intro_strategic What is Strategic HRM? HRM- the bundle of org. practices and policies, including: recruitment, selection, orientation, compensation, training, evaluation, career planning & job design, aimed at efficiently utilizing the human resources of an org. Has largely been seen as an administrative function and as a cost center SHRM- Attracting, developing, retaining, deploying, evaluating, and motivating human resources to: Further the accomplishment of org. strategy Generate and sustain competitive advantages Seen as an investment and as a value-added activity

Central Themes of SHRM Expanded Role of HR Administrative Expert Employee Champion Strategic Partner Change Agent Emphasis on HR and general management competencies Focus on customers, the value chain & deliverables; not on HR practices HR seen as a source of strategic advantage; is increasingly important People are an investment HR can have a HUGE effect on the bottom line HR practices can and must be costed and evaluated

A Model of the HR-Shareholder Value Relationship Employee Skills Design of Productivity Business Human Employee Improved Profits Market and Strategic Resource Motivation Creativity Operating and Value Initiatives Management Performance Growth System Job Design Discretionary & Work Effort Structures

SHRM Challenges The need to be flexible in response to changing business environments Increasing int’l competition and the expanding global economy Increased litigation related to HRM Rapid technological developments Mergers & Acquisitions Changing characteristics of the workforce Older & more diverse Generational values Projected Labor Shortfall Changing Expectations b/t employers & employees

High-Performance Work Practices Large Investment in Training Performance-Based Pay and Bonuses Internal Promotions Value and Attitude Fit as part of Selection Long-Term Commitment to Employees Generous Benefits

The Benefits of Putting People First A One Standard Deviation Increase (from 50%ile to 84%ile) in these Practices is Associated with: 7% decrease in turnover $27,000 more in sales per employee $18,000 more in market value per employee $4,000 more in profits per employee $41,000 more in shareholder wealth per employee 10% greater chance of 5 year IPO survival

Overarching Themes Ability Effort Opportunity to Perform The Performance Equation The job of managers is to enhance the performance of their people. HR must support managers in this endeavor Performance is a function of: Ability Effort Opportunity to Perform Appropriate technology, tools, systems, resources, political cover 80% of variance in performance is system-based (Deming) How can HR affect these three levers?

SHRM & Alignment Slate of HR Practices should be aligned with Org. Strategy, in particular, these 5 Forces: Environment Social, legal, economic & competitive forces Org. Strategy How does org hope to achieve competitive advantage? Distinct competencies Org. Culture Norms, values and assumptions that govern org behavior Technology/Type of Job How inputs are converted to outputs; Formal org structure, decision latitude, specialization, cooperation, layout, workgroup interdependence Workforce Characteristics Demography, labor market, skills

A Quick Review of Strategy Strategic Management is aimed at identifying (formulation) and executing (implementation) activities designed to generate a sustainable competitive advantage Porter’s Generic Strategies: Cost vs. Differentiation Focused vs. Broad Miles & Snow Typology: Prospectors, Defenders, Analyzers & Reactors SWOT Analysis- Scan the org and its environment to identify Strengths, Weaknesses, Opportunities & Threats Development of Core Competencies Development of rare, inimitable, non-substitutable and valuable resources

Internal Alignment Slate of HR Practices should be aligned with and complement each other If not, fail to reap full benefit E.g., Development & low turnover Reinforces management’s message Do we really value empowerment? Employees (and prospective employees) know the lay of the land ASA model; alignment of efforts Increases Internal Equity Alignment w/in employee, across employees, across time Is too much alignment a bad thing? Wage compression, external equity Do we want “class distinctions”?

The Roles of SHRM Must manage both people and processes Must have both day-to-day/operational focus and a strategic/future focus Strategic Focus Operational Focus Processes People Strategic Partner Align HR and business strategy Change Agent Ensure change capacity and lead change Admin. Expert Build efficient infrastructure Employee Champion Listen & respond, increase commitment Traditional HR Perceptions

The Role of Strategic Partners Create and manage processes to meet strategic goals and business requirements HR follows from Strategy, but also shapes it over time Three approaches to Strategy & HRM: “Add-on” approach- Mgt makes business decisions, using market, product & technology input. Give plan to HR to help implement “Isolated” approach- HR works on a plan, presents to mgt for approval, and then implements “Integrated” approach- Mgt and HR work together to develop plans to highlight HR activities that help the business achieve goals Only the 3rd approach ensures Alignment & Partnership

Challenges for SP’s Following Through on Strategy Execution Failing to Measure Deliverables A “Balanced Scorecard” approach: Economic value-added (EVA) Customer value-added (CVA) People (emp.) value added (PVA) Relying on Quick Fixes- the “benchmarking trap” & Fads Overcome these through: Proving worthy of and demanding participation in business DM process Learning about the whole business Management by Walking Around Thorough diagnosis and follow-through Publicize accomplishments: Becoming recognized for deliverables Encouraging “org. learning”, shaping culture

Org. Diagnosis Strategic Alignment is accomplished by conducting and continually updating an “organizational audit” A systematic assessment and alignment of org. practices to business goals 4 Steps: Define an “org. architecture” Specify the major systems that compose the org. Work with mgt. to set priorities & goals Create an assessment process Goals, gaps, types of data to be used, accountability Provide leadership in improvement practices (lead by example)