Meeting Present and Emerging Strategic Human Resource Challenges 1 Meeting Present and Emerging Strategic Human Resource Challenges

Challenges Explain how a firm’s human resources influence its performance. Describe how firms can use HR initiatives to cope with workplace changes and trends such as a more diverse work force, the global economy, downsizing, and new legislation. Distinguish between the role of the HR department and the role of the firm’s managers in utilizing human resources effectively. Indicate how members of the HR department and managers within a company can establish a strong partnership. Formulate and implement HR strategies that can help the firm achieve a sustained competitive advantage. Identify HR strategies that fit corporate and business unit strategies.

Key HR Challenges for Today’s Managers Environment Rapid Change Workforce Diversity Globalization Rise of Internet Legislation Evolving Work and Family Roles Skill Shortages and the Rise of the Service Sector Organization Competitive Position: Cost, Quality, Distinctive Capabilities Decentralization Downsizing Organizational Restructuring Self-Managed Work Teams Small Businesses Organizational Culture Technology Outsourcing Environmental challenges are the forces external to the firm. They influence organizational performance but are largely beyond management’s control. Managers need to monitor the external environment constantly for opportunities and threats. This slide demonstrates how a variety of environmental factors impact the organization. Individual Matching People and Organization Ethical Dilemmas and Social Responsibility Productivity Empowerment Brain Drain Job Insecurity

Blazing Graphics’ Mission Statement Blazing Graphics will provide you with the most effective visual communication attainable. We will help you achieve all of your goals while providing you with the greatest value both seen and unseen. Here at Blazing Graphics we will take the time to do things right. We do this by controlling the entire graphic art process. This enables us to better coordinate each job while providing a higher level of service. This slide, and the next, represent an organization’s mission statement. Mission statements have become useful tools that an organization may use to clarify the essential strengths and purposes of an organization, as well as point to where the organization would like to go.

Blazing Graphics’ Mission Statement (cont.) Our mission is to ensure exceptional quality by opening up communication between crafts normally separated and at times adverse to one another. Here at Blazing Graphics we have committed ourselves and our resources to being on the forefront of technology. Creative technical know-how is the single most critical determinant of economic competitiveness. It’s our real belief that together we can create an environment that will be both personally and professionally fulfilling for all the people who make up the Blazing Community.

Effective HR Strategy Formulation and Implementation Organizational Strategies Consistency Environment Fit Fit Improved Firm Performance HR Strategies Consistency Consistency The success of HR strategies depends on the situation or context in which they are used. An HR strategy’s effect on firm performance is always dependent on how well it fits with other factors. This slide depicts the key factors that firms should consider in determining which HR strategies will have positive impact on firm performance: organizational strategies, environment, organizational characteristics, and organizational capabilities. Fit Fit Organizational Characteristics Organizational Capabilities Consistency

Selected HR Strategies That Fit Porter’s Three Major Types of Business Strategies Strategy Common Organizational Characteristics HR Strategies Overall cost leadership Sustained capital investment and access to capital Intense supervision of labor Tight cost control requiring frequent, detailed control reports Low-cost distribution system Structured organization and responsibilities Products designed for ease in manufacture Efficient production Explicit job descriptions Detailed work planning Emphasis on technical qualifications and skills Emphasis on job-specific training Emphasis on job-based pay Use of performance appraisal as a control device These next three slides illustrate Porter’s three major types of business strategies. The overall cost leadership strategy is aimed at gaining a competitive advantage through lower costs. Cost leadership requires aggressive construction of efficient plant facilities, intense supervision of labor, vigorous pursuit of cost reductions, and tight control of distribution costs and overhead.

Selected HR Strategies That Fit Porter’s Three Major Types of Business Strategies (cont.) Strategy Common Organizational Characteristics HR Strategies Differ- entiation Strong marketing abilities Product engineering Strong capability in basic research Corporate reputation for quality or technological leadership Amenities to attract highly skilled labor, scientists, or creative people. Emphasis on innovation and flexibility Broad job classes Loose work planning External recruitment Team-based training Emphasis on individual- based pay Use of performance appraisal as development tool A differentiation business strategy attempts to achieve a competitive advantage by creating a product or service that is perceived as unique. Approaches to differentiation can take may forms, among them: design or brand image; technology; features; customer service; and dealer networks.

Selected HR Strategies That Fit Porter’s Three Major Types of Business Strategies (cont.) Strategy Common Organizational Characteristics HR Strategies Focus Combination of cost- leadership and differentiation strategy directed at a particular strategic target. Combination of HR strategies above. A focus strategy relies on both a low-cost position and differentiation, with the objective of serving a narrow target market better than other firms. The HR strategies likely to fit the focus strategy best would be somewhere in the middle of those described for low-cost producers and differentiators.

Selected HR Strategies That Fit Miles and Snow’s Two Major Types of Business Strategies Strategic HR Area Defender Strategy Prospector Strategy Innovation Flexibility Broad job classes Loose work planning External recruitment Supervisor makes selection decision Emphasis on fit of applicant with culture Informal hiring and socialization process of new employees Work flows Staffing Efficient production Control emphasis Explicit job descriptions Detailed work planning Internal recruitment HR department makes selection decision Emphasis on technical qualifications and skills Formal hiring and socialization process These next three slides illustrate how strategic HR areas differ between the two major types of business strategies suggested by Miles and Snow. Work flows, staffing, employee separations, performance appraisal, training, and compensation all can be approached differently; depending on whether a defender strategy or a prospector strategy is used.

Selected HR Strategies That Fit Miles and Snow’s Two Major Types of Business Strategies (cont.) Strategic HR Area Defender Strategy Prospector Strategy Employee separations Performance appraisal Voluntary inducements to leave Hiring freeze Continuing concern for terminated employee Preferential rehiring policy Uniform appraisal procedures Used as control device Narrow focus High dependence on superior Layoffs Recruit as needed Individual on his/her own No preferential treatment for laid-off workers Customized appraisals Used as developmental tool Multipurpose appraisals Multiple inputs for appraisals

Selected HR Strategies That Fit Miles and Snow’s Two Major Types of Business Strategies (cont.) Strategic HR Area Defender Strategy Prospector Strategy Training Compensation Individual training On-the-job training Job-specific training “Make” skills Fixed pay Job-based pay Seniority-based pay Centralized pay decisions Team-based or cross-functional training External training Generic Training emphasizing flexibility “Buy” skills Variable pay Individual-based pay Performance-based pay Decentralized pay decisions

Selected HR Strategies For Firms Low and High on Different Environmental Characteristics Dimension Low High Degree of Uncertainty Volatility Detailed work planning Job-specific training Fixed pay High dependence on superior Control emphasis Efficient production Loose work planning Generic training Variable pay Multiple inputs for appraisals Flexibility Innovation The next two slides focus on four major dimensions of the environment in which an organization operates: degree of uncertainty, volatility, magnitude of change, and complexity. HR strategies are given for environments that are low in the particular environmental dimension, and different strategies are given for environments that are high in the same environmental dimension.

Selected HR Strategies For Firms Low and High on Different Environmental Characteristics (cont.) Dimension Low High Magnitude of Change Complexity Explicit job descriptions Formal hiring and socialization of new employees “make” skills Uniform appraisal procedures Control emphasis Internal recruitment Centralized pay decisions High dependence on superior Broad job classes Informal hiring and socialization of new employees “buy” skills Customized appraisals Flexibility External recruitment Decentralized pay decisions Multiple inputs for appraisals

Competencies Required of HR Department to Become a Full Strategic Partner Leadership Understand the nature and styles of leadership, and display appropriate leadership characteristics in performance of professional responsibilities. Demonstrate leadership at multiple performance levels: Individual Team Unit or Organization For the sake of the firm, managers and the HR department need to work together closely. Lack of cooperation has traditionally been a problem. The next five slides highlight five competencies required of HR departments in order that they might be strategic partners with management. Companies can take certain steps to foster an effective partnership between managers and HR department. Companies should: (1) Analyze the people side of productivity rather than depend solely on technical solutions to problems. (2) View HR professionals as internal consultants who can provide valuable advice and support that improve the management of operations. (3) Instill a shared sense of common fate in the firm rather than a win/lose perspective among individual departments and units. (4) Require some managerial experience as part of the training of HR professionals. (5) Actively involve top corporate and divisional managers in formulating, implementing, and reviewing all HR plans and strategies in close collaboration with the HR department. (6) Require senior HR executives to participate on an equal basis with other key managers from the various functional areas (marketing, finance) involved in charting the enterprise’s strategic direction.

Competencies Required of HR Department to Become a Full Strategic Partner (cont.) Knowledge of the Business Understand corporate business (structure, vision and values, goals, strategies, financial, and performance characteristics). Understand the unit’s business, including special knowledge of competitors, products, technology, and sources of competitive advantage. Understand internal and external customers. Understand the environment (external and internal) of corporation and individual businesses. Understand key business disciplines Nature, scope, and HR implications of business globalization Information technology as it affects competitiveness and business processes

Competencies Required of HR Department to Become a Full Strategic Partner (cont.) HR Strategic Thinking Understand the strategic business planning process. Understand and be able to apply a systematic HR planning process. Be able to select, design, and integrate HR systems or practices to build organizational mindset, capability, and competitive advantage for the business. Be able to develop and integrate business unit HR strategies within framework of corporate HR strategies.

Competencies Required of HR Department to Become a Full Strategic Partner (cont.) Process Skills All HR professionals should be competent in key corporate processes and understand management processes critical to particular business units. Understand key process skills such as consulting, problem solving, evaluation/diagnosis, workshop design, and facilitation. Understand the basic principles, methodologies, and processes or organizational change and development. Facilitate and manage organizational change. Balance, integrate, and manage under conditions of uncertainty and paradox.

Competencies Required of HR Department to Become a Full Strategic Partner (cont.) HR Technologies All HR professionals should have a generalist perspective on HR systems and practices as they relate to achievement of business competitive advantage. Generalists are capable of designing, integrating, and implementing HR systems to build organizational capability and create business competitive advantage. Specialists are capable of designing/delivering leading-edge practices to meet competitive business needs. All HR professionals are capable of measuring effectiveness of HR systems and practices.

Relationship of HR Department and managers HR responsible for developing programs; management responsible for implementation Each accountable for assisting the other!

Companies can foster effective partnership Formal HR skills training for managers Managerial experience as part of training for HR professionals Position HR staff as internal consultants Implement incentives for HR and managers to work together Involve top operational managers in development of HR strategies Involve senior HR executive(s) as equal partners in corporate strategic planning

Companies can foster effective partnership Establish ongoing evaluation process Predetermined goals (specific, measurable, related to corporate goals) Data gathering systems Evaluate both process and outcomes—relate to goals!

Recap Chapter 1 HR includes a long list of functions There are strategic choices in each of these functional areas that should be made in a way that supports the mission and overall strategic plan Environmental factors and organizational characteristics impact the most effective mix of HR strategies HR professionals and operating management must collaborate on both strategy development and implementation of HR processes