LEVELS OF STRATEGIC DECISION-MAKING

Ideally, the formulation of HR strategies is conceived as a process, which is closely aligned to the formulation of business strategies. HR strategy can influence as well as be influenced by business strategy. In reality, however, HR strategies are more likely to flow from business strategies, which will be dominated by product/market and financial considerations. But there is still room for HR to make a useful, even essential contribution at the stage when business strategies are conceived, for example by focusing on resource issues. This contribution may be more significant if strategy formulation is an emergent or evolutionary process – HR strategic issues will then be dealt with as they arise during the course of formulating and implementing the corporate strategy.


Adistinction is made by Purcell (1989) between:

● ‘upstream’first-order decisions, which are concerned with the long-term direction of the enterprise or the scope of its activities; 

● ‘downstream’ second-order decisions, which are concerned with internal operating procedures and how the firm is organized to achieve its goals; 

● ‘downstream’ third-order decisions, which are concerned with choices on human resource structures and approaches and are strategic in the sense that they establish the basic parameters of employee relations management in the firm.

It can indeed be argued that HR strategies, like other functional strategies such as product development, manufacturing and the introduction of new technology, will be developed within the context of the overall business strategy, but this need not imply that HR strategies come third in the pecking order. Observations made by Armstrong and Long (1994) during research into the strategy formulation processes of 10 large UK organizations suggested that there were only two levels of strategy formulation: 1) the corporate strategy relating to the vision and mission of the organization but often expressed in terms of marketing and financial objectives; 2) the specific strategies within the corporate strategy concerning product-market development, acquisitions and divestments, human resources, finance, new technology, organization, and such overall aspects of management as quality, flexibility, productivity, innovation and cost reduction.