The alignment of HR and business strategies and its relationship to effective organisational performance

Castro Christiansen, L. and Higgs, M. (2006) The alignment of HR and business strategies and its relationship to effective organisational performance (Henley Working Paper Series, HWP 0609) Henley, UK. Henley Business School, University of Reading

Abstract

One of the means for measuring the effectiveness of Strategic Human Resource Management (SHRM) is by looking at the link between HR strategy and business strategy. This paper explores how the alignment of HR strategy and business strategy relates to organisational performance. It addresses the core question, “Does the alignment of HR strategy and business strategy matter?”

The paper explores the arguments relating to the significance of achieving alignment between HR and business strategies. The proposition that alignment will lead to effective organisational performance is explained through an empirical study. Data was collected from 156 Danish managers working at the corporate, business and functional strategy levels. Miles and Snow’s theory of strategic typologies (defender, prospector, and analyser) (Miles and Snow, 1978) was used to operationalise business strategy. Their further work on strategic HR systems (Miles and Snow, 1984a) corresponding to these strategic types was used to operationalise HR strategy. The resulting combination of these strategies was used to represent the dynamics of fit (tight fit, minimal fit, and misfit) (Miles and Snow, 1994). Analysis of the data from this study indicated that variations in organisational performance are best explained by the tight alignment and the minimal alignment of HR and business strategies, whereas misalignment was not associated with organisational performance.

The study indicates the viability of using a combination strategy where dimensions from two or more “pure” strategies in a typology can be combined and effectively implemented. The minimal alignment group, consisting of organisations applying a combination of prospector or defender business strategy and analyser HR strategy and vice versa, had significantly higher levels of organisational performance than the misalignment group. This, in essence, manifests another important feature of alignment, that of flexibility. The methodological and sample limitations of the study are considered along with areas for further research based on the findings. Finally the implications for practitioners in terms of the role of HR in the strategic dialogue are briefly explored.

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Contributors

Author: M. Higgs

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