A good business strategy, one which is likely to succeed, is informed by people factors. One of the driving factors behind the evaluation and reporting of human capital data is the need for better information to feed into the business strategy formulation process.
In the majority of organisations people are now the biggest asset. The knowledge, skills and abilities have to be deployed and used to the maximum effect if the organisation is to create value. The intangible value of an organisation which lies in the people it employs is gaining recognition by accountants and investors, and it is generally now accepted that this has implications for long term sustained performance.
It is therefore too simplistic to say that strategic human resource management stems from the business strategy. The two must be mutually informative.
a) The way in which people are managed, motivated and deployed, and,
b) the availability of skills and knowledge will all shape the business strategy.
It is now more common to find business strategies which are inextricably linked with and incorporated into strategic HRM, defining the management of all resources within the organisation. Individual HR strategies may then be shaped by the business strategy.
So if the business strategy is about improving customer service this may be translated into training plans or performance improvement plans.
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