PART ONE INTRODUCTION C H A P T E R T T h r e e Strategic Human Resource Management and the HR Scorecard 3 Lecture Outline Strategic Overview HR’s Strategic Challenges The Strategic Management Process Types of Strategies Achieving Strategic Fit HR and Competitive Advantage Strategic Human Resource Management HRM’s Strategic Roles The Strategy Execution Role HR’s Strategy Formulation Role Creating a Strategic HRM System The High- Performance Work System Translating Strategy into Policy and Practice HR Strategy in Action: An Example Appendix B: Using the HR Scorecard Approach Creating an HR Scorecard The 10-Step HR Scorecard Process The Hotel Paris International: An Example The HR Scorecard: Improving productivity through HRIS In Brief: This chapter explains how to design and develop an HR system that supports the company’s strategic goals. It explains the strategic management process, how to develop a strategic plan, and the HR manager’s role in the process of strategy execution and formulation. It discusses how to create a strategy oriented HR system and reviews the HR Scorecard approach to creating such a system. Interesting Issues: The Human Resource function today continues to play an increasingly visible role in the strategic planning and management process, requiring a new level of skill and competency among HR professionals. HR managers must develop measureable strategies that convincingly showcase HR’s impact on business performance. Successful Human Resource managers have adopted a perspective that focuses on how their departments can play a central role in implementing the firm’s strategy. ANNOTATED OUTLINE I. HR’s Strategic Challenges I. A strategic plan is the company’s plan for how it will match its internal strengths and weaknesses with external opportunities and threats in order to maintain a competitive advantage. The HR strategy needs to support the company’s strategic plan. In formulating their HR strategies, HR managers must address three basic challenges: 1) support corporate productivity and performance improvement efforts; 2) employees play an expanded role in employers’ performance improvement efforts; 3) HR must be more involved in designing – not just executing – the company’s strategic plan. A. The Strategic Management Process: Strategic management is the process of identifying and executing the organization’s mission, by matching the organization’s capabilities with the demands of its environment. It consists of several related tasks: 1. Define the Business and Its Mission – Managers choose strategies to get the company from where it is to where it wants to be tomorrow. The company’s vision is a general statement of its intended direction that evokes emotional feelings in organization members. The mission is more specific and shorter term, communicating “who we are, what we do, and where we’re headed” 2. Perform External and Internal Audits – SWOT analysis is a commonly used tool that identifies the company’s strengths and weaknesses, opportunities and threats. 3. Translate the Mission into Strategic Goals – Operationalize the mission by getting specific around goals. 4. Formulate a Strategy to Achieve the Strategic Goals – A strategy is a course of action, showing how the enterprise will move from where it is now to where it wants to be as stated in its vision, mission and strategic goals, given its opportunities, threats, strengths and weaknesses. 5. Implement the Strategy – Translating the strategies into actions and results. 6. Evaluate Performance – Assessing progress toward strategic goals and taking corrective action as needed. Strategic control keeps the company’s strategy up to date, and identifies where adjustments need to be made B. Types of Strategies– Managers have three levels of strategic planning. 1. Corporate-level strategy – Identifies the portfolio of businesses that comprise the company and the ways in which these businesses related to each other. Diversification, vertical integration, consolidation and geographic expansion are all examples of corporate level strategies. 2. Business-level/competitive strategy – Identifies how to build and strengthen the business’s long term competitive position in the marketplace. Companies try to achieve competitive advantages for the business they are in, which allow them to differentiate its product or services from those of its competitors to increase market share. Examples of competitive strategies include cost leadership and differentiation. 3. Functional strategies - identify the basic course of action that each department will pursue in order to help the business attain its competitive goals. When You’re On Your Own: Using Computerized Business Planning Software. There are several business planning software packages available to help the small business owner write top-notch strategic and business plans. C. Achieving Strategic Fit Strategic planning experts have different views on fitting capabilities to the opportunities and threats vs. stretching beyond capabilities to take advantage of an opportunity. 1. Fit - The “fit” point of view, as purported by Michael Porter, states that all of the firm’s activities must be tailored to or fit its strategy by ensuring that the firm’s functional strategies support its corporate and competitive strategies. 