The importance of Porter's model in HR strategy
Michael Porter’s Five Forces Model plays a pivotal role in shaping how HR professionals approach their strategic responsibilities. By encouraging a thorough analysis of external pressures—such as industry competition, the threat of new market entrants, and the bargaining power of suppliers and employees—HR leaders can better understand the broader landscape in which their organization operates.
This strategic awareness is crucial when making decisions about recruitment, retention, and workforce planning. For example, in a highly competitive industry, attracting and retaining top talent becomes not just a goal but a strategic imperative, requiring HR to develop innovative talent acquisition and retention strategies that align with the company’s competitive position.
Incorporating Porter’s model into HR strategy enables professionals to anticipate and mitigate risks associated with external market forces. This proactive approach ensures that HR policies and practices are not only reactive to immediate challenges but also forward-looking, positioning the organization to navigate future disruptions effectively. For instance, understanding the threat of substitutes, such as automation or gig work, allows HR to develop reskilling programs that prepare the workforce for shifts in industry demands. By aligning HR strategy with these external pressures, organizations can maintain a competitive edge through a well-prepared and adaptable workforce.
While Porter’s Five Forces Model offers a robust framework for external analysis, it is most effective when combined with other HR models that address internal dynamics. The Ulrich+ model, McKinsey’s 7-S Framework, Maslow’s Hierarchy of Needs, and the Competency Model each offer unique insights into different aspects of HR management.
By integrating Porter’s strategic insights with these complementary models, HR teams are equipped to drive not only immediate operational success but also long-term sustainable growth. This integrated approach allows HR to contribute meaningfully to the organization’s competitive strategy, ensuring that human capital is leveraged as a key asset in achieving business objectives. As a result, HR is not just a support function but a strategic partner that plays a crucial role in shaping the future of the organization, aligning talent management with the external and internal factors that define success in today’s complex business environment.
Here, we explore five essential HR models, with a special focus on Michael Porter’s work.
1. Michael Porter’s Five Forces Model
Michael Porter’s Five Forces Model is a powerful tool that helps organizations understand the competitive dynamics of their industry. Traditionally used in market analysis, it also provides valuable insights for HR strategy:
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Industry Rivalry: HR must consider competition levels when developing talent acquisition strategies. In fiercely competitive industries, retaining top talent becomes a priority.
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Threat of New Entrants: The ease of market entry affects HR strategies, particularly in employee retention and training. High turnover could leave an organization vulnerable to new competitors.
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Bargaining Power of Suppliers: In HR terms, this refers to the labor market. The availability of skilled workers influences salary negotiations and other employment terms.
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Bargaining Power of Buyers: Employees, as buyers of jobs, exert influence, particularly in skills-short markets. HR must adapt policies to attract and retain talent.
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Threat of Substitutes: This involves considering alternative employment models, such as gig work or automation, that could replace traditional roles.
Porter’s model encourages HR professionals to think strategically about external pressures and their impact on internal HR dynamics, especially in recruitment, retention, and workforce planning.
2. The Ulrich HR Model (Ulrich+)
The Ulrich HR Model, developed by Dave Ulrich, is one of the most widely adopted HR frameworks, dividing HR into four key roles:
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Strategic Partner: Aligns HR practices with business strategies to drive success.
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Change Agent: Facilitates organizational change, helping employees adapt.
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Administrative Expert: Focuses on efficiency and compliance.
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Employee Champion: Advocates for employee needs and concerns.
The Ulrich+ model is an evolved version, addressing the limitations of the original by enhancing HR’s strategic capabilities and integrating digital operations. It adapts to the growing need for HR to keep pace with rapid business transformations.
3. McKinsey’s 7-S Framework
McKinsey’s 7-S Framework focuses on seven interconnected elements critical to organizational success:
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Strategy: The overall plan for maintaining competitive advantage, with HR aligning talent management accordingly.
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Structure: The organizational hierarchy, optimized by HR for efficiency.
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Systems: The processes overseen by HR for smooth operations.
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Shared Values: Core organizational values, upheld by HR.
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Skills: Employee capabilities, developed through HR training programs.
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Style: Leadership approaches, influenced by HR.
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Staff: The workforce, managed by HR in terms of recruitment and retention.
This model aligns with Porter’s emphasis on integrating organizational resources with strategic goals.
4. Maslow’s Hierarchy of Needs
While not an HR model per se, Maslow's Hierarchy of Needs is vital for understanding employee motivation:
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Physiological Needs: Addressed by basic salary and working conditions.
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Safety Needs: Ensured job security and safe environments.
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Social Needs: Fostered by HR through relationships and a sense of belonging.
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Esteem Needs: Met by recognition and career advancement opportunities.
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Self-Actualization: Opportunities for personal growth and fulfillment.
HR professionals use this hierarchy to design benefits and engagement programs that meet employees' evolving needs.
5. The Competency Model
The Competency Model identifies the skills, knowledge, and behaviors required for effective job performance:
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Identifying Core Competencies: Essential skills and behaviors for success.
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Assessing Competency Gaps: Identifying where employees or teams need development.
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Developing Competency-Based HR Practices: Recruitment, training, and performance management systems based on competencies.
This model aligns workforce capabilities with strategic business needs, echoing Porter’s focus on aligning resources with competitive strategy.