HR Strategies for Organizations Competing in the Millennium

1. HR Strategies for Organizations Competing in the Millennium

2. 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? Management Quiz/Future Trends

3. 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 HR Strategy: Core Concepts

4. 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

5. 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? Basic Question: How do HR Practices add Strategic Value?

6. 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 Why do HR Strategies Matter?

7. 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 Some General Strategic HR Congruence Issues

9. 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

10. 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 Strategic HRM Perspectives

11. 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

12. 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? HR Bundles Characterizing High Performance Work Systems (Resource View/ Universal Best Practice Example)

13. 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

14. 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

15. 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 Modular Companies: Outsource Non-Vital Functions

16. 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 Modular Companies

17. 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 Virtual Companies

18. 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 Virtual Companies

19. 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 Virtual Companies

20. 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 Barrier-Free

21. 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 Barrier-Free

22. 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) Re-Engineering

23. 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) Re-Engineering

24. HR Strategy Framework

25. 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) Current HR Trends: Workplace of the Future

26. 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 Current HR Trends: Workplace of the Future

27. 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.) Current HR Trends: Workplace of the Future

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.