2. Leverage - Other strategy experts Hamel and Prahalad argue for “stretch”, suggesting that leveraging resources can be more important than just fitting the strategic plan to current resources. They believe there are times when a manager must underplay the company’s weaknesses and capitalize on some core company strength. D. HR and Competitive Advantage In order to have an effective competitive strategy, the company must have one or more competitive advantages. Technology itself is rarely enough to set a firm apart as most companies today have easy access to the same technologies, so that the real differentiation is people and the management system. E. Strategic Human Resource Management HR strategies refers to the specific courses of action the company pursues to achieve its aims. It means formulating and executing HR systems that produce the employee competencies and behaviors the company needs to achieve its strategic aims. ➢ NOTES Educational Materials to Use II. HRM’s Strategic Roles A. Introduction 1. Human Resources is increasingly assuming more strategic planning responsibilities and involvement in the process. Among their contributions to strategic planning are identification of human issues that are vital to the business strategic, helping to establish and execute strategy, and forecasting potential obstacles to success. HR Managers can provide alternative insights and are centrally involved in creating responsive and market driven organizations. 2. In order to play this role, HR managers need an in-depth understanding of the value creating proposition of the firm. B. The Strategy Execution Role Strategy execution is traditionally the heart of the HR manager’s strategic planning job. The company’s HR strategies should flow directly from its company-wide and competitive strategies. C. HR’s Strategy Formulation Role 1. HR increasingly plays an expanded strategic planning role, to include working with top management to formulate the company’s strategic plans. Formulating a company’s strategic plan requires identifying, analyzing, and balancing the company’s external opportunities and threats on the one hand and its internal strengths and weaknesses on the other. 2. HR Management is in a unique position to supply competitive intelligence useful in the strategic planning process, such as competitors’ incentive plans, pending legislation, and the company’s internal human strengths and weaknesses. 3. By working closely with top management, HR is able to build a persuasive case through a strategy-oriented HR system to shows how the firm’s HR activities contribute to creating value for the company. ➢ NOTES Educational Materials to Use III. Creating a Strategic HRM System A value-creating strategy-oriented HR process consists of three basic components which comprise what some experts refer to as a company’s basic HR architecture: 1) HR professionals who have the strategic skills required to build a strategy oriented HR system; 2) HR policies and activities that comprise the HR system itself; and 3) Employee behaviors and competencies that the company’s strategy requires that emerge from the actions and policies of the firm’s strategy-supporting HR system. A. The High Performance Work System – Managers and HR experts advocate that the HR system itself be a high-performance work system, maximizing the overall quality of human capital throughout the organization (ref. Table 3-1). 1. Evidence suggests that high performance HR practices, combined with new technology, produce better productivity, quality, sales, and financial performance. 2. The HPWS includes high-involvement organizational practices, high- commitment work practices, and flexible work assignments, as well as practices that foster skilled workforces and expanded opportunities to use those skills. 3. Measuring HR’s Contribution – Broad HR effectiveness measures, such as revenue per full time equivalent (FTE) employee are used to assess worker productivity. The Bureau of National Affairs annually publishes HR benchmarks and analyses listing industry wide metrics as a point of comparison for companies seeking such information. B. Translating Strategy into HR Policy and Practice – The basic model of how to align HR strategy and actions with business strategy is outlined in Figure 3-9. HR management formulates HR strategies, policies, and practices aimed at achieving the desired workforce skills, attributes, and behaviors. Metrics are identified which can be used to measure the extent to which new HR initiatives are supporting management’s strategic goals. C. HR Strategy in Action: An Example – This example illustrates how Einstein Medicals HR managers formulated and used HR strategies to execute strategic plans. The example explains how the vision to change the organization into a comprehensive healthcare network providing a full range of high-quality services in various local markets required numerous changes in the organization and human resources. Behavioral outcomes by the CEO from which HR developed five key HR strategies aimed at creating the required employee competencies, skills and behaviors. Specific programs and practices were then developed by HR which contributed directly to achieving the organization’s strategic aims. ➢ NOTES Educational Materials to Use IV. Appendix B – Using the HR Scorecard Approach HR creates value by engaging in activities that produce the employee behaviors the company needs to achieve strategic goals. Managers use an HR Scorecard to measure the HR function’s effectives and efficiency in producing these employee behaviors and thus in achieving the company’s strategic goals. The HR Scorecard shows the causal link between the HR activities, and emergent employee behaviors, and the resulting firm-wide strategic outcomes and performance. A. Information for Creating an HR Scorecard - Three types of information are needed to create an HR Scorecard. 1. Company strategy information 2. Causal links between HR activities, employee behaviors, organizational outcomes, and the organization’s performance 3. Metrics that can be used to measure HR activities, emergent employee behaviors, strategically relevant organizational outcomes, and organizational performance. B. The 10-Step HR Scorecard Process – There are seven steps involved in using the HR Scorecard to create a strategy-oriented HR system (see Figure 3-11) 1. Define the business strategy – In this step, management translates its broad strategic plans into specific actionable goals. 