HR Strategies for Organizations Competing in the Millennium

Copyright 2000 - South-Western College Publishing

Module 2 - 1

HR Strategies for Organizations Competing in the Millennium


Module 2 - 2

Management Quiz/Future Trends

• Have you ever worked for a learning organization?

• Do you think business process re-engineering is a good idea?

• Do most companies leverage their core competencies?

• What is sound organizational architecture?

• Do you believe in time-based competition?


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HR Strategy: Core Concepts

• Strategic HRM• HR activities must be designed to

support strategic & business objectives (vertical fit)

• HR congruence• HR systems must have congruence

between other HR subsystems & other org. systems (Horizontal fit)

• Strategies for Gaining Competitive Advantage

• Core Competencies, Resources & Activity Streams

• Alternative Strategic HR perspectives

• HR Strategy Framework

• Reflection on workplace of the future


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Definition: Strategic HRM• An organization’s fundamental approach to the

employment relationship; the pattern of HR decisions made by managers that reflect business strategies & relate to firm & environmental conditions

• The approaches to the separate HR activities (e.g., selection, compensation, performance appraisal) are integrated to provide a unified pattern to the employment relationship


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Basic Question: How do HR Practices add Strategic Value?

• What is the relative contribution of different HR practices? (Black Box problem)

• HR Practices -> employee attitudes and Behaviors -> firm performance?

• How do bundles of HR practices filter down to people? (How do people experience policies and how do they operate to influence strategy?


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Why do HR Strategies Matter?

• HR strategies are important because they are malleable and affect human capital

• Key to differentiate between management of HR function vs. HR management

• While orgs. cannot easily change firm assets, they can change how they manage people.

• HR practices can operate in 2 ways:

• increase value • lower human capital

investments


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Some General Strategic HR Congruence Issues

• Upward Bias: firms that have more policies and are good at HR seem to do it better and better over time

• Downward Bias: firms that are below average and have fewer policies seem to do it worse and worse

• Complementary aspects of HR (Synergy) 1 +1 =5

• Internal alignment: fit with bundles of practices

• External alignment: fit with current external environment


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5

ENVIRONMENTAL CONTEXT

ORGANIZATIONAL BUSINESS

Managerial Discretion

(More Less)

Unilateral

Decisions

Negotiated

Decisions

Imposed

Decisions

Transaction

Translation

HR S

trateg

y

HR Roles

Transition

STRA

TEG

Y

Transformation

MODEL FOR UNDERSTANDINGMODEL FOR UNDERSTANDINGHUMAN RESOURCE STRATEGY:HUMAN RESOURCE STRATEGY:

CONTEXT, ROLES, AND CONSTRAINTSCONTEXT, ROLES, AND CONSTRAINTS


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Key Forces Shaping Business Strategy

• External environment (Social, political, legal, economic)

• Workforce (demographics and occupational mix)

• Org. culture• Org. Strategy (plan for achieving competitive

business advantage)• Technology of Production & Layout of Work


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Strategic HRM Perspectives

• Strategic Contingency Behavioral Perspective of HR strategy

• Different firms follow different strategies which require unique behaviors and competencies (e.g. innovation, cost, customer focus)

• HR adds value by alignment

• Resource Based View• Any asset adds economic

value particularly if they enable my org. to be further down the dependent path (First mover advantage); If I’m further down the path on HR, I have competitive advantage


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Strategies for Gaining Competitive Advantage

• Cost leadership:Compete by lower costs – Core workforce mindset: cost reduction & effectiveness

• Product Differentiation/Innovation– Core mindset: innovation & flexibility

• Focus: Best customer service or quality– Core mindset: reward teamwork and quality successes that

surpass customer needs

• Speed to Market– Core mindset: Work faster than competitors


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HR Bundles Characterizing High Performance Work Systems

(Resource View/ Universal Best Practice Example)

• Extensive Recruitment and Selection Procedures

• Needs-based training• Performance contingent

incentive compensation & performance management systems

• Procedures that allow for voice

• Optimal levels of job involvement

• What others can you think of?


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Strategic Analysis: Core Competencies, Resources,

Activity Streams• Firm must identify its core competencies

(identify and organize around what they do best that gives the firm access to many markets and is difficult to imitate.)

• Firms should also identify its most valuable resources and how workflow activity streams add to customer value


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New Forms of Corporate Architecture

• Value Chain Perspective

• Organizations should only expend financial & managerial resources on activities that add a lot of value to the final value of its products goods or services

• Should outsource activities that add only a fraction to final value

• Example: Modular Companies


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Modular Companies: Outsource Non-Vital Functions

• Nike & Reebok– Focus on designing

fashionable footwear; outsource manufacturing

• Core competencies:– design & marketing,

not manufacturing

• Sun Microsystems• Buys ready-made parts

from employers & performs only the final assembly

• Core competencies: design & assembly


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Modular Companies

• Pros– Focus managerial &

technical talent on most critical activities

– Obtains best in the business for each value chain activity

– Centralizes decision-making for core competencies; all else outsourced

– Focus on customers & markets

– Quickens response to environmental shifts

• Cons– May keep you from

investing in core competencies or ability to bring back value added activities

– Too much outsourcing can lead to hollow companies & loss of competitive advantage

