Current Approaches to HR Strategies

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    Cornell University ILR School

    DigitalCommons@ILR

    CAHRS Working Paper SeriesCenter for Advanced Human Resource Studies

    (CAHRS)

    12-1-2003

    Current Approaches to HR Strategies: Inside-Outvs. Outside-In

    Patrick M. WrightCornell University, pmw6@cornell.edu

    Scott A. SnellCornell University, ss356@cornell.edu

    Peder H. JacobsenCornell University

    This Article is brought to you for free and open access by the Center for Advanced Human Resource Studies (CAHRS) at DigitalCommons@ILR. It

    has been accepted for inclusion in CAHRS Working Paper Series by an authorized administrator of DigitalCommons@ILR. For more information,

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    Wright, Patrick M. ; Snell, Scott A. ; and Jacobsen, Peder H. , "Current Approaches to HR Strategies: Inside-Out vs. Outside-In"(2003). CAHRS Working Paper Series. Paper 41.http://digitalcommons.ilr.cornell.edu/cahrswp/41

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    WWWW O R K I N GO R K I N GO R K I N GO R K I N G PPPP A P E RA P E RA P E RA P E R SSSS E R I E SE R I E SE R I E SE R I E S

    Current Approaches to HR Strategies:

    Inside-Out vs. Outside-In

    Patrick M. WrightScott A. SnellPeder H. Jacobsen

    Working Paper 03 22

    CAHRS / Cornell University187 Ives HallIthaca, NY 14853-3901 USATel. 607 255-9358www.ilr.cornell.edu/CAHRS/

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    Current Approaches to HR Strategies:Inside-Out vs. Outside-In

    Patrick M. Wright

    Scott A. Snell

    Peder H. Jacobsen

    All of:

    Center for Advanced HR StudiesSchool of Industrial and Labor Relations

    Cornell UniversityIthaca, NY 14853-3901

    December 2003

    http://www.ilr.cornell.edu/cahrs

    This paper has not undergone formal review or approval of the faculty of the ILR School. It isintended to make results of Center research available to others interested in preliminary form to

    encourage discussion and suggestions.

    Most (if not all) of the CAHRS Working Papers are available for reading at the CatherwoodLibrary. For information on whats available link to the Cornell Library Catalog:

    http://catalog.library.cornell.edu if you wish.

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    Executive Summary

    In an effort to determine the best practices with regard to Human Resource (HR)

    strategies, we conducted interviews with HR executives knowledgeable about their HR

    strategies from 20 companies, and gathered archival materials such as the HR strategy

    documents from 9 of the companies. We found that the content, process, and evaluation of the

    HR strategies can each be classified as focusing primarily on the HR function, the people of the

    firm, or the business. We provide some examples of ways that firms can move from an HR-

    focused to a business-focused HR strategy.

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    Current Approaches to HR Strategies:Inside-Out vs. Outside-In

    In 1985, Golden and Ramanujam studied 10 firms in order to assess the linkage

    between HR and the business. They focused on structural/process-related issues and

    described 4 types of linkage. The Administrative Linkage described the situation where the HR

    function was completely divorced from the strategy of the business. Under the One-way

    linkage, top managers provided the HR function with the business strategy and the function was

    then expected to develop practices and processes to help implement the strategy. Firms

    exhibiting the Two-way linkage saw the HR function providing information to the top

    management to be considered in their development of the business strategy. Then, the strategy

    was handed back to HR to help implement. Finally, the most advanced linkage was the

    Integrative linkage where the senior HR executive was part of the top management team, and

    was able to sit at the table and contribute during the business strategy development. These

    authors found that of the firms in their study, 1 fell into the Administrative category, 4 into the

    One-way, 4 into the Two-way, and 1 into the Integrative category.

    A few years later, Buller (1988) followed up this study using the same categorization

    scheme as Golden and Ramanujam (1985). On a slightly positive note, he found that 0 of the 8

    firms in his study fell in the Administrative linkage category, with 3, 3, and 2 falling into the One-

    way, Two-way, and Integrative categories, respectively. In the ensuing years, numerous studies

    have examined the relationship between how well integrated HR is with the business strategy

    and business performance (c.f., Bennett, Ketchen, & Schultz, 1998; Huselid, 1993; Martell &

    Carroll, 1995; Wright, McMahan, McCormick, & Sherman, 1998). In addition, numerous books

    have been written to provide HR executives guidance with regard to how to better integrate HR

    and strategy (c.f., Becker, Huselid, & Ulrich, 2001; Ferris, Butler, & Napier, 1991; Greer, 1995,

    Ulrich, 1998; Walker, 1992).

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    Surely, almost 20 years and numerous books and articles later, the field of HR has

    developed a much more tightly integrated structure and is much more highly involved in the

    development and implementation of business strategy than it was in the early 1980s. Or has it?

    The purpose of this study was to assess the current state of the art and current best practices

    in the development and implementation of HR strategies. By conducting interviews with HR

    executives knowledgeable about their HR strategies and examining some of the HR Strategy

    documents themselves, we were able to both differentiate those HR functions that seemed to

    be most integrated with the needs of their businesses, and identify some of the processes and

    structures that enable HR functions to become better integrated.

    Method

    The research presented here was conducted through the Center for Advanced Human

    Resource Studies (CAHRS) in the School of Industrial and Labor Relations at Cornell

    University. CAHRS is a research partnership between 50 to 55 corporate sponsorsiand the

    faculty and students in the School of ILR. The corporate sponsors are all Fortune 500

    companies, representing a variety of industries; most are well-known multinational firms.

    CAHRS has traditionally developed and maintained a best practice file to make available

    to students for classroom use. These files are developed by asking the sponsor companies to

    share, across 35 different HR topic areas, any documents that provide examples of what they

    consider to be some of their best practices. Students can then access these files to find

    examples of how companies have implemented programs in areas such as performance

    management, diversity, leadership development, etc. for their class projects.

    During 2002, the development of the best practice file differed. Instead of only asking for

    mailed-in documents, we chose to focus on 3 areas in considerably greater depth. In a survey

    of our sponsor companies, they indicated that the greatest need for best practice information

    was in the areas of HR Strategy, Leadership Development, and E-HR. This paper presents the

    results with regard to the HR Strategy benchmarking study.

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    We invited any of the sponsor companies that felt they were companies that could be

    considered best practice companies to provide someone knowledgeable about the development

    of their HR strategy to submit to a one-hour interview. Twenty companies agreed to participate.

    As can be seen in Table 1, these were predominantly large, multinational, Fortune 200

    companies. They had an average employment base of 76,000 (median = 35,700), ranging from

    under 10,000 to over 300,000 employees. The table also lists the title of the individuals who

    submitted to the interviews, and suggests that these individuals held positions in which they

    should have in-depth knowledge of their companies HR strategies.

    Table 1

    Company Characteristics and Participant Titles in the HR Strategy Best Practices Study

    Companys Industry Participant Title(s)2001

    RevenueEmployees

    (2001)

    Aerospace VP, Compensation & Benefits $15-30B 75K-150KChemicals HR Operations Lead $5-15B 10K-25KComputer HW, SW, Services Director, HR Communications $5-15B 10K-25KComputer HW, SW, Services Senior Director, HR S