Chapter 14: Creating High-Performing HR Systems

Objectives After reading this chapter, you should be able to: Explain the principle of external fit. Explain the principle of internal fit. Explain how HR systems can be aligned with the contributions employees make. Discuss how to manage an employment portfolio. Explain what strategic performance drivers and HR deliverables are. Evaluate the external alignment of your HR system. Evaluate the internal alignment of your HR system. Create a plan to change your HR system to make it more effective.

Axioms for Effectively Managing Employees 11/21/2018 Axioms for Effectively Managing Employees No two companies are the same There is no one best way to manage employees Using the wrong practice, or using the right practice poorly, can cause more harm than good

High-Performing HR Systems External alignment — managers select HR activities that help company meet its organizational demands, cope with environmental factors and comply with regulatory issues Internal alignment — focuses on how well a firm’s employee management practices support one another

Internal Fit: Aligning HR Activities with One Another Each decision influences other choices companies make about managing employees Synergies occur when combined with other HR practices Deadly combinations - HR practices that seem appropriate but present problems when combined with other HR practices Powerful connections - occur when practices support and reinforce each other

Mapping your Employment Portfolio Core Employees High value and high uniqueness Most likely to contribute directly to a firm’s core competencies on the basis of what they know and how they use their knowledge Commitment-Based HR Systems investing extensively in the development of core employees’ competencies empowering employees to use their competencies in the performance of their jobs, and encouraging employees’ full participation in decision making and discretion on the job

Mapping your Employment Portfolio Job-Based Employees High value and low uniqueness Employees employed internally who do contribute in a unique manner Productivity – Based HR System Involves standardized jobs and selecting people from the external labor market who can contribute immediately in these jobs, rewards based on efficiency and productivity improvements, and Results-oriented performance management systems

Mapping your Employment Portfolio Contract Workers Low value and low uniqueness External employees Productivity – Based HR System focus on meeting preset rules, regulations, and/or procedures an emphasis on short-term productivity an emphasis on efficient performance of tasks that are limited in scope, purpose, or duration

Mapping your Employment Portfolio Alliance / Partners Low value and high uniqueness External employees who make unique contributions Productivity – Based HR System focus on managing external labor on a long-term basis through alliances or partnership reliance on group incentives, cross-functional teams, and the like

The HR Scorecard Offers a way to evaluate your HR systems To create an HR scorecard you need to: Identify your firm’s strategic performance drivers Evaluate your firm’s external alignment Evaluate your firm’s internal alignment

The HR Scorecard Step1: Identify your firm’s strategic performance drivers Activities that enable a company to realize its source of competitive advantage Low-cost leadership Operational excellence Increased productivity Strategic performance drivers - translate a firm’s strategic objectives into actionable activities

The HR Scorecard Step 2: Evaluate your firm’s external alignment Align primary HR activities with the source of firm’s competitive advantage Translate strategic performance drivers into HR deliverables HR deliverables - how HR systems create value for a company Evaluating the alignment of HR deliverables with the strategic performance drivers

The HR Scorecard Step 3: Evaluate your firm’s internal alignment Determine whether practices used for primary HR activities are helping or hurting the achievement of firm’s HR deliverables When misalignments occur, managers can look for ways to improve company's HR deliverables

Building a High-Performing Organization Continually assess the ability of your HR system to meet company’s changing needs Reassess and redesign the practices used to manage employees Customize an HR scorecard to be consistent, specific, and provide follow up

Building a High-Performing Organization (1) Customizing your HR scorecard Identify the source of company’s competitive advantage Follow steps already noted (2) Being consistent Ensure all practices reinforce rather than counteract each other (3) Being specific Employees need a clear understanding of what they need to do to help their company succeed F Follow up will dramatically increase success

Learning Exercise 1

Case Study 1: The Puzzling Climate at Digital Gaming