Managing Employee Performance and Reward Concepts, Practices, Strategies 2nd edition

Being strategic What is strategy? ‘Best practice’ vs strategic alignment External alignment Internal alignment Internal/external alignment Competitive or business strategy Organisational structure Management culture What aligns with what?

Strategy in human resource management A plan of action for identifying goals and establishing how to achieve them Strategy-making: ‘Intended’: premeditated, planned, envisioned, holistic, long-term, driven ‘Enacted’: emergent, evolutionary, short-term, reactive, iterative, negotiated, partial, derived HRM strategy: An integrated ‘bundle’ of human resource principles, policies and practices associated with how human resources can best be utilised within an organisation to ensure organisational effectiveness and support organisational success

The ‘best practice’ approach Basis: There is one set of superior human resource practices that can be applied in virtually any context to achieve competitive advantage and deliver ‘win-win’ for all parties Versions and exponents: Theory Y (McGregor) 1980s Harvard School (Walton, Beer, Spector, Lawrence) High-involvement management (Lawler, Pfeffer, Guest, Long & Shields) Mutual gains model (Kochan, Osterman) High-performance work systems (Appelbaum, Cappelli, Huselid, Becker)

The ‘best practice’ approach Which practices? The Pfeffer-digm (Jeffrey Pfeffer, 1998) Employment security Selective hiring Self-managed teams or teamworking High pay contingent on company performance Extensive training Reduction of status differences Information sharing

The ‘best practice’ approach Strengths: Consistency of practice ‘Off the shelf’ ‘Best practice’ benchmarking Wide agreement as to what constitutes ‘worst practice’ Some evidence that it does work

The ‘best practice’ approach Weaknesses: Human resource policies alone cannot deliver overall competitive advantage Ignores organisational specifics/differences Insensitive to contextual factors, including national differences Internal inconsistencies, e.g. selective hiring vs egalitarianism Disagreement about which practices are ‘best’; e.g. group vs individual incentives Prone to ‘faddism’

External alignment External contingencies Product market competition and conditions Labour market conditions Social and political factors Opportunities Threats Competitive/ business strategy ‘External alignment’

HRM strategy, policies and practices Internal alignment Internal contingencies Organisational structure, size, age, technical base Management culture/style Workforce profile Strengths Weaknesses ‘Internal alignment’ HRM strategy, policies and practices

Internal/external alignment Product market competition and conditions Labour market conditions Social and political factors Internal Organisational structure, size, age, technical base Management culture/style Workforce profile Opportunities Threats Strengths Weaknesses Competitive/ business strategy HRM strategy, policies and practices ‘External alignment’ ‘Internal alignment’ Internal/external alignment

Four key elements of strategic alignment COMPETITIVE STRATEGY MANAGEMENT CULTURE PERFORMANCE AND REWARD SYSTEMS ORGANISATIONAL STRUCTURE

Competitive or business strategy (Miles & Snow, 1978) ‘Defender’ Defend market from competitors Operate in stable product/service markets Narrow product/service range Risk-averse, reactive Compete on basis of low cost or high quality Maximise efficiency of existing technical methods

Competitive or business strategy (Miles & Snow, 1978) ‘Analyser’ Cautious diversifiers, typically in related product/service markets Market followers

Competitive or business strategy (Miles & Snow, 1978) ‘Prospector’ Market opportunists and aggressive diversifiers Operate in changing product/service markets Market-wide range of often unrelated products/services Proactive; first movers Compete on basis of innovation Flexible and agile Strategic risk-taking

Organisational structure (Burns & Stalker, 1961) The framework of roles, relationships and rules that provide organisational cohesion and integration.

Organisational structure (Burns & Stalker, 1961) ‘Mechanistic’ High formalisation High centralisation Narrow span of control High standardisation Examples: Military Multi-divisional firms Bureaucratic government departments Unions Centrally controlled franchises (e.g. McDonald’s)

Organisational structure (Burns & Stalker, 1961) ‘Organic’ Low formalisation Low centralisation Wide span of control Low standardisation Examples: Decentralised networks/franchises (IGA, Amway, community banks, eBay) Joint venture projects (movies, software development) Employee-owned firms/collectives

Management culture ‘Traditional’ Detailed division of labour Vertical communications Strong technical or bureaucratic control systems Hierarchical/top-down decision-making Labour as a ‘factor of production’ Task compliance Internal labour market/promotion/training Commitment to employer Unionised Relational psychological contract

Management culture ‘High involvement’ Fluid division of labour Lateral communications Shared decision-making Devolved/consultative External recruitment Employees seen as high-value ‘contributors’ Commitment to profession Non-unionised Transactional psychological contract

Aligning strategy, structure, culture, espoused contracts and performance requirements