Strategically Managing the HRM Function Chapter 16 Strategically Managing the HRM Function After reading this chapter, you should be able to: Describe the roles that HR plays in firms today and the categories of HRM activities. Discuss how the HR function can define its mission and market. Explain the approaches to evaluating the effectiveness of HR practices.

Strategically Managing the HRM Function Chapter 16 Strategically Managing the HRM Function Describe the new structures for the HR function. Relate how process reengineering is used to review and redesign the HR practices. Discuss the types of new technologies that can improve the efficiency and effectiveness of HR. Describe how outsourcing HR activities can improve service delivery efficiency and effectiveness.

Introduction Human resource management practices can help companies gain a competitive advantage. Virtually every HR function in top companies is going through a transformation process to create a function that can play this new strategic role while fulfilling its other roles. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Categories of HRM Activities Transformational Knowledge management Cultural Change Strategic redirection and renewal Management development Traditional Recruitment and selection Training Performance management Compensation Employee relations Transactional Benefits administration Record keeping Employee services McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Categories of HRM Activities Transactional activities are the day-to-day transactions a company makes. Low in their strategic value. Traditional activities are the nuts and bolts of HR such as performance management, training, recruiting, selection, compensation, and employee relations. Moderate strategic value. Transformational activities create long-term capability and adaptability for the firm. Activities include knowledge management, management development, cultural change, and strategic redirection and renewal. Comprise the greatest strategic value for the firm McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Strategic Management of the HRM Function For the HR function to become truly strategic in its orientation, it must view itself as being a separate business entity. A customer orientation is one of the most important changes in the HR function’s attempts to become strategic. The products of the HR department must be identified. The technologies through which HR meets customer needs vary depending on the need being satisfied. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Customer-Oriented Perspective Customers Line managers Strategic planners Employees HRM function Technology Staffing Performance management Rewards Training and development Customers’ Needs Committed employees Competent employees McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Basic Process for HR Strategy Scan the external environment Identify strategic business issues Identify people issues Develop HR strategy Communicate the HR strategy McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Involving Line Executives Involving those in charge of running the business can increase the quality of information from which the HR strategy is created. Involvement can occur in a few ways: Line executives could simply provide input. Line executives could be members of a team that develops HR strategy. Once strategy is developed, line managers could receive communications with the HR strategy information. Line managers could formally approve a strategy. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Categorizing HR Strategies HR-Focused People-Linked Business-Linked Business-Driven People issues/ outcomes HR strategy People issues/ outcomes HR strategy Business issues/ outcomes People issues/ outcomes HR strategy Business issues/ outcomes People issues/ outcomes HR strategy McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Measuring HRM Effectiveness Marketing the function – evaluation is a sign that the HR function cares about the organization as a whole and is trying to support operations, production, marketing, and other functions in the company. Providing accountability – evaluation helps determine whether the HRM function is meeting its objectives and effectively using its budget. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Approaches to Evaluating HRM Effectiveness Audit Approach Focuses on reviewing the various outcomes of the HR functional areas. Both key indicators and customer satisfaction measures are typically collected. Employee assessment. Surveys of top-line executives. Analytic Approach Focuses on either: (1) determining whether the introduction of a program or practice has the intended effect or (2) estimating the financial costs and benefits resulting from an HR practice. More demanding than the audit approach because it requires the detailed use of statistics and finance McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Restructuring to Improve HRM Effectiveness The HRM function effectively is divided into three divisions: The Centers for Expertise - Consist of functional specialists in the traditional areas of HR. These individuals ideally act as consultants in the development of state-of-the-art systems and processes for use in the organization. The Field Generalists - Consist of the HRM generalists who are assigned to a business unit within the firm. The Service Center - Consists of individuals who ensure that the transactional activities are delivered throughout the organization. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Outsourcing Outsourcing - Contracting with an outside vendor to provide a product or service to the firm. Usually this is done for one of two reasons: The outsourcing partner can provide the service more cheaply The partner can provide it more effectively. Firms primarily outsource transactional activities and services of HR such as payroll, pension, and benefits administration. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Reengineering Reengineering is a complete review of critical work processes and redesign to make them more efficient and able to deliver higher quality. The reengineering process has four steps: Identify the process to be reengineered Understand the process Redesign the process Implement the process Feedback McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Improving HRM Effectiveness through New Technologies New technologies - Applications of knowledge, procedures, and equipment that have not previously been used. Transaction Processing—Computations and calculations used to review and document HRM decisions and practices. These include documenting employee relocation, payroll expenses, and training course enrollments. Decision Support Systems—These are systems designed to help managers solve problems. They usually include a "what if" feature. Expert systems are computer systems incorporating the decision rules of people deemed to have expertise in a certain area. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Network and Client Server Architecture A Network is a combination of desktop computers, computer terminals, and mainframes or minicomputers that share access to databases and a means to transmit information throughout the system. Client-server architecture is a common form of network that provides the means of consolidating data and applications into a single system. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Relational Database, Imaging, and Groupware Relational database – Information is stored in separate files that look like tables and can be linked by common elements such as name. Imaging – The process for scanning documents, storing them electronically, and retrieving them. Groupware (or electronic meeting software) – A software application that enables multiple users to track, share, and organize information and to work on the same document simultaneously. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

Software Applications for HRM Improving HRM Effectiveness through New Technologies–E-HRM - The speed requirements of e-business force HRM managers to explore how to leverage technology for the delivery of traditional and transformational HRM activities. Recruitment and Selection - Technology has enabled firms to monitor hiring processes to minimize the potential for discriminatory hiring decisions. Compensation and Rewards - Leveraging technology may allow firms to better achive their compensation goals with considerably less effort. Training and Development - Technology allows firms to deliver training and development for at least some skills or knowledge faster, more efficiently, and possibly more effectively. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

The Future for HR Professionals The future for careers in HR seems brighter than ever. Firms need to seek balance between attracting, motivating, and retaining the very best talent and keeping costs as low as possible. Finding such a balance requires HR leaders who have a deep knowledge of the business combined with knowledge of HR issues, tools, processes, and technology. McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.