– Inhibits common vision

– Decreases operational control


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Virtual Companies

• Continually evolving network of independent companies, customers, suppliers, even competitors that link together to share costs, skills & access to one anothers’ markets

• Term virtual comes from computer industry; A computer’s ability to appear to have more storage than it really has

• By assembling resources from a variety of entities, an org. has more capability that it possesses on its own

• Not permanent

• Participating firms give up some control & accept interdependent destinies


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Virtual Companies• The ultimate joint

venture• Example: Paramount &

Hughes conversion of movies & texts into digital formats; Apple & Sony’s Powerbooks

• Pros: good for getting products to the market quickly

Pros:• Enables sharing of costs &

skills• Enhances access to global

markets• increases market

responsiveness– Creates “Best of

Everything” since each partner brings core competencies to alliance


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Virtual Companies

Cons:• In order to be successful,

a strategic plan must determine effectiveness of combining core competencies

• Need to develop common vision, trust, & manage control issues

• Boundary Management• Leads to potential loss

of operational control• Results in loss of

strategic control over emerging technology

• Tough to manage; a new org. form


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Barrier-Free

• Bridging differences in culture, function & goals to find common ground; eliminating multiple organizational boundaries (internal & external) fluid ambiguous roles

• Interdivisional task forces at GE; Chrysler’s development of Neon

• Pros– Leverages talent of

all types

– enables quick market response through single goal focus

– Enhances cooperation


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Barrier-Free

• Cons– difficult to overcome

political & authority boundaries

– coordination problems can come from lack of strong leadership & common vision

– Time-consuming

• Problems in managing politics & trust

• often managers trained in rigid hierarchies have difficulties making the transition to more democratic participative style


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Re-Engineering

• Examining entire work process and redesigning functions to organize around customer needs (e.g. increase quality, service, flexibility, and lower costs) rather than functions

• Simplify flow of work• Starts with

benchmarking: identifying how exceptional companies achieve their results (Best practices)


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Re-Engineering• Several jobs combined

into one(reduces errors, delays & miscommunications via hand-offs)

• Employees empowered to make decisions

• Use of teams/ High performance work systems

• Work is performed where it makes the most sense (e.g. team hiring)

• Controls are used only where they add value(e.g. Walmart has given suppliers control over inventory management)


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Organizational Adaptation& Performance Outcomes

FirmStrategic Analysis &Formulation1. ExternalEnvironmentScan/Forecast *Competitor/Industry*Stakeholder Analysis *EnvironmentalSituational Factors(e.g., Social, Political,Technological, Legal),2.Internal CapitalAssessment-Financial-Physical & Technological-Human

*Workforce Skills,Abilities,Competencies,CultureManagementStyle Values

3.IdentifyCompetencies &Sources of

CompetitiveAdvantage

4.OrganizationalStrategy Fomulation- Mission & Vision- Strategic Thrusts:- Operating- Financial- Human Capital

Human ResourceStrategy Development& Execution5.Management Choices& Constraints regardingthe HR and PeopleDeployment6.HR Planning &Organization Design ofPolicy Clusters- HR Strategy &

Work Organization- Talent ID &

Deployment- HumanCapital

Development- Reward

Management- Employee Relations

& Voice7.Allocate resources &develop processes &systems for HR roledelivery- Transactions- Translation- Transition- Transformation

-OrganizationCulturalResponse

Employee &Work UnitAttitudes.Behaviors&Performance

OrganizationalPerformance,Stakeholder &Societal Outcomes

HR Strategy Framework


Module 2 - 25

Current HR Trends: Workplace of the Future

• TRADITIONAL HR– Jobs designed for

individual work

– HR systems designed based on based on assumption of workforce homogeneity

– Standardized work sites & schedules set by company

• FUTURE TRENDS– Jobs designed for

teamwork

– HR systems designed based on assumption of heterogeneity (sex, age, ethnicity, country)

– Flexiplace (work may be done at home, at the customer & employees have greater control over when & where it is done)


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• TRADITIONAL HR– U.S. culturally driven

HR policies

– Segmented work/life boundaries

– Strive for compliance with EEO & AA

• FUTURE TRENDS– Global best practices

of HR policies

– Integrated/blurring work/life boundaries

– Manage diversity & EEO/AA compliance


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• TRADITIONAL HR– Technology

controlled by experts

– Limited training investments

– Explicit HR systems & Management Determined Policies

• (Most work rules are clearly written down and administered by the HR department and controlled by mgmt.)

• FUTURE TRENDS– Employees control

technology – -Learning organization &

high skill utilization – Implicit Systems &

Negotiated HR Policies• (A lot of critical HR work is

culturally driven. and constantly being renegotiated between employees & managers, employees & customers and teams.)


Module 2 - 28

Application

• HR Vignettes: Discuss each case in small groups and come to consensus on the guide questions to the exercise. Your group should be prepared to report out on your thinking and rationale for the case(s) you are assigned.

Documents

HR Strategies for Organizations Competing in the Millennium