This Document Contains Chapters 1 to 4 Chapter 1 An Investment Perspective of Human Resource Management A. OVERVIEW This chapter introduces the concept of treating human resource management processes, practices and procedures from a strategic point of view. The skills and knowledge possessed by individuals can be valuable assets to any organization, and should be treated as such. Organizations should understand how to value/measure and manage from an investment point of view all assets, including those related to their employees. However, many factors can influence the investment orientation of an organization. Understanding the risks and benefits to the organization of investing in human capital is of great importance. B. LECTURE OUTLINE 1. OPENING CASE - NORDSTROM A strategic competitive advantage for Nordstrom includes a successful human resource (HR) approach, involving heavy investment in their sales force of associates. Nordstrom consistently produces above-industry-average profits and has continued to be profitable when its competitors have declined or fallen flat. 2. INTRODUCTION 1. The human element is often the most important element of performance. Thus, appropriate resources and investments must be committed by any organization to facilitate systems for attracting, motivating and managing human resources. Adopting a strategic view of HR involves considering employees as “human assets,” and developing appropriate policies and procedures to manage them as valuable investments. 2. See Exhibit 1-1: SOURCES OF EMPLOYEE VALUE 1. Technical Knowledge 2. Ability to Learn and Grow 3. Decision Making Capabilities 4. Motivation 5. Commitment 6. Teamwork 3. ADOPTING AN INVESTMENT PERSPECTIVE 1. Characterizing employees as human assets implies the strategic management of human resources should include considering HR from an investment perspective. 2. Cost/Benefit basis analysis may be used to evaluate HR programs, such as training and development. 3. Investment perspective toward human assets facilitates their becoming a competitive advantage as most other resources/assets can be cloned, copied or imitated by competitors. 4. A strategic approach to HR, however, does not always involve a human relations approach to employee relations, as noted in the Managing Employees at United Parcel Service example 5. Investments in employees must be undertaken in tandem with strategies to retain employees long enough to realize an acceptable return on investments in employees. This requires valuation of the employee as an asset, which can be difficult to do. 4. VALUATION OF ASSETS See Exhibit 1-2: TYPES OF ORGANIZATIONAL ASSETS/CAPITAL - from easiest to most difficult to measure 1. Financial 2. Physical 3. Market 4. Operational 5. Human 5. UNDERSTANDING AND MEASURING HUMAN CAPITAL 1. Employees are both a significant resource and significant cost for an organization, thus employee contributions to the bottom line must be measured. 2. Watson Wyatt Worldwide found the primary reason for organizational profitability is the effective management of human capital. 3. Dyer and Reeves defined the HR “value chain,” arguing performance could be measured via four different sets of outcomes: employees, organizational, financial and accounting, which have a sequential cause-effect relationship on each other. (Exhibit 1-3: HR VALUE CHAIN) 4. Employees are increasingly attempting to develop and measure meaningful HR metrics to aid them in developing effective strategies for managing human capital. 5. Fortune 500 firms often evaluate HR in limited, non-monetary ways, including dimensions of retention, turnover, corporate morale, and employee satisfaction 6. Accounting practices tend to favor valuation methods stressing past and current asset value, while much of the value of human assets lies in the future. Thus, organizations must be future-oriented in valuing HR. 7. Measuring Human Assets/Capital at Dow Chemical example illustrates how Dow as developed two meaningful metrics; expected human capital return and actual human capital return. 8. Six step model of valuation of HR initiatives 1. Identify specific business problem that HR can impact 2. Calculate actual cost of the problem 3. Choose an HR solution that addresses all or part of the problem 4. Calculate the cost of the solution 5. After implementation, calculate the value of the improvement 6. Calculate the specific return on investment (ROI) 9. HR must provide senior level management with value-added human capital investments. 10. Moneyball and the Oakland Athletics example illustrates how nonconventional staffing metrics analytical techniques resulted in championship teams despite these teams having one of the lowest payrolls in the “industry.” 6. HUMAN RESOURCE METRICS 1. Wall Street analysts still generally fail to acknowledge human capital in assessing the value of an organization and the effect that human resources can have on stock price 2. This is rooted in the fact that there are no “standard” metrics or measures of human capital, much as there are for other organizational assets. 3. Exhibit 1.4 lists some Common HR Metrics while Exhibit 1.5 displays the means of calculating five common metrics. However, the appropriate metrics for any given organization will be dependant on that organization’s strategy. 4. Labor Supply Chain Management at Valero Energy describes how Valero has applied principles of supply chain management to its staffing and employee development functions. 7. FACTORS INFLUENCING “INVESTMENT ORIENTATION” OF AN ORGANIZATION Exhibit 1-6 describes the major factors which influence how investment oriented an organization is: 1. Management values 2. Utilitarianism 3. Attitude toward risk 4. Availability of outsourcing 5. Nature of employment skills 8. CONCLUSION 1. Effective strategies to manage human assets utilize HR practices and policies are in sync with the organization’s overall strategy and encourage the organization to invest in its best opportunities. 2. Organizations should retain employees at least to the point of achieving an adequate return on investment. 3. Organizations often do not follow an investment perspective of HR because it involves making a longer-term commitment to employees, and all human assets and their contribution to the bottom line must be assessed, which can be difficult. 4. Once an organization develops a competitive advantage through its employees, the positive outcome is likely to be enduring, and difficult to duplicate by competitors. 5. Although investment in human assets can be risky and the return long to develop, investment in people continues to be the main source of competitive advantage for organizations. READINGS Reading 1.1 - The India Way; Lessons for the U.S. The “India Way” is characterized by and distinct from the U.S. business model in four fundamental ways. First, Indian companies see their most important goal as serving a social mission, not maximizing shareholder value, as is the case in the United States. An advantage of this approach for corporate performance is that it greatly enhances the ability to motivate and engage employees. Second, Indian companies take the management of human capital seriously. They invest in the capabilities of their employees, promote internally rather than relying on outside hiring, and engage employees with empowerment and similar arrangements. Indian companies measure and manage almost every aspect of human resource practices and effectiveness with extreme care. Third, the persistence of engaged employees contributes to a uniquely Indian approach to problem solving that the authors describe with the Hindi term jugaad, banging away at hard problems with a persistent trial-and-error approach that is deeply rooted in a culture of scarcity and constraints. Fourth, these practices come together to create a unique approach to business strategy, one that is internal and rests on innovations in the companies’ value chains. They are much less interested in acquiring competencies through mergers and acquisitions, joint ventures or other externally oriented approaches as compared to U.S. firms. And they are much more likely to stick with traditional customers and search for better ways to meet their long-term needs, as opposed to relying on market research to find new opportunities. The India Way is unique, but the set of practices that comprise it are not necessarily dependent on the Indian context. The India Way can serve as a model for other countries in part because it addresses the intense pressures for greater social responsibility but most importantly because it is succeeding in the competitive environment with a competitive advantage that appears to be sustainable in the long run. Reading 1.2 – Strategic Human Resource Management as Ethical Stewardship Ethical stewardship has been defined as ‘‘the honoring of duties owed to employees, stakeholders, and society in the pursuit of long-term wealth creation” and is a theory of organizational governance in which leaders seek the best interests of stakeholders by creating high trust cultures that honor a broad range of duties owed by organizations to followers. This stewardship role has been described as values-based, principle-centered and committed to the welfare of all stakeholders. In pursuit of the best interests of each stakeholder, leaders have a duty to optimize outcomes, rather than settling for a compromise position that overlooks opportunities. In order for the human resources professional to function as an ethical steward in the modern organization, she/he must display 1) a profound knowledge of the operations of the firm; 2) an understanding about how to implement systems by which organizations can maximize human performance; 3) an understanding of the empirical value and cost/benefit contribution of high performance systems; and 4) the ability to communicate effectively to top management and Boards of Directors in a convincing manner so that those policy makers will adopt policies and systems essential for creating integrated and effective HRM systems that support organizational goals. Human resource professionals honor the obligations of ethical stewards when they develop knowledge of guiding principles that characterize great organizations, and when they help organizations to create aligned organizational cultures that match actual behaviors with espoused values. This ability is a key element in establishing and implementing human resource systems that earn employee commitment and trust. As ethical stewards, human resource professionals need to demonstrate their fierce commitment to the success of the organization while creating systems that recognize employee contributions and give credit to employees for achieving an organization’s success. This requires leadership insight that willingly shares both power and the credit for accomplishments while accepting personal responsibility for organizational failures. Human resource professionals act as ethical stewards when they create human resource systems and processes that are fully aligned with the normative and instrumental goals of the organization while giving employees credit for their role in the accomplishment of those goals. These aligned and congruent systems and processes balance the needs of the organization with a commitment to the best interests of its stakeholders and create reward systems that also reward employees for contributing to organizational success. The willingness of organizations to pursue systematically the twin goals of achieving organizational mission and assisting employees to achieve their personal goals is an implicit obligation of ethical stewardship and organizational leadership. Chapter 2 Social Responsibility and Human Resource Management A. OVERVIEW This chapter discusses the some of the challenges face by human resource management in responding to changes in society as well as issues related to ethics and social responsibility. Near-constant changes in workforce composition, skills, worker expectations and worklife relationships require well-conceived and effectively implemented HR practices and systems that must be continuously reviewed from a strategic point of view. Pressure from a variety of external constituents and/or the desire to “do the right thing” greatly influence decisions related to ethics and social responsibility and are influenced and affected by human resource management. B. LECTURE OUTLINE 1. OPENING CASE - Safeway In response to escalating competition, Safeway developed a program designed to make it an employer of choice. Given that most of its customers were female, Safeway developed a “Championing Change for Women” program designed to promote the development of its female employees into managers. The program provided flexibility relative to its hours, allowing employees to achieve work/family balance. As part of its program it also developed the Women’s Road show, in which female executives visited various locations throughout the country to assist with learning, networking and development. 2. WORKFORCE DEMOGRAPHIC CHANGES AND DIVERSITY 1. Demographic changes in society have greatly impacted the composition of the workforce. In addition, numerous laws protect diverse groups in our society from discrimination in employment Most organizations have developed some kind of diversity management program in response to one of both of these factors. 2. Diversity initiatives can be designed to ensure legal compliance or to truly promote and encourage respect for others and differences. There is a marked difference between a diversity programs that attempt to address these motivations, as illustrated in Exhibit 2.1. 3. Diversity is a strategic business issue for an overwhelming majority of organizations/employers. Pricewaterhouse Coopers has created the position of Chief Diversity Officer which reports directly to the Chairman of the Board. 4. Generational diversity is becoming increasingly prevalent as individuals live and remain in the workplace longer than in previous years. Different generations need to be able to work alongside each other in contemporary organizations. Exhibit 2.2 illustrates some of the characteristics of different generations found in the workplace. Retailer Abercrombie and Fitch has developed practices which effective allow it to manage Generation Y employees. 5. Increasing laws and company policies which prohibit discrimination based on sexual orientation have been implemented. The ongoing evolution of same-sex marriage has created dilemmas and challenges for employees. 6. Individuals with disabilities are protected by the Americans With Disabilities Act yet still suffer from stigmatization and underemployment. Walgreens has implemented a model program to assist with the employment of individuals with disabilities. 7. Hasbro, Texas Instruments, Intel and PepsiCo have both developed innovative approaches for managing diversity in the workplace. 8. Other dimensions of diversity which create challenges for organizations include the management of professionals, shifting employee loyalty and personal and family life dynamics. 9. The development and support of affinity groups is one way in which organizations manage and encourage diversity. Both Frito-Lay and PepsiCo have successfully embraced this strategy with successful business results. 3. ETHICAL BEHAVIOR 1. Many employers are now considering ethics and ethical behavior in light of major bankruptcies, scandals and business meltdowns. However, ethics are subject to personal values and convictions. 2. Common ethical concerns for HR include off-duty behavior, ownership of work and non-compete clauses. These latter two issues have been dealt with at Intel through an intraprenuership program. 3. The Sarbanes-Oxley Act of 2002 provides sweeping measures to control deception in accounting and management practices by increasing government oversight of financial reporting, holding senior executives more responsible that previously and protecting whistle blowers. 4. Many organizations and some industries have developed their own code of ethics. The Society of Human Resource Management (SHRM) has developed such a code for HR professionals, displayed in Exhibit 2.5. This code presents core principles, intent and guidelines in a number of areas, including: Professional Responsibility; Professional Development; Ethical Leadership; Fairness and Justice; Conflicts of Interest; and Use of Information. Exhibit 2.6 provides some guides for developing a code of ethics or code of conduct. 4. Corporate social responsibility in the form of sustainability involves taking a more macro approach to managing an organization’s relationship with its external environment. Organizations are being increasingly expected to consider the effects of their operations, decision and business on the social and natural environment. Exhibit 2.7 examines some of the proven positive links between environment and economic performance. General Electric has developed a model program related to sustainability and Gap has set standards for offshoring of its manufacturing operations. Exhibit 2.8 provides some HR-related standards of the Global Reporting Initiative. 5. CONCLUSION 1. Organizations operate in dynamic environments are must evolve and adapt to changes in society, including changing demographics and lifestyles and expectations to contribute to, rather than take from, the larger society. 2. Human resource management strategies can facilitate organizational responses to society. READINGS Reading 2.1 – Stereotype Threat at Work Stereotype threat is defined as the fear of being judged according to a negative stereotype. Even if an employer were successful in hiring only non-prejudiced managers, stereotypes still exist in the broader society and hence, the workplace. Stereotype threat has been documented across a wide range of diversity dimensions and performance domains. It extends beyond those in traditionally disadvantaged groups to those who are members of high-status groups. Stereotype threat affects everyone as every individual is a member of at least one group about which stereotypes exist. Stereotype threat is based on the conditions of task difficulty and personal task investment. Stereotype threat is more likely to influence performance on difficult, challenging tasks which are at the limits of a person’s abilities. It is also more likely to influence performance when an individual in more personally involved with a task and hence, cares about performance. Stereotype threat can be reduced by teaching affected employees behavioral strategies for improving performance and counteracting negative stereotypes. Stereotype threat can also be eliminated by refuting or diminishing the stereotype relevance of a given task. Employees can also re reminded about external factors which might constrain performance such as a difficult client, limited resources or a tight deadline. Stereotype threat can also be minimized by presenting a role model who contradicts the stereotype. Mangers can actually use stereotype threat to create more diversity-friendly work environments. Stereotypes should be acknowledged and addressed directly and managed by focusing on a larger context or environment. Reading 2.2 - The Ethics of Human Resources and Industrial Relations Human resource managers typically face three kind of ethical problems. The first is the need for discernment or determining the right thing to do in a given situation. The second is conflict between what the HR managers feels is right and what the employer asks be done. The third is conflicts of interest where the HR manager’s personal beliefs differ from the responsibility of acting as an agent for the employer. Ethical dilemmas in recruitment can involve special requests for hiring criteria from managers, setting or recommending entry salary, how extensively to recruit, internal versus external recruiting, privacy protection due to applicants and follow-up with rejected applicants/candidates. Ethical dilemmas in training and development can involve training employees who make take their skills to a competitor, ensuring employee safety, particularly given an employee’s language, minimizing abuses of power in mentoring relationships and fully and truthfully informing employees about their future prospects with the employer. Ethical dilemmas in compensation can involve compressed compensation systems, ensuring that employers are not exploited by managers relative to compensated hours of work, comparable worth, differences in pay between levels of responsibility and equity in pay relative to the marketplace. Ethical dilemmas may also be present relative to employee monitoring, progressive discipline and termination, balancing costs of benefits with employees’ needs and choice and measures used to retain employees. Reading 2.3 – How Do Corporations Embed Sustainability Across the Organization? Many employees may be unaware of sustainability issues beyond their immediate work responsibilities. The reading provides four recommendations for organizations as well as eight specific training and development tools which can facilitate such awareness among employees. Recommendations • Learning about sustainability is a companywide necessity that should not be restricted to the discourse of leaders and senior managers • Awareness initiatives need to be cross-functional and spread across the full range of business functions • Embedding sustainability should include both technical and action learning opportunities • Learning cycles should include opportunities for social learning and expansion of company knowledge systems Most definitions of sustainability draw on the principles of the Brundtland Commission: “Meeting the needs of the present without compromising the ability of future generations to meet their own needs.” The three pillars of sustainability include economic, social, and environmental. Economic sustainability is ensuring that expenditures do not exceed income. Social sustainability embodies the humanitarian context of business and relates to issues of poverty and income inequality, public health and health care, education and social aspects of economic development. Environmental sustainability considers the impact of business on the quality and quantity of natural resources. The question remains as to whether their resolution of social and environmental problems is the responsibility of corporations. Investing in sustainability has potential benefits for the corporation, as it signals to stakeholders that it is committed to social and environmental goals, which has been linked to positive corporate performance, competitive advantage, customer loyalty, enhanced company image and goodwill, legitimacy and improvements in employee recruitment and retention. However, investing in sustainability can incur costs that corporations have a fiduciary obligation to evaluate to ensure this expenditure is in line with shareholders’ interests. Training and Development Tools Codes of Conduct - specify minimum acceptable standards in corporate processes and procedures Impact Measures - social and environmental accounting tools and environmental impact measures calculate social and environmental impact Company Structure and Policies – clear delineation of whom, where, and how responsibility will be managed and how sustainability will be integrated into corporate governance structures Purchasing and Supply Chain Initiatives - dialogue with suppliers on the importance of sustainability in the supply chain with targets and performance indicators set for affirmative action and procurement practices that proactively support social and environmental stewardship Communications and