The Relationship Between Human Resource Practices And Business Strategy In A Business Organization

The relationship between human resource practices and a company’s business strategy are aligned in many ways. The ultimate goal of the alignment is to use human capital as instrument to maximize the organization assets for the benefit of the stakeholders. Below are some of the relationship between human resource practices and business strategy.


Human resource practices create the process for the development of employees’ knowledge and the skill-set across the organization to promote its core competencies that support and maintain its competitive advantage in the industry. The term “strategic HRM” is the new template in the management of modern organization that is anchored on the concept that the most valuable asset an organization provides itself is HR, since it is the tool that is responsible for the coordination and implementation of other factors of production that spurs corporate performance journals

The business strategy adopts by an organization is meant to showcase how it intend to succeed by using the factors of production at its disposal to build a competitive advantage, strategy-business. Business strategy helps to identify the direction that the organization wishes to go in relation to its environment. Human resource strategies manage human resource so that the goals set by the organization can be achieved. The focus is directed on what the business intentions are as they relate to human resource policies and practices. Therefore, how human resource is spread across the organization’s units and departments, motivated, managed and retained will affect the performance outcome after the business strategy has been implemented. The relationship between business strategy and human resource practices also would determine the organization competitive and performance outcome.

A glimpse into Oya Erdil & Ayse Gunsel’s ‘BUSINESS STRATEGY AND HUMAN RESOURCE STRATEGY- THE INTERACTION’ shows there is a relationship between human resource management practices and an organization business strategy, which also could be referred to as the business environment and organizational development. Another defining aspect of that relationship is the across the board acceptance that an organization’s human resource management practices have a link to the firm’s decision making process, in other words, the HR practices be closely aligned with the strategy of the whole business. While there is not much disagreement as pertaining to the relationship between HR practices and business strategy, there is a tendency not to acknowledge the deeper nature of the relationship. The theory of human resource management opined that should employees be considered and managed as a valued strategic asset, the organization in practice would be able to achieve a competitive advantage, and the outcome will be a superior performance. This again, means managing human resource in such a way that it will correspond to the business strategy, being that the goals and process of each of the strategy profiles are different.

According to Oya Erdil & Ayse Gunsel, this relationship is further entrenched when you look at how human resource practices are selected based on competitive strategy espoused by the organization. An organization that coordinates its business strategy and human resources policies and practices achieve a superior performance outcome than those that do not.


As explained by Rob Gray’s ‘Aligning performance management with business strategy,’ some employers could be missing the key factor that links performance management to strategy and culture. For it is an organization’s prevailing culture and practices that will determine the optimum use of its valuable asset (human beings) when its business strategy is aligned with its human resource practices. The right tools are needed if employers are to succeed in aligning their human resource management to its business strategy. The era of using performance review and appraisal as the only tools for performance, management solutions have since been replicated by a complete suite of competency measurement tools. These tools are able to assist employees to understand the means and learning resources through which they can effectively develop their skills and talent. Technology is one of the enablers but needs commitment from top down that is important for a high performance culture.


Edward E. Lawler lll’s, ‘What should HR Leaders Focus On In 2014’ gives a deep insight into how business entities could achieve a superior outcome for their shareholders. While technology is a valued enabler that spurs performance leading to superior outcome for an organization, another thing that should be a thing of focus for HR is the aspect of talent management that assesses the necessary skills every organization needs to implement its business strategy, the plan for recruitment and the management of critical talent. Even though, talent has long been determined to be important, it is of recent becoming more so given that many businesses are performing knowledge based work that is more complex, and with operations in the global markets. This has led to the situation of performance talent having a great impact on the organization’s bottom line. Google, Amazon, Apple, and other techs and service organizations have done a tremendous job of recruiting and managing people around the world that have the needed critical knowledge based skills. Their talented workforce have been able to perform well, differentiate their companies from competitors across industries which have translated to a pattern of communication that relays their type of employees and the jobs they offer.


Innovation is another standard of performance management,, that when effectively coordinated with an organization business objectives lead to a superior performance outcome. When an organization devote a substantial amount of time to innovation and business strategy, and both are valued equally, promoted across the board, and well communicated, a culture would exist naturally which will foster a relationship of the two. The fostered culture creates a top down business objectives that are communicated across the board in the organization, that enable all units to focus in addressing the organization’s short and long-term goals. From then, it becomes the innovators’ task to forge an alignment of their activities in support of the organization’s goals. The various ways to naturally coordinate both camps is the joint development of technology/product, and business road maps that encourage discussion and debate, forging links that guides actions. Successful performance outcome are highlighted through internal business and fairs, using the avenue to raise visibility for long term opportunities.


