A Strategically-Aligned Organizational Culture is the best Enabler of your strategy Culture: shared values and norms. Rules: Formal directives (SOPs). Norms: shared standards against which the appropriateness of behavior can be evaluated. Formal rules, policies, and procedures will hardly result in outstanding customer service, innovation, or quality.

How norms shape organizational culture: A monkey-see, monkey-do story

None of these monkeys had ever been showered before. Many of them had never seen another monkey being hit by the others. Yet they didn’t dare to touch the bananas!

Counterproductive norms “If you continue like this, you are going to make lots of enemies around here. ” “We have never done things that way.” Strategically-aligned norms “I can’t believe you didn’t work harder to find those shoes for her.” “You can’t treat customers like that!” Humans use more subtle ways to enforce norms…

The Three C’s of a Strong Culture: Clear, Consistent, and Comprehensive Turf battlesCommitment and (self) control Mind your business (it doesn’t really matter anyway) Go along to get along (or let’s agree to be mediocre) Agreement Intensity lowhigh low high

Cultural Levers Recruit and Select for those hard- to-train attributes demanded by your strategy. Socialize, orient, and train to enable the attributes. Lead and reward to achieve strategic results and create a spiraling effect. Cultural Levers

And remember: If you don’t form a strategically- aligned culture that helps you achieve your strategic objectives, A culture will be formed anyway!

Traditional Organizational Structure Chief Exec. Officer President Executive VP HR Director HR Manager HR VP Mftg. Director Mftg. Manager Mftg. VP Finance Director Finance Manager Finance VP Accounting Director Accounting Manager Accounting VP Marketing Director Marketing Manager Marketing

Designing Competency Models and Pay-for- Knowledge Programs l Establishing Skill Blocks »Skill type »Number of skills »Grouping of skills l Transition Matters »Skills assessment »Aligning pay with the knowledge structure »Access to training l Training and Certification »In-house or outsourcing training »Certification and recertification

OUTSOURCING THE COMPENSATION FUNCTION Why outsourcing? Why now? 1.Better use of “HR time” (HR executives becoming strategic partners). 2.Transfer administrative processes to focus on core business (Make capital funds available for core business areas). 3.HR departments run as profit centers. 4.Imitation/Institutionalism/Benchmarking. 5.Increased complexity of compensation issues due to new regulations. 6.Advanced technology does not require an HR on-site location. Outsourcing provides access to the latest technology. 7.May provide a better quality of service at less cost than an in- house operation. 1-18

OUTSOURCING: MORE THAN COST- CUTTING 1.Outsourcing as a strategic practice. 2.Forming strategic outsourcing alliances. 3.Outsourcing as a means to question the organization’s underlying assumptions. 4.Outsourcing as a source of competitive advantage: strategic outsourcing alliances are difficult to replicate. 1-19

TYPES OF OUTSOURCING 1.Total HR outsourcing: no need for a core HR group on-site. 2.Partial HR outsourcing: retain some HR activities. 3.Employee leasing: hire vendor to maintain HR functions in-house. 4.Time-sharing; share systems time and equipment; vendor furnishes technical staff. 1-20

SHOULD COMPENSATION BE OUTSOURCED? Best outsourced?Best in-house? PayrollCompensation 1-21

OUTSOURCING STAGES 1.Setting goals & reaching consensus. 2.Performing cost-benefit analysis: compare to current costs. 3.Availability of vendors/in-house capability. 4.Establishing a time line. 5.Identifying possible vendors 6.Preparing RFP: What info do you need to select a vendor? What is your timetable? Short or long-term alliance? Breach of contract liabilities. 7.Choosing vendor that best fits your needs/culture. Document criteria/selection procedures. 1-22

OUTSOURCING STAGES (cont’d) 8.Negotiate contract: fee increases, hidden fees, non- standard contracts. 9.Communicating with HR staff & company: manage fears. 10.Check vendor background. Conflict of interests for your agent? 11.Build rollout schedule: plan ahead for enrollment periods. 12.Monitor performance & regulatory compliance. Deliverables. 1-23

TRANSITION ISSUES 1.Outsourcing presents opportunities for professional renewal/rejuvenation. 2.HR as core business vs. HR as support function. 3.Opportunities for career mobility & broader professional horizons. 4.Job loss anxiety among transitioned personnel. 5.Manage termination. 6.Change attitudes: Outsourcing as strategic alliance rather than “downsizing.” 7.Outsourcing and the public sector: Privatization debate. 1-24

Discussion Question 2-1 Base 50% Bonus 17% Options 16% Benefits 17% Chart A Base 70% Bonus 6% Options 4% Benefits 20% Chart C Base 50% Bonus 10% Options 10% Benefits 30% Chart B Base 80% Benefits 20% Chart D Study each one of the following pay mixes. Think about the kind of HR strategy that each one of these pay mixes supports. Then, answer the questions in WebCT Quiz 2-1. What kind of strategy (I.e., performance- driven, job security, market match, and work-life balance) is best supported by each one of these pay mixes?