2. Outline the company’s value chain – Here the manager identifies the strategically relevant outcomes and required employee behaviors by identifying the value chain, which identifies the primary activities that create value for customers and the related support activities. The value chain is a tool for identifying, isolating, visualizing, and analyzing the firm’s strategic activities and strategic costs. This step allows managers to better understand the activities that drive performance in their company. 3. Outline a Strategy Map – A summary of the chain of major activities that contribute to a company’s success, the strategy map shows the “big picture” of how each department’s performance contributes to the achievement of company goals. 4. Identify the strategically required organizational outcomes – In order to achieve its strategic goals, every company must produce critical, strategically relevant outcomes. For example, “delivering new services” is an example of an organizational outcome. 5. Identify the required workforce competencies and behaviors – Competencies and behaviors such as personal accountability, working proactively, motivation, courteous behavior, and commitment drive organizational performance by producing strategically relevant organizational outcomes. 6. Identify the required HR system policies and activities – The question in this step is “what HR system policies and activities will enable us to produce those workforce competencies and behaviors?” The answer might include things like special training programs or changing the compensation plan. These policies and activities are often referred to as “HR enablers”, which create and make possible the HR ”performance drivers” – the workforce competencies and behaviors that produce the strategically relevant organizational outcomes. Once these enablers are identified, the next question that follows is, what specific form should these policies and activities take? How and to what end should systems and processes be changed? The HR system must be aligned with the company’s specific strategic needs. At this point, the HR manager must become precise about the actual form and design of the firm’s HR deliverables. 7. Create the HR Scorecard – In this step, the question is how are the organizational outcomes, workforce competencies and behaviors, and HR system policies and activities measured? Just a few sample measures for assessing HR performance drivers could be employee attitude surveys, employee turnover, level of organizational learning, employee productivity, percentage of retention of high performing key employees, number of hours of training employees receive every year, and percentage of the workforce routinely working in a self managed team. These types of measures allow the company to assess HR’s performance objectively and quantitatively, and also enable the HR manager to build a measurable and persuasive business case for how HR contributes to achieving the company’s strategic financial goals. 8. Choose HR Scorecard Measures – Find a balance of financial and non- financial goals, with both short and long-term foundations. 9. Summarize the Scorecard Measures in a Digital Dashboard – A digital dashboard usually presents information in a way that grabs management’s attention. It displays a “bird’s eye view” of how the HR function is doing. 10. Monitor, Predict, Evaluate - The HR Scorecard’s various measures will not always stay the same, and should be evaluated periodically to ensure they are still valid. C. The Hotel Paris International: An Example This example illustrates how the multi-step process for developing an HR Scorecard works. As a corporate strategy, the management and owners want to continue to expand geographically, believing that doing so will allow them to capitalize on their reputation for good service, by producing multi-city alternatives for guests. The challenge is that their reputation for good service has been deteriorating, thereby making the expansion strategy a risk since guest might actually prefer other hotels after trying the Hotel Paris. This example walks students through the steps involved in developing an HR management system. 1. The Strategy - The strategy chosen by management is to use superior guest services to differentiate their properties, and increase the length of stays and return rate of guests, thereby boosting revenues and profitability. 2. The Value Chain – Figure 3-12 outlines the value chain. Inbound logistics activities (getting guests from the airport and checked in, operations activities (cleaning the guest’s room); outbound logistics activities (picking up baggage), marketing and sales activities (attracting guests to the hotel), service activities (travel awards) and support activities (purchasing, information systems, HR). The question for the HR manager is “given our strategic goals, how can HR management help our hotel achieve its goals by adding value to each of the hotel’s core value chain activities?” 3. The Strategically Required Organizational Outcomes – the outcomes that the Hotel Paris is seeking includes fewer customer complaints, more written compliments, more frequent guest returns, longer stays, and higher guest expenditures per visit. 4. The Strategically Relevant Workforce Competencies and Behaviors – Based on the value chain analysis, competencies and behaviors identified are “high quality front-desk customer serivce”, “taking calls for reservations in a friendly manner”, “greeting guests at the front door”, and “processing guests’ room service meals efficiently”. 5. The Strategically Relevant HR System Policies and Activities – Here HR deliverables are identified to produce the crucial workforce competencies and behavior. For example, in order to produce “high quality front-desk customer service,”, an HR deliverable of instituting practices to improve disciplinary fairness and justice in the company with the aim of improving employee morale is identified. 