Business Strategy and HR Management


The principle of matching the overall strategy of the firm with its social and personnel policy is an axiom of modern management. The determination of parameters of the optimal balance between the business strategy of the firm and its personnel policy, in fact, allows achieving maximum efficiency in both parameters (Stewart & Brown 2009).

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At the same time, along with the interest in human resources policy (social relations within the firm), recently there has been growing attention to the parameters of social responsibility of business conducted by firms and the relationship with the social environment. Analysis of the literature suggests the existence of two complementary approaches to the description of the relationship between the strategy and social and personnel policies of the company, “strategic fit” and “strategic stretch” (Ansoff 2007).


The idea of the alignment strategy of the firm and its social and personnel policy was launched in the early 1980s by members of the Michigan school. The social and human resources policy is used here as a means of gaining one of the most important types of strategic resources of the firm, which are abilities and skills of employees (Kearns 2003). The meaning of strategic fit is the “natural” ratio between the individual parameters of the company’s strategy (objectives, competitive position, the intensity of product innovation) and elements of social and personnel policies (such as organizational climate, motivation and control systems, in-house communication parameters, and so on). The most effective options are provided in the work of R. Schuler and S. Jackson. The model of the strategic fit has been actively used for the past 15 years. As a result, the structure of the strategic fit was perceived as a complex multi-level model, which can be optimized by means of the organizational development. However, in the early 1990s, the model of the strategic fit was a matter of serious criticism. Back in 1993, Hamel and Prahalad pointed out that the disparity between resources and goals leads not only to innovation in products and services, but also to the search for more economical ways of organizing major functions. Thus, the approach of the strategic stretch does not reject the whole idea of ??the optimal organization, but draws attention of managers to the availability and adequacy of sub-optimal solutions. The approach of the strategic fit supplemented by the idea of the strategic stretch was adopted by G. Hamel and Prahalad K. as the main theoretical paradigm (Boxall & Purcell 2003).

The problem of the relation between business strategies of enterprises and social and personnel policy is traditionally studied in two dimensions (on the basis of the most important works written in accordance with generally accepted methodological standards):

  1. social aspects of the restructuring of enterprises;
  2. relations within enterprises in the implementation of strategies.

If the first approach is based on microeconomic tools (econometric methods) and analyzes mostly complex processes, the second approach is based on ethnographic tools (qualitative monographs) and analyzes the social dynamics at the level of small and medium-sized groups. There are four possible assumptions: HR strategy depends on the business strategy; business strategy depends on human resources strategy; human resource strategy and business strategy is not dependent on one another; and human resources strategy and business strategy are determined interactively), with the last one being the dominant assumption (Schuler & Jackson 2007).

It is possible to move from the descriptive to the appraised characteristics of the business strategy and human resources policy of the firm in terms of strategic fit and situational fit. More importantly, this approach allows separating the quantitative parameters of the personnel system of the firm (sources of recruitment, employee turnover, promotion policy) and substantive parameters of the state of the resource block (the absolute and relative level of staff skills, the type of inner climate, and so on). On the basis of this approach, it is possible to create the first quantitative model of the relationship, the overall strategy of the firm and its personnel policy and perform the first cross-national comparisons (Baye 2006). An attempt to carry out a similar analysis showed a significant resolution of the proposed model. At the same time, it became clear that the specific personnel system of the construction industry is often not as important as national (country) features. In addition to descriptive studies, the results of a theoretical synthesis allowed formulating a regulatory framework harmonization of the HR policy and business strategy at the level of an individual firm.

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A determining factor in the choice of the personnel policy is the strategy (concept) of the company as the industrial and economic system. Moreover, successfully chosen and implemented personnel policies contribute to the implementation of the strategy itself. The constituent parts of this strategy are:

  • production activities of the company: the reorganization of the production in relation to the demand for its products;
  • financial and economic: the possible involvement of monetary resources in the production and consequently the development of the labor force;
  • social activities associated with meeting the needs of the enterprise personnel.

Each of the parts has a direct impact on the personnel policy, as it determines the financial resources for the company’s recruitment and workers who need to be taken into account. The organizational forms of the construction and development of the production activities of the enterprise are manifold (Jeyarathnam 2008).

As it is known, there are three basic strategic directions:

  1. the production of products with the lowest possible cost. This direction is acceptable in the production of consumer goods (Sadler 2003). Although it is associated with the investment in new equipment and technology, it contributes to achieving maximum benefit from cost savings, including labor costs and investments in workforce development;
  2. diversification. This is the focus on diverse consumer demands and the production of goods with a specific design and unique quality characteristics. Higher prices for such products can offset the cost of attracting qualified personnel or training;
  3. focus on specific niche markets. These can be markets in different geographical areas or the output for specific groups of customers. Selecting this option makes almost no difference in the staffing of the production.

The relationship between the enterprise development and the human resource policy is revealed in the classification of strategies, taking into account situational factors (Nankervis 2010). Most of the top executives say that the strategy of human resource management is an integral part of the overall strategy of the organization. However, in practice, there are different options for their interaction:

  1. The most common is the idea of the HR strategy as a dependent derivative of the strategy of the organization as a whole. In this situation, workers must adapt to the decisions of the organization’s leaders, which will contribute to the overall strategy.
  2. The overall strategy of the organization and the personnel management strategy are designed and developed as a whole, which means the involvement of experts in the HR department of the strategic objectives at the corporate level. This is facilitated by the presence of their high competence and, consequently, the ability to independently solve problems related to the staff, from the perspective of the entire organization.


Therefore, the strategy of human resource management involves methods and procedures for analyzing the feasibility of the general long-term objectives in terms of the ability of the personnel to achieve long-term goals.