Dialogue - corporate publications and social media can be used to communicate the importance of sustainability as well as the organization’s position and practices on such to both internal and external stakeholders Employee Training and Workshops - deliver technical information as well as company expectations about sustainability to employees Company Visits - learn from other organizations that have successfully implemented sustainability initiatives Employee Volunteering Opportunities - opportunities to enable employees to contribute their knowledge and skills to social and environmental projects and learn first-hand about their impact Chapter 3 Strategic Management A. OVERVIEW This chapter provides an overview of the strategic management process, including specific influences on HR policies, practices and procedures. Two fundamental strategic models are presented, including the Industrial Organizational (I/O) Model with its external environmental analysis emphasis (outside-in approach) and Resource Based View of the Firm (RBV) with its internal analysis emphasis (inside-out approach). Generic corporate strategies discussed include growth, stability and turnaround, each with specific HR implications. Finally, business unit strategies of cost leadership, differentiation and focus are elaborated, along with staffing/HR influences. Fundamentally, organizational strategy formulation and implementation should be the driving force behind all HR policies, programs and practices. B. LECTURE OUTLINE 1. OPENING CASE - COSTCO Costco is an international chain of membership retail warehouse stores that keep costs down by lowering overhead, such as by only carrying 4,000 SKUs (stock- keeping units) of inventory, buying in bulk and utilizing warehouse space. Costco also only employs very limited staff outside of the buying and merchandising functions, further lowering overhead. Costco recognizes that busy consumers want value and convenience, and build these into product offerings. 2. INTRODUCTION Strategic management is the process of formulating and implementing an action plan to achieve corporate objectives, specifically including how these objectives are to be met. Senior management must find “fit” between the organization, its strategy and its environment. Strategic plans are long-range in nature, and require review and updating to ensure continued fit. 3. MODELS OF STRATEGY 1. Industrial Organization (I/O) Model argues that the external environment should be the primary determinant of firm strategy. The model assumes that the external environment presents threats and opportunities, and equal access to highly mobile resources across industry firms. Organizations should operate within the industry that affords the best opportunities, and where competitive advantage can be developed through low cost or differentiating strategic approaches. Strategy is externally driven. 2. Resource Based View of the Firm (RBV) argues that organizational resources and capabilities, including human resources, should be the basis for strategic decision making. Organizations can develop a competitive advantage through the acquisition and value enhancement of their resources. Sarasota Memorial Hospital’s five pillars of excellence approach example. Strategy is internally driven. 4. THE PROCESS OF STRATEGIC MANAGEMENT Exhibit 3-1: THE PROCESS OF STRATEGIC MANAGEMENT 1. Mission Statement - defines organizational purpose. Solectron (Exhibit 3.2) and Microsoft (Exhibit 3-3) mission statements are provided. 2. Environmental Analysis - of the external environment, including regulatory, competitive and industry structures; market, economic, technological and demographic trends. Southwest Airlines management of its environment is provided as an illustration. 3. Organizational Self-Assessment - of various organizational resources and of management systems. 4. Goals and Objectives - should be specific, measurable and flexible; define performance measures and evaluation processes. 5. Strategy - how the organization intends to achieve its goals, including specific means, competitive actions and organizational operations. First Tennessee National is presented as an example. 6. Identify Assumptions – throughout the process it is critical to identify and preferably write down assumptions which have been made about future conditions in the external environment (i.e., economy, competition, technology, etc.) 5. CORPORATE STRATEGIES Three generic organizational strategies, each with HR implications 1. Growth - can be internal or externally driven. Strategic HR issues include adequate hiring and training planning; informing current employees of promotion and development opportunities; and ensuring quality and performance standards are maintained. External growth through merger and acquisition may result in layoffs, and difficulties can be encountered in merging two HR systems, cultures, etc. 2. Stability - organizations maintain the status quo, often resulting in limited upward mobility opportunities for employees that can lead to turnover. Key employees should be identified and retention strategies developed. 3. Turnaround or Retrenchment - organizational downsizing or downscoping may lead to cost cutting in payroll/HR. Best Buy is presented as an example of a turnaround strategy. 6. BUSINESS UNIT STRATEGIES Three basic business unit strategies are recognized here, each requiring different strategic HR approaches. 1. Cost Leadership Strategy - increased efficiency and cost cutting, with savings passed to customers. Short term HR strategies are emphasized, rather than long term ones that focus on results. HR implications include specialized jobs, cross-trained employees, incentives which might be developed to entice higher paid people to leave the organization. 2. Differentiation Strategy - organization distinguishes its products and services, or at least consumer perceptions of them. Premium pricing is common and performance measures may be more long term in nature. Staffing may focus more on external hiring to bring constantly needed fresh, creative approaches. 