6. The HR Scorecard – Metrics are selected to show the links among the HR activities, workforce behaviors and organizational outcomes. The Scorecard is illustrated in Figure 3-13. For example, metrics of grievance activitiy, scores on attitude surveys, and customer complaints are chosen for inclusion in the scorecard. Improving Productivity Through HRIS: Software Systems for Managing Scorecard Programs. The balanced scorecard does for the company as a whole what the HR scorecard does for the HR function. It is a management tool (usually a computerized model) that traces a multitude of performance measures simultaneously and shows their interactions across the company. The balanced scorecard includes multifunctional metrics that top management believes contribute to the company’s strategic success. ➢ NOTES Educational Materials to Use Teaching Tips – The Bureau of National Affairs website ( http://www.bna.com/surveys/calc.htm) has free calculators and tools available to assess a number of HR metrics, including Turnover Rate, Job Absence, HR Staff Ratio and Recruiting Efficiency Ratio. The website also outlines advantages to knowing how your organization measures up. Non-traditional students may work in organizations which have HR departments. Ask students to query their HR departments as to whether they use these ratios in their strategic planning process. Discuss these ratios and possible organizational uses for them. DISCUSSION QUESTIONS 1. What is the difference between a strategy, a vision, and a mission? Please give one example of each. A strategy identifies a course of action to get the company from where it is today to where it wants to be tomorrow. One example of a company’s strategy given in the text is Dell Computer’s strategy to be a “low cost leader” by using the Internet and phone to sell PCs directly to end users at prices competitors cannot match. A vision is a general statement of the company’s intended direction that evokes emotional feelings in employees. It is a “mental image” of a possible and desirable future state for the organization, and articulates a view of a realistic, credible, attractive future of the organization that is better than what now exists. For example, the vision for the California Energy Commission is “for Californians to have energy choices that are affordable, reliable, diverse, safe, and environmentally acceptable”. The mission is a more specific and shorter term statement which lays out what is supposed to be now, communicating “who we are, what we do, and where we’re headed”. Following the vision for the California Energy Commission, their mission is to “assess and act through public/private partnerships to improve energy systems that promote a strong economy and a healthy environment”. 2. Define and give at least two examples of the cost leadership competitive strategy and the differentiation competitive strategy. The cost leadership competitive strategy means that the enterprise aims to become the low-cost leader in an industry. For example, stores such as Staples and Office Max maintain their competitive advantage by selling large quantities of office products at low prices. Airlines such as Southwest offer low fares in addition to quick turnarounds at the gate. In a differentiation competitive strategy, firms seek to be unique in its industry along dimensions that are widely valued by buyers. For example, Ocean Spray Cranberries charges a premium price for their juices, stressing premium high quality ingredients. Visa differentiates itself by being accepted as a form of payment universally where other credit cards are not. 3. Explain how HR can be instrumental in helping a company create its competitive advantage. Human Resources is regarded in a growing number of organizations as a source of competitive advantage, through recruiting, selecting, retaining and developing human capital that enables organizations to compete on a number of different levels to be flexible, capable, and responsive, demonstrating creativity and innovation in order to produce products and services of high quality. 4. What is a high performance work system? Provide several specific examples of the elements in a high performance work system. High Performance Work Systems are characterized by high involvement organizational practices, (such as job enrichment and team- based organizations), high-commitment work practices (such as improved employee development, communications, and disciplinary practices), and flexible work assignments. The evidence suggests that companies that employ HPWS practices produce better productivity, quality, sales and financial performance. What makes the HPWS unique is the quality, quantity, and specific features of the HR policies and practices. Each element is designed to maximize the overall quality of human capital throughout the organization. Several characteristics of high performance work organizations include multi-skilled work teams; empowered frontline workers; more training; labor management cooperation; commitment to quality; and customer satisfaction. 5. Define what an HR Scorecard is, and briefly explain each of the ten steps in the HR scorecard approach to creating a strategy oriented HR system. The HR Scorecard is a concise measurement system that shows the metrics the firm uses to measure HR activities, measures the employee behaviors resulting from these activities, and measures the strategically relevant organizational outcomes of those employee behaviors. It highlights the causal link between the HR activities, and the emergent employee behaviors, and the resulting firm-wide strategic outcomes and performance. The ten steps involved in the HR scorecard approach are as follows: 1. Define the business strategy – In this step, management translates its broad strategic plans into specific actionable goals. 2. Outline the company’s value chain – Here the manager identifies the strategically relevant outcomes and required employee behaviors by identifying the value chain, which identifies the primary activities that create value for customers and the related support activities. The value chain is a tool for identifying, isolating, visualizing, and analyzing the firm’s strategic activities and strategic costs. This step allows managers to better understand the activities that drive performance in their company. 3. Outline a Strategy Map – A summary of the chain of major activities that contribute to a company’s success, the strategy map shows the “big picture” of how each department’s performance contributes to the achievement of company goals. 4. Identify the strategically required organizational outcomes – In order to achieve its strategic goals, every company must produce critical, strategically relevant outcomes. For example, “delivering new services” is an example of an organizational outcome. 5. Identify the required workforce competencies and behaviors – Competencies and behaviors such as personal accountability, working proactively, motivation, courteous behavior, and commitment drive organizational performance by producing strategically relevant organizational outcomes. 6. Identify the required HR system policies and activities – The question in this step is “what HR system policies and activities will enable us to produce those workforce competencies and behaviors?” The answer might include things like special training programs or changing the compensation plan. These policies and activities are often referred to as “HR enablers”, which create and make possible the HR ”performance drivers” – the workforce competencies and behaviors that produce the strategically relevant organizational outcomes. Once these enablers are identified, the next question that follows is, what specific form should these policies and activities take? How and to what end should systems and processes be changed? The HR system must be aligned with the company’s specific strategic needs. At this point, the HR manager must become precise about the actual form and design of the firm’s HR deliverables. 7. Create the HR Scorecard – In this step, the question is how are the organizational outcomes, workforce competencies and behaviors, and HR system policies and activities measured? Just a few sample measures for assessing HR performance drivers could be employee attitude surveys, employee turnover, level of organizational learning, employee productivity, percentage of retention of high performing key employees, number of hours of training employees receive every year, and percentage of the workforce routinely working in a self managed team. These types of measures allow the company to assess HR’s performance objectively and quantitatively, and also enable the HR manager to build a measurable and persuasive business case for how HR contributes to achieving the company’s strategic financial goals. 8. Choose HR Scorecard Measures – Find a balance of financial and non- financial goals, with both short and long-term foundations. 9. Summarize the Scorecard Measures in a Digital Dashboard – A digital dashboard usually presents information in a way that grabs management’s attention. It displays a “bird’s eye view” of how the HR function is doing. 10. Monitor, Predict, Evaluate - The HR Scorecard’s various measures will not always stay the same, and should be evaluated periodically to ensure they are still valid. DESSLER COMPANION WEB SITE We invite you to visit the Dessler homepage (http://www.prenhall.com/dessler) on the Prentice Hall Web site for the best online business support available. This site provides professors with a customized course Web site, including new communication tools, one-click navigation of chapter content, and great resources, such as Internet Resources, an HRCI Exam Prep Guide, assessment exercises, and more. INDIVIDUAL AND GROUP ACTIVITIES 1. With three or four other students, form a strategic management group for your college or university. Your assignment is to develop the outline of a strategic plan for the college or university. This should include such things as mission and vision statements, strategic goals, and corporate, competitive, and functional strategies. In preparing your plan, make sure to show the main strengths, weaknesses, opportunities, and threats the college faces, and which prompted you to develop your particular strategic plans. Look for students to prepare a well developed mission and vision statement, making sure that they are clearly differentiated from each other with the vision being future focused, articulating the desired state, with the mission supporting the vision, describing “who we are, what we do, and where we are headed”. Use this exercise as an opportunity to discuss the problems that may be created by not clearly the defining the mission, vision, as well as the strengths, weaknesses and opportunities and threats. 2. Using the Internet or library sources, analyze the annual reports of at least five companies. Bring to class examples of how those companies say they are using their HR processes to help the company achieve its strategic goals. In class, facilitate a discussion on how effective students believe the HR processes each company is using to support the strategic goals. Challenge students to come up with additional ideas for other approaches for using the HR processes and how they would go about implementing them, noting the specific challenges of each. 3. Interview an HR manager and write a short report on the topic: “The strategic roles of the HR manager at XYZ Company.” Instruct students to follow the model outlined in this chapter for the steps in the strategic management process, and HR’s role in strategy execution and strategy formulation. 4. Using the Internet or library resources, bring to class and discuss at least two examples of how companies are using an HR Scorecard to help create HR systems that support the company’s strategic aims. Do all managers seem to mean the same thing when they refer to “HR Scorecards”? How do they differ? For each example, ask students to comment on how effective they believe the measures that were selected by the company are in terms of allowing the company to assess HR’s performance objectively and quantitatively, as well as serving as a tool for the HR manager to build a measurable and persuasive business case for how HR is contributing to achieving the company’s strategic financial goals. Challenge students to critique the scorecard and how it could be improved to measure strategically relevant organizational outcomes, workforce competencies and behaviors, and HR system policies and activities. 5. The HRCI “Test Specifications” appendix at the end of this book (pages 726-734) lists the knowledge someone studying for the HRCI certification exam needs to know in each area of human resource management (such as in Strategic Management, Workforce Planning, and Human Resource Development). In groups of 4-5 students, do four things: (1) review that appendix now; (2) identify the material in this chapter that relates to the required knoweldge the appendix lists; (3) write four multiple choice exam questions on ths mateial that you believe would be suitable for inclusion in the HRCI exam; and 4) if time permits; have someone from your team post your team’s questions in front of the class, so the students in other teams can take each other’s exam questions. Material in this chapter that could be covered in the HRCI certification exam include: Under Strategic Management, the formulation of HR strategies to support the company’s overall strategic plan; HR’s role in helping companies to build a competitive advantage, strategic HR management, role in strategy executiion and formulation; high performance work system concepts and supporting HR systems/ practices; the HR Scorecard and all the steps involved in developing it. Examples of multiple choice questions to provide to students follow: 1. Formulating and exeucting HR systems that produce the employee competencies and behaviors the company needs to achieve its strategic aims is called: a. The HR Scorecard b. Strategic human resource management (correct answer) c. Strategic control d. Competitve Advantage 2. The HR Scorecard does the following: a. Defines the companies business and its mission b. shows the causal link between HR activities, emergent empoyee behaviors and resulting strategic outcomes and performance (correct answer) c. Identifies how to build and strengthen the business’s long term competitive position in the marketplace d. Ensures that the firm’s functional strategies support its corporate and competitive strategies 3. Strategic HR Activity Metrics could be: a. Number of grievances per year b. Number of hours of training per employee per year c. Turnover costs d. All of the above (correct answer) 4. High Performance Work System practices include: a. Structured and hierarchical organizational structure b. Flexible work assignments (correct answer) c. Employees specializing in one job task d. Limited opportunities for training Experiential Exercise: Developing an HR Scorecard EXPERIENTIAL EXERCISES & CASES Purpose: The purpose of this exercise is to give students experience in developing an HR scorecard, by developing one for your college. Students should understand the HR scorecard approach to creating a strategy oriented HR system, and in particular, the seven steps in the process. Instructions: Set up groups of three to four students for this exercise. Using whatever sources are available, including personal interviews with college administrators, each group should outline an HR scorecard for your college, by addressing each of the seven steps in the process, starting with a short definition of the business strategy for the college. Ask each group to present their scorecard to the rest of the class. Have the class play the role as the Board of Directors for the college. At the end of each presentation, ask the class to provide feedback on the scorecard, commenting on the following: a. How effectively does the scorecard measure 1) organizational outcomes 2) workforce competencies and behaviors, and 3) HR system policies and activities? b. Comment on how effective scorecard is on the following dimensions: 1) allowing the board to assess HR’s performance objectively and quantitatively 2) as a tool for the HR manager to build a measurable and persuasive business case for how HR is contributing to achieving the organization’s strategic goals Application Case: Siemens Builds a Strategy – Oriented HR System 1. Based on the information in this case, provide examples, for Siemens, of at least four strategically required organizational outcomes, and four required workforce competencies and behaviors. Strategically required organizational outcomes would be the following: 1) An employee selection and compensation system that attracts and retains the human talent necessary to support global diversification into high tech products and services 2) A “learning company” in which employees are able to learn on a continuing basis; 3) A culture of global teamwork which will develop and use all the potential of the firm’s human resources; 4) A climate of mutual respect in a global organization. Workforce competencies and behaviors could include 1) Openness to learning; 2) teamwork skills; 3) cross-cultural experience; 4) openness, respect and appreciation for workforce diversity. 2. Identify at least four of the strategically relevant HR system policies and activites that Siemens has instituted in order to help HR contribute to achieving Siemens’ strategic goals. 