each other where the focus should be on the proper alignment and implementation of all dimensions with HR strategy.  The company should ensure the alignment of HR strategy with the business strategy and then make sure that is translated into the HR policies that should be relevant to employees and management values. Gratton & Truss (2003) used the example of Citibank in 1997 which created a successful and strong horizontal alignment across policies that made significant positive changes concerning performance by following a new process that detects strengths and weaknesses. However, that same process wasn’t used by line managers so few employees thought that process is accurate (Gratton & Truss, 2003). Therefore, applying one dimension is not enough, and even successful approaches can fail if they were just ink on paper without their proper implementation and acceptance from employees and managers.