3. Focus Strategy - assumes that different market segments have different needs, and attempts to satisfy particular groups. Employees must be aware of what makes that particular market unique, and should be appropriately trained to ensure customer satisfaction. 7. DYER AND HOLDER’S TYPOLOGY OF STRATEGIES 1. Investment logic – concerned with adaptability to changing market conditions. 2. Inducement logic – concerned with cost containment and efficiency. 3. Involvement logic – dual strategy of cost containment and innovation. 7. OTHER DIMENSIONS OF STRATEGY 1. Innovation and creativity. Whirlpool is provided as an example of innovation. Cirque du Soleil is provided as an example of creativity. 2. Privatization 8. CONCLUSION 1. The development of organizational strategy is a unique process that can vary greatly from one organization to another. 2. Often, organizational success can be traced to people management systems that clearly support its mission and strategy. 3. Organizational strategy formulation should be the driving force behind all HR policies, programs and practices. 4. A strategic HR approach provides three critical benefits, including facilitation of: 1. The development of a high quality work force through its focus on the types of people and skills needed 2. Cost-effective utilization of labor, particularly in service industries where labor is generally the highest cost. 3. Planning and assessment of environmental uncertainty and adaption, discussed further in Chapter 4. READINGS Reading 3.1 – Are You Sure You Have a Strategy? This article argues that “strategy” has become a catchall term which means anything an individual wants it to mean. It argues that a true strategy has five components, which provide answers to five specific questions: 1) where will we be active? (arenas); 2) how will we get there? (vehicles); 3) how will we win in the marketplace? (differentiators); 4) what will be our speed and sequence of moves? (staging); and 5) how will be obtain our returns? (economic logic) IKEA and BPI are presented as examples. Reading 3.2 – Bringing Human Resources Back into Strategic Planning In most organizations, HR is only brought in for informative consultation after the strategic plan is constructed to ensure that the HR team will be able to provide the right number of people, in the right place, with the right training. Such a process is too little, too late and ignores the values which HR can provide to the strategic planning process. This occurs for two primary reasons. First, senior managers who have been developed from within tend to be disconnected from the operational level of the organization. Second, executives hired from the outside often fail to fully appreciate the context and environment in which the organization operates. HR can provide the remedies to each of these deficiencies and ensure greater success with the planning process by being the conduit for subject-matter contribution and the linchpin that sustains and holds the process together. The author developed an eight stage strategic planning processes and identifies the critical roles which HR can play during each stage of the process. Stage 1 - Understand the Planning Legacy- the planning process needs to be informed by what’s been done before; What was the result of any previous work?; Where were the successes and failures?; How have employees been affected?; and What is the organizational attitude, at all levels, toward the strategic planning process and the resulting plans? HR can conduct this type of research at all levels of the organization. Without this knowledge, strategic planning teams will often repeat the same mistakes of their predecessors. Step 2 - Create a Diverse Planning Team - the formation of an intelligent strategic-planning team which includes both diversity of thought and diversity of skills. HR is the repository of all employee data related to knowledge, functional expertise, skills and experiences and is in the best position to compile an optimal team. Step 3 - Align Planning with Leadership Goals – ensuring that planning efforts are being conducted in tandem with the organization’s mission and vision of senior executives HR should communicate this knowledge as well as provide access to senior leaders and help facilitate effective and well-structured interviewing sessions that will aid communication. Step 4 - Analyze Current Realities – examine the organization’s history with its current position and identify both the factors that can be leveraged to move the organization forward as well as those may serve as obstacles and challenges to moving forward. HR can facilitate the selection of subject matter experts as well as provide technical expertise regarding laws and regulations which affect existing and potential employees Step 5 - Develop Alternative Performance Options – ensuring that the strategic plan has some flexibility in the form of alternative scenarios and courses of action HR can determine, with a great degree of accuracy, what resources (people, time, tools, and money) realistically exist in the current organization, which ones can be acquired from outside the organization, and which ones can be redistributed around the organization to achieve any alternative options. Step 6 -Measure Progress – ensuring that actual performance is in line with that expected HR ensures that all associated performance measures are clearly understood throughout the organization and ensures that the performance management system rewards appropriate performance. Step 7 - Deploy the Strategic Plan – developing appropriate and effective communication to create enthusiasm and commitment to the components of the plan. HR develops plans and programs to ensure and monitor employee engagement and commitment. Step 8 - Develop Contingency Plans – given the fact that assumptions made during the planning process about the future may not materialize as anticipated, plans need to be flexible to address the realities which develop for the organization. HR assists the organization with any kind of change initiatives which must be implemented as part of this process. Chapter 4 The Evolving/Strategic Role of Human Resource Management A. OVERVIEW This chapter discusses the evolution of the role and activities of HR managers. Traditional views of HR roles are more restrictive and tend to rely on the HR function in more of a personnel approach. However, strategic HR policies and practices can be critical to organization success and even survival. Barriers to successful implementation of strategic HR practices are introduced, with most revolving around the short-term approach to capital performance, and various perceptions held by management, both HR and otherwise. B. LECTURE OUTLINE 1. OPENING CASE - Netflix Netflix uses a very nontraditional approach to HR. Company executives realized early on that the marketplace in which they competed for talent was extremely competitive. As a result, Netflix tried to create a company culture and work environment which was conducive to attracting and retaining the creative types of individuals it sought. Work rules and presence are very relaxed and employers are given the freedom to work when and where they choose. Even vacation policy is absent with employees allowed to take as much or as little vacation as they choose at their own discretion. These policies reflect performance expectations of getting the job done in the manner best suited for individual employees. INTRODUCTION “The development of a consistent, aligned collection of practices, programs and policies to facilitate the achievement of the organization’s strategic objectives” is the key to strategic human resource management. This philosophy is consistent with taking a long-term, strategic view of the HR function. 2. STRATEGIC HR AT GENERAL ELECTRIC GE’s success relies heavily on the belief that the HR function is a critical, driving factor in performance worldwide. HR executives are expected to understand components critical to organizational success, including finance, marketing and operational issues. A comprehensive Human Resource Leadership Program (HRLP) is in place, encompassing extensive training and hands-on rotational assignments. An environment that treats HR managers as strategic partners is relevant, allowing full contribution to the business 3. STRATEGIC HR VERSUS TRADITIONAL HR 1. The role of HR management is evolving, with old school “personnel department” actions of record keeping, file maintenance and other clerical functions behind us. In the world of strategic HR, company objectives must be translated into specific people management systems. This requires a focus that is more strategic and less operational in nature. Such a shift in philosophy requires considering the implications of corporate strategy for all HR systems, although specific approach and process will vary across organizations and no one “best practices” approach exists. 2. Possible roles assumed by the HR function include strategic partner, change agent, administrative expert and employee champion. 3. The “HR Roles at Mercantile Bank” example outlines a shift in HR functions to a strategic approach. This evolved through streamlined work processes, eliminating unnecessary activities, reevaluating technology and outsourcing non-strategic functions. 4. HR roles in a knowledge based economy include 1. human capital steward 2. knowledge facilitator 3. relationship builder 4. rapid deployment specialist. 5. Critical strategic HR competencies include 1. Strategic contribution 2. Business knowledge 3. Personal credibility 4. HR delivery 5. HR technology 6. Lepak and Snell’s Employment Model (Exhibit 4.4) considers the strategic value and uniqueness of human capital. As the strategic value of human capital increased, so did the likelihood that the organization would employ it internally rather than externally. The more unique the human capital, the more likely it will contribute to competitive advantage. Model components include 1. Knowledge Based Employment-Commitment Based HR Configuration 2. Job Based Employment-Productivity Based HR Configuration 3. Contractual Work Arrangement-Compliance Based HR Configuration 4. Alliances/Partnerships-Collaborative Based HR Configuration 7. The “Strategic Human Resource Management at Southwest Airlines” example illustrates unique HR practices follow from a unique corporate culture, including the “FUN” and “LUV” concepts. 8. Exhibit 4.5 - TRADITIONAL HR VERSUS STRATEGIC HR. Traditional HR sees an organization’s key assets as its capital, products, brand name, technology and investment strategy. Strategic HR views key investments as people, their knowledge, skills and abilities. 9. Employee Engagement at Aetna – discusses how Aetna, on the verge of bankruptcy, engaged employees in a downsizing strategy which refocused the organization on key values, developed a means for assessing employee engagement and developed a succession planning program. 4. BARRIERS TO STRATEGIC HR (Exhibit 4.9) Although strategic HR makes sense intuitively, many organizations have a difficult time implementing for many reasons: organizational culture, history, values and management practices can act as disincentives for change initiatives. Common barriers to strategic HR implementation include: 1. The short-term approach taken by most organizations to performance, performance evaluation and compensation, which follows the short-term approach taken by capital stakeholders 2. HR managers often have a difficult time thinking strategically, often due to insufficient training to understand the whole organization and its challenges across functional areas. 3. Senior managers often lack appreciation for HR as a strategic partner 4. Functional managers often do not see themselves as HR managers, a requirement of the strategic HR approach. 5. Difficulty in quantifying outcomes and benefits of HR programs 6. Human assets are not owned by the organization, and therefore may be perceived as having a higher risk than capital assets 7. Resistance to change may follow introduction of strategic HR initiatives, and there may be few incentives to change 5. Exhibit 4.10 - OUTCOMES OF STRATEGIC HR 1. Increased performance 2. Customer and employee satisfaction 3. Enhanced shareholder value 6. Exhibit 4-11 - A MODEL OF STRATEGIC HUMAN RESOURCE MANAGEMENT. This model provides the framework for the rest of the book. 7. CONCLUSION 1. Top management often does not realize the value that strategic HR can provide benefits to the organization. Senior HR managers also may not realize themselves how they can contribute to their organizations strategically. Lack of a holistic approach limits the ability of HR managers to contribute to high level strategic thinking. HR managers must appreciate that a strategic approach can provide three critical outcomes: increased performance; enhanced customer service and employee satisfaction; and enhanced shareholder value. These outcomes are accomplished through effective management of the staffing, retention and turnover processes through selection of employees that fit the strategy and culture of the organization; cost effective utilization of investment in identified human capital with the potential for high returns; integrated HR programs and policies that clearly follow corporate strategy; facilitation of change and adaptation; and tighter focus on customer needs, key and emerging markets and quality. 2. Strategic Reorganization of the HR Function General Motors and Strategic Reorganization of the HR Function at Wells Fargo Bank examples, one following a centralized and one a decentralized approach to HR within the context of the organization’s strategy. READINGS Reading 4.1 –Distinctive Human Resources are Firm’s Core Competencies This article takes a counterpoint to the “best practices” approach to superior management performance. The authors contend that there is no one set of best practices, and there should be a substantial fit between HR practices and business strategies. People management practices are the drivers to create distinctive competencies and business strategies. Pairs of firms in various divergent industries are examined, with each pair employing different HR strategies based upon different corporate strategies. Despite competing in the same industry using different approaches, each organization was successful because its HR practices were well suited to its overall strategy. Industries and organizations analyzed in each include: Professional Sports - San Francisco 49ers and Oakland Raiders Retailing - Sears and Nordstrom Professional Services - Boston Consulting Group (BCG) and McKinsey & Company Business Schools - Harvard and Wharton (University of Pennsylvania) Financial Services - Chubb and AIG Shipping - Federal Express (Fed Ex) and United Parcel Service (UPS) Food and Beverages - Coke and Pepsi Details in this paired comparisons approach clearly demonstrate the critical relationship between business strategies and employment practices. Organizations increasingly feel pressured to be flexible and anticipate change. Organizations employing strategic flexibility in search of new market opportunities do not always develop employee competencies and skills from within. Conversely, organizations that compete for dominance in an established market or niche often employ specific capabilities developed and rewarded internally and through supportive cultures and operating systems. The fact that employment practices are hard to change helps explain and support the basic notion that core competencies should drive business strategies, and not vice versa. New business strategy development supported by existing management practices and competencies are perhaps easier to develop than new practices and competencies that support a new strategy. The authors do not suggest that all practices are equally good, but do suggest that for practices not central to core competencies, a best practices approach that cuts across firms may emerge. Additionally, some management practices may dominate others (e.g., lean production). Thus, variety in employment practices can be the source of distinctiveness and competitive advantage. Reading 4.2 – Employee Engagement and Commitment This article explores the critical competitive advantage that an employer can gain from having engaged employees. Engagement and enhanced commitment result in both higher levels of productivity and lower levels of employee turnover. Engagement is defined differently by different organizations but the common themes center around employee satisfaction with their work, pride in the employer, employee belief in what they do is important and employee sense of being appreciated by the employer. Employers usually attempt to measure engagement using the following criteria: • Pride in employer • Satisfaction with employer • Job satisfaction • Opportunity to perform well at challenging work • Recognition and positive feedback for one’s contributions • Personal support from one’s supervisor • Effort above and beyond the minimum • Understanding the link between one’s job and the organization’s mission • Prospects for future growth with one’s employer • Intention to stay with one’s employer Engagement can be enhanced by various HR practices related to • Job and task design • Recruiting • Selection • Training and Development • Compensation • Performance Management Instructor Manual for Accounting Theory: Conceptual Issues in a Political and Economic Environment Harry I. Wolk, James L. Dodd, John J. Rozycki 9781285426792, 9781337619998
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