1) Training and development activities to support continuous learning through a system of combined classroom and hands-on apprenticeship training to support technical learning; 2) Continuing education and management development to as developing skills necessary for global teamwork and appreciation for cultural diversity; 3) Enhanced internal selection process which includes pre-requisites of cross-border and cross cultural experiences for career advancement; 4) Organizational development activities aimed at building openness, transparency, fairness, and supporting diversity 3. Provide a brief illustrative outline of an HR scorecard for Siemens. Metrics could include things such as: 1. Level of organizational learning: a. Number of hours of technical training per employee (class room and hands-on) b. Number of hours of education management development 2. Level of cross cultural team work a. Number of employees assigned to roles including cross-border and cross-cultural experiences b. Survey results measuring employee climate on dimensions of teamwork, openness, transparency, fairness, diversity 3. Extent to which the employees can describe the company’s core values 4. Effectiveness of selection process for identifying high quality candidates – number of qualified candidates per position, turnover and retention statistics. Continuing Case: the Carter Cleaning Company 1. Would you recommend that the Carters expand their quality program? If so, specifically what form should it take? Most students will agree that there are opportunities to expand the quality program. The employee meeting approach is a good start in terms of utilizing high involvement organizational practices. There are opportunities to maximize the overall quality of their human capital. For example, training seems to be an obvious area to focus in terms of educating and building awareness about basic standards and procedures. 2. Assume the Carters want to institute a high performance work system as a test program in one of their stores. Write a one page outline summarizing what such a program would consist of. Students should include some of the following ideas in their outline: Identify the types of HR practices they would implement to improve quality, productivity, financial performance; methods for job enrichment; strategies for implement and leverage a team-based organization; ways to implement and facilitate high commitment work practices; employee development and skill building to foster increased competency and capability in the workforce; a compensation program which provides incentives (for example profit sharing; pay for performance) for achieving major goals and financial targets. KEY TERMS competitive advantage Any factors that allow an organization to differentiate its product or service from those of its competitors to increase market share. HR scorecard A concise measurement system that shows the quantitative standards, or “metrics” the firm uses to measure HR activities, to measure the employee behaviors resulting from these activities, and to measure the strategically relevant organizational outcomes of those employee behaviors. leveraging Supplementing what you have and doing more with what you have. metrics Statistics used to measure the activities and results involved in a field. mission A more specific and shorter term statement which communicates for a company who they are, what they do, and where they are headed. strategic control The process of assessing progress toward strategic goals and taking corrective action as needed. strategic human Formulating and executing HR systems – policies and activities resource management – that produce the employee competencies and behaviors the company needs to achieve its strategic aims. strategic management The process of identifying and executing the organization’s mission, by matching the organization’s capabilities with the demands of its environment. strategic plan The company’s plan for how it will match its internal strengths and weaknesses with external opportunities and threats in order to maintain competitive advantage. strategy Specific courses of action the company pursues to achieve its aims. strategy map A diagram that summarizes the chain of major activities that contribute to a company’s success. SWOT Analysis The process of identifying company strengths, weaknesses, opportunities, and threats. value chain analysis Identifying the primary activities that create value for customers and the related support activities. vision A general statement of a company’s intended direction that evokes emotional feelings in organization members. VIDEO CASE APPENDIX Video 1: Showtime Showtime Networks operates cable networks and pay-per-view cable channels across the United States and in several countries abroad. As this video illustrates, its HR function supports corporate strategy by helping to determine what kind of employees are needed to keep the company in peak performance, and then by providing the company and its employees with the HR activities that these employees need to do their jobs. For example, you’ll see that Showtime offers many development and training programs, as well as personal development type activities including mentoring programs and career oriented development activities. The firm’s performance management process (which the employees helped develop) focuses specifically on the work activities and results that help achieve departmental and corporate goals. In this video, Matthew, the firm’s CEO, emphasizes that it is essential to use human resources as a strategic partner, and the video then goes on to provide something of a summary of the basic human resource management functions. Video 2: IQ Solutions IQ solutions is in the business of providing health-care system services. It says one of its aims is lessening the inequality that they say exists in America’s health-care system, and the company uses its very diverse employee base to better serve and attract a broad client base. Employees at IQ solutions work together in teams to achieve the company’s goals. As we see in this video, the company itself is indeed very diverse: for example, employees speak about 18 languages. The company capitalizes on this diversity in many ways. For example, they let their employees share their ethnically unique holidays, and provide special training and other benefits that support diversity. For full video case and discussion questions, please visit the Instructor’s Resource section of the Dessler Companion Web Site at: http://www.prenhall.com/dessler PowerPoint Presentation by Charlie Cook The University of West Alabama 1 Human Resource Management ELEVENTH EDITION G A R Y D E S S L E R Strategic Human Resource Management and the HR Scorecard Chapter 3 Part 1 | Introduction 3–2 After studying this chapter, you should be able to: 1. Outline the steps in the strategic management process. 