Human Resource Management:Gaining a Competitive Advantage

Chapter 16

Strategically Managing the

HRM Function

Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Learning Objectives

Discuss roles that HRM plays and categories of HRM activities.

Discuss how HRM function can define its mission and market.

Explain approaches to evaluating the effectiveness of HRM practices.

Describe new structures for HRM function. Describe how outsourcing HRM activities can improve

service delivery efficiency and effectiveness. Relate how process reengineering is used to review

and redesign HR practices. Discuss types of new technologies that can improve

HR efficiency and effectiveness. List competencies HRM executive needs to become a

strategic partner in the company.

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Introduction

HRM practices can help companies gain a competitive advantage.

Virtually every HR function in top companies

is going through a transformation process to create a function that can play this new strategic role while fulfilling its other roles.

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Categories of HRM Activities

Transformational Knowledge Management

Cultural ChangeStrategic Redirection &

RenewalManagement development

TraditionalRecruitment and Selection

TrainingPerformance Management

CompensationEmployee Relations

TransactionalBenefits Administration

Record KeepingEmployee Services

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Categories of HRM Activities Transactional activities - day-to-day transactions

- Low strategic value.

Traditional activities - nuts and bolts of HR such as performance management, training, recruiting, selection, compensation and employee relations. - Moderate strategic value.

Transformational activities create long-term capability and adaptability. Activities include knowledge management, management development, cultural change and strategic redirection and renewal. - Greatest strategic value

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Strategic Management of HRM

For HR to become truly strategic in its orientation, it must view itself as a separate business entity.

Customer orientation is one of the most important changes in HR's attempt to become strategic.

Products of HR must be identified.

Technologies through which HR meets customer needs vary depending on the need being satisfied.

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Customer-Oriented Perspective

CustomersLine managers

Strategic plannersEmployees

H R M

TechnologyStaffing

Performance ManagementRewards

Training & Development

Customers’ NeedsCommitted EmployeesCompetent Employees

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Basic Process for HR Strategy

Scanexternal

environment

Identifystrategicbusiness

issues

Identifypeopleissues

DevelopHR

strategy

CommunicateHR

strategy

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Involving Line Executives

Involving those in charge of running the business can increase quality of information from which HR strategy is created.

Involvement can occur 4 ways:

1. Line executives could provide input.

2. Line executives could be members of a team that develops HR strategy.

3. Once strategy is developed, line managers could receive communications with HR strategy information.

4. Line managers could formally approve a strategy.

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Characterizing HR Strategies

HR-Focused

People-Linked

Business-Linked

Business-Driven

People issues/outcomes

People issues/outcomes

HR strategy

HR strategy

HR strategy

HR strategy

Business issues/outcomes

People issues/outcomes

Business issues/outcomes

People issues/outcomes

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Measuring HRM Effectiveness

Marketing the function – evaluation is a sign that HR cares about the organization as a whole and supports operations, production, marketing and other functions.

Providing accountability – evaluation helps determine whether HRM function is meeting its objectives and effectively using its budget.

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Audit & Analytic Approaches Evaluating HRM Effectiveness

Audit Approach• Focuses on

reviewing various outcomes of HR functional areas.

• Both key indicators and customer satisfaction measures are collected.

• Employee assessment.

• Surveys of top executives.

Analytic Approach• Focuses on either:

(1) determine whether introduction of a program or practice has intended effect or

(2) estimate financial costs and benefits resulting from HR practice.

• More demanding than the audit approach because it requires detailed use of statistics and finance

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Restructuring to Improve HRM

3 Divisions of HRM:

1. Centers for Expertise - functional specialists in traditional areas of HR who act as consultants in development of state-of-the-art systems and processes for use in the organization.

2. Field Generalists - HRM generalists assigned to a business unit.

3. Service Center - ensure that transactional activities are delivered throughout the organization.

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Outsourcing

Outsourcing - Contracting with an outside vendor to provide a product or service to the firm.

2 Reasons to Outsource: Outsourcing partner can provide the service

more cheaply Outsourcing partner can provide it more effectively.

• Firms primarily outsource transactional activities and services of HR such as payroll, pension and benefits administration.

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Reengineering

Reengineering is a complete review of critical work processes and redesign to make them more efficient and able to deliver higher quality

4 Steps of The Reengineering Process :

Identifyprocess

to bereengineered

Understand process

Redesign process

Implement process

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Improving HRM Effectiveness through New Technologies

New technologies - Applications of knowledge, procedures, and equipment that have not previously been used. Transaction Processing—Computations and calculations

used to review and document HRM decisions and practices. These include documenting employee relocation, payroll expenses and training course enrollments.

Decision Support Systems—Systems designed to help managers solve problems. usually include a "what if" feature.

Expert systems - Computer systems incorporating decision rules of people deemed to have expertise in a certain area.

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Network and Client Server Architecture

A Network is a combination of desktop computers, computer terminals and mainframes or minicomputers that share access to databases and a means to transmit information throughout the system.

• Client-server architecture is a common form of network that provides the means of consolidating data and applications into a single system.

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Relational Database, Imaging and Groupware

Relational database – Information is stored in separate files that look like tables and can be linked by common elements such as name.

Imaging – Process for scanning documents, storing them electronically and retrieving them.

Groupware (or electronic meeting software) – software application that enables multiple users to track, share and organize information and to work on same document simultaneously.

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Software Applications for HRM Improving HRM Effectiveness through New

Technologies–E-HRM – Speed requirements of e-business force HRM managers to explore how to leverage technology for delivery of traditional and transformational HRM activities.

Recruitment and Selection - Technology monitors hiring processes to minimize potential for discriminatory hiring decisions.

Compensation and Rewards - Leveraging technology may allow firms to better achive compensation goals with less effort.

Training and Development - Technology allows firms to deliver training and development for some skills or knowledge faster, more efficiently and possibly more effectively.

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The Future for HR Professionals

The future for HRM careers brighter than ever.

HR leaders need knowledge of the following:- business, change processes, integration competence and people’s role in competitive advantage

- HR issues, tools, processes and technologies, policies and programs

- HR practices in areas such as staffing, development, rewards, communication and organizational design

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Summary HRM functions must consist of individuals who view

themselves as businesspeople who work in HRM.

With the opportunity to impact the way organizations compete through people, comes serious responsibility and accountability.

Firms need balance attracting, motivating and retaining the best talent and keeping costs low.

HR leaders need knowledge of the business combined with knowledge of HR issues, tools, processes and technology.

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