Diversity in an organization plays a significant role in forging a link between performance management and business strategy. There is a business case for diversity in the organization based on the evidence and arguments that both believe that when diversity is leveraged in an organization, it can contribute to the achievement of the company’s goals and priorities. To understand the relevance of diversity to the attainment of business objectives, the type of diversity under consideration has to be relevant to business performance and innovation

Formulation Of Human Resources Strategy

The formulation of the organization’s human resources strategy begins with basic questions concerning how employment will be structured, what corporate culture will be fostered, how careers will unfold in the organization, what sort of employees will be sought, and so forth. Within this general category of tasks we include both organization-wide human resources strategy and the tailoring of that strategy to specific business units, regional units, functions, or divisions.

Especially important in terms of organization-wide strategy are answers to the questions: How consistent should human resources policies and practices be throughout the enterprise? Where are distinctions in policies and practices (across locales or employee subgroups) desirable? How much latitude should particular organizational units be given in formulating their own human resources strategies?

After the broad outlines of strategy have been set, questions about general policies arise, such as: What will be the broad base of compensation and performance management throughout the organization or in particular units? What tasks will be outsourced, and will the outsourcing be done via labor contractors or independent contractors? What training will be done in-house, and what will be outsourced, and to whom? It is hard to draw a line between strategy and policy, and we will not make any attempt to do so: In this category we will include any human resources related activity that sets rules for the management of human resources that apply broadly to groups of employees.

Formulating strategy and general policies, it seems to us, is a managerial task of the utmost importance. It is fraught with ambiguity; there is no checklist of what to do or what to think about. The outcomes are noisy-how do you know if you’ve succeeded? Results often take a long time to be realized. Interdependencies with other parts of business strategy are tight.

At the same time, dependence on local environmental conditions can be important, so the local environment must be well understood by those who formulate human resources strategy and policies. Finally, the tasks here strongly mix guardian and star elements. Poorly aligned or inconsistent human resources policies and practices can be devastating for an organization. At the same time, the ability to see beyond conventional wisdom, to put together a human resources system that works especially well, is as potent a competitive weapon as one can imagine.

– Implementation of Strategy and Policies. In this category we have in mind tasks that involve nontrivial judgment in fitting general policies and procedures to specific cases. Performance evaluation of individuals and teams, crafting job designs, decisions on whom to hire (and where specifically to look, although this could be construed as part of policy formation), decisions on whom to promote, decisions on training for individuals, specific layoff decisions, and the like all fit here.

Ambiguity in these tasks is not particularly high if a well-formed set of human resources policies and practices is in place; however, outcomes are noisy and feedback can be substantially delayed. Interdependencies with other parts of the business can be substantial; decision-makers should have a fairly well-developed “big picture” of the organization or, at least, of the specific function involved. Because of reputation and social comparison effects, these tasks are predominately guardian roles, although especially when it comes to recognition of talent and accurate placement of individuals, some star aspects are involved.

– Record Keeping, Compliance, and Personnel Service Delivery. Here we have in mind those tasks that, unfortunately, have come to dominate many line managers’ perceptions of what the human resources Department does: compliance reports; keeping employee records; filling out forms for benefits and payroll; and so forth, on down to buying the beverages and pizza for the regularly scheduled employee beer blast.

There isn’t a lot of ambiguity here and performance is fairly easily monitored. The job is a mix of some guardian and mainly foot-soldier tasks: Screwing up compliance reports can get the firm in trouble with legal authorities, and a bad benefits office can reduce employee morale pretty quickly, but management that isn’t completely asleep or complacent can usually avoid the big disasters in this realm.

This enumeration of the tasks involved in doing human resources management helps clarify a root problem with how human resources is traditionally organized. In the traditional organization, this bundles together all these tasks, a small fraction of the activities account for a huge proportion of the value added by the function, by creating potential upside and/or helping the organization avoid downside disasters. In contrast, most of the activities conducted, measured by time expended or paper consumed, are the routine foot-soldier tasks, perceived as adding little value by managers and employees. Complying with rules and filling out forms imposed by central human resources regarding job searches, performance appraisal, or compensation and benefits – or being required to have a human resources representative present during a sensitive conference with a subordinate are frequently not viewed as helping matters very much. And employees, once they are hired, often interact with the human resources department only when they have a problem or concern, so they may not have an especially positive view of the function either.

In any event, it is not altogether surprising that a function that is perceived as responsible for explaining benefits programs, processing change-of-address forms, complying with governmental regulations, and enforcing policies that limit managers’ discretion on how they can treat employees-or that is touted as the “conscience” or “kinder, gentler side” of the corporation-is unlikely to be viewed as a hard-charging, tough-minded, strategic business partner.

In addition it’s easier to measure how well the human resources department is doing in terms of filling out forms and delivering routine services; it’s a lot harder to measure how well it does at formulating and implementing a human resources strategy.