2. Explain and give examples of each type of companywide and competitive strategy. 3. Explain what a strategy-oriented human resource management system is and why it is important. 4. Illustrate and explain each of the seven steps in the HR Scorecard approach to creating human resource management systems. 3–3 The Strategic Management Process • Strategic Management ➢The process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment. • Strategy ➢A chosen course of action. • Strategic Plan ➢How an organization intends to balance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage over the long-term. 3–4 Business Vision and Mission • Vision ➢A general statement of an organization’s intended direction that evokes emotional feelings in organization members. • Mission ➢Spells out who the company is, what it does, and where it’s headed. 3–5 FIGURE 3–1 The Strategic Management Process 3–6 FIGURE 3–2 A SWOT Chart 3–7 FIGURE 3–3 Strategies in a Nutshell Source: Arit Gadiesh and James Gilbert, “Frontline Action,” Harvard Business Review, May 2001, p. 74. 3–8 FIGURE 3–4 Relationships Among Strategies in Multiple-Business Firms 3–9 Types of Strategies Diversification Strategy Geographic Expansion Strategy Vertical Integration Strategy Corporate-Level Strategies Consolidation Strategy 3–10 Types of Strategies (cont’d) Cost Leadership Focus/Niche Business-Level/ Competitive Strategies Differentiation 3–11 FIGURE 3–5 The Southwest Airlines’ Activity System Note: Companies like Southwest tailor all of their activities so that they fit and contribute to making their strategies a reality. Source: Michael E. Porter, “What Is Strategy?” Harvard Business Review, November–December 1996. Reprinted with permission. 3–12 Achieving Strategic Fit • The “Fit” Point of View (Porter) ➢All of the firm’s activities must be tailored to or fit the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies. • Leveraging (Hamel and Prahalad) ➢“Stretch” in leveraging resources—supplementing what you have and doing more with what you have— can be more important than just fitting the strategic plan to current resources. 3–13 Strategic Human Resource Management • Strategic Human Resource Management ➢The linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. ❖ Involves formulating and executing HR systems—HR policies and activities—that produce the employee competencies and behaviors that the company needs to achieve its strategic aims. 3–14 FIGURE 3–6 Linking Company-Wide and HR Strategies Source: © Gary Dessler, Ph.D., 2007. 3–15 Strategic Human Resource Challenges Corporate productivity and performance improvement efforts Increased HR team involvement in design of strategic plans Basic Strategic Challenges Expanded role of employees in the organization’s performance efforts 3–16 Human Resource Management’s Strategic Roles Strategy Execution Role Strategic Planning Roles Strategy Formulation Role 3–17 FIGURE 3–7 Percent of Successful Mergers in Which HR Manager Was Involved Source: Jeffrey Schmidt, “The Correct Spelling of M & A Begins with HR,” HR Magazine, June 2001, p. 105. Reproduced with permission of Soc. for Human Resource Mgmt. via Copyright Clearance Center. 3–18 Creating the Strategic Human Resource Management System Human Resource Professionals Employee Behaviors and Competencies Components of a Strategic HRM System Human Resource Policies and Practices 3–19 FIGURE 3–8 Three Main Strategic Human Resource System Components Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance (Boston: Harvard Business School Press, 2001), p. 12. Characteristics of HPWS • multi-skilled work teams • empowered front-line workers • extensive training • labor-management cooperation • commitment to quality • customer satisfaction 3–20 FIGURE 3–9 Basic Model of How to Align HR Strategy and Actions with Business Strategy Source: Adapted from Garrett Walker and J. Randal MacDonald, “Designing and Implementing an HR Scorecard,” Human Resources Management 40, no. 4 (2001), p. 370. “ 3–21 K E Y T E R M S strategic plan strategic management vision mission SWOT analysis strategy strategic control competitive advantage leveraging strategic human resource management HR Scorecard metrics value chain analysis 3–22 FIGURE 3–A1 The Basic HR Scorecard Relationships HR Activities Organizational Performance Emergent Employee Behaviors Strategically Relevant Organizational Outcomes Achieve Strategic Goals 3–23 FIGURE 3–A2 The Seven Steps in the HR Scorecard Approach to Formulating HR Policies, Activities, and Strategies Source: © Gary Dessler, Ph.D., 2007. 3–24 Creating an HR Scorecard 1 2 3 4 5 Outline value chain activities Define the business strategy Outline a strategy map Identify strategically required outcomes Identify required workforce competencies and behaviors 6 7 8 9 10 Create HR Scorecard Identify required HR policies and activities Choose HR Scorecard measures Summarize Scorecard measures on digital dashboard Monitor, predict, evaluate The 10-Step HR Scorecard Process 3–25 FIGURE 3–A3 Simple Value Chain for “The Hotel Paris” Source: © Gary Dessler, Ph.D., 2007. 3–26 FIGURE 3–A4 Strategy Map for Southwest Airlines Source: Adapted from “Creating a Strategy Map,” Ravi Tangri, [email protected]. 3–27 FIGURE 3–A5 HR Scorecard Process for Hotel Paris International Corporation* *Note: An abbreviated example showing selected HR practices and outcomes aimed at implementing the competitive strategy, “To use superior guest services to differentiate the Hotel Paris properties and thus increase the length of stays and the return rate of guests, and thus boost revenues and profitability and help the firm expand geographically.” Solution Manual for Human Resource Management Gary Dessler 9780133029864, 9789353942205, 9780135226803, 9780136089964, 9780134235455, 9780130141248, 9780131746176
Download
Close
Close
