CHAPTER 1

AN INVESTMENT PERSPECTIVE OF HUMAN RESOURCE MANAGEMENT

The Strategic View of Human Resources

Employees are human assets that increase in value to the organization and the marketplace when investments of appropriate policies and programs are applied. Effective organizations recognize that their employees do have value, much as same as the organizations physical and capital assets have value. Employees are a valuable source of sustainable competitive advantage.
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Sources of Employee Value

Technical Knowledge
Markets, Processes, Customers, Environment

Ability to Learn and Grow

Openness to new ideas Acquisition of knowledge and skills

Decision Making Capabilities Motivation Commitment Teamwork

Interpersonal skills, Leadership ability
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Valuation of Human Assets

Implications for Individuals and Organizations
Determination of compensation
Internal and external equity for employees in return for their contributions to the organization. Organization placement of resources and returns on employee development are aligned and well-matched.

Advancement opportunities
Developing current employees creates motivation and permits promotion from within.

Development of retention strategies

Effective means of retaining valuable employees allows for the recapture of the invested costs of their development.

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Investment Orientation

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The Investment-Oriented Organization

Organizational Characteristics
Sees people as central to its mission/strategy. Has a mission statement and strategic objectives that espouse the value of human assets in achieving goals. Has a management philosophy that encourages the development and retention of human assets and does not treat or regard human assets in the same ways as physical assets.

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Investment Orientation Factors

Senior Management Values and Actions
An organizations willingness to invest in its human resources is determined by the investment orientation of its managers.

Attitude Toward Risk

Investment in human resources is inherently riskier due to lack of absolute ownership of the asset.

Nature of Skills Needed by Employees

The more likely that skills developed by employees are marketable outside the firm, the more risky the firms investment in the development of those skills.
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Investment Orientation Factors

Utilitarian (Bottom Line) Mentality
An attempt is made to quantify employee worth to the organization through a cost-benefit analysis. The soft benefits of HR programs and polices are difficult to objectively quantify because they affect many different organizational areas and have differential effects on individual employees.

Availability of Outsourcing
If cost-effective outsourcing is available, investments will be made only in HR activities producing the highest returns and largest sustainable competitive advantages.
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CHAPTER 2
TRENDS AFFECTING HUMAN RESOURCE MANAGEMENT

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Major Factors Affecting HRM

Technological Advancement

Demographics and Diversity

Strategic HRM

Globalization
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Technology and HRM

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Technology Challenges for HRM

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Workforce Demographic Changes

The Graying of the Workforce Negative Aspects of Older Workers
Perceived resistance to change by older workers. Increased health-care costs for senior workers Blocking advancement opportunities for younger workers Higher wage and salary costs for senior workers

Positive Aspects of Older Workers

As productive or more productive than younger workers Have more organizational loyalty than younger workers Possess broader industry knowledge and professional networks
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Workforce Demographic Changes

Baby Boomers (19451962)
In excess supply in middle management ranks HR challenge is to manage plateaued workers

Baby Busters (1963mid-1970s)

Are career bottlenecked by the Boomers Who have skills in high demand are doing and will do well

Generation Xers (late 1970searly 1980s)

Have life-long exposure to technology and constant change Seek self-control, independence, personal growth, creativity Are not focused on job security or long-term employment.
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New Employee/Workplace Dynamics

Emphasis on the Management of Professionals
Establishment of separate career tracks
Technical/Professional, Managerial /Administrative

Use of project teams

Less Employee Loyalty, More Loyal to Self

Staying with employers for shorter periods; demanding more meaningful work and involvement in organizational decisions

Increased Personal and Family Dynamic Effects

More single-parent families, dual-career couples, and domestic partners

Increased Nontraditional Work Relationships

Part-time, consulting, and temporary employment flexibility Outsourcing and entrepreneurial opportunities
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Managing Workplace Diversity

Understanding and Appreciating Diversity
Is critical to effectively marketing to ethnic and minority groups Is promoted by having a diverse workforce at all organization levels Helps ensure that hiring and promotion decisions are unbiased by person differences

Diversity Management Programs/Initiatives

Must be integrated with organizations mission and objectives Help key decision makers identify diversitys benefits to the organization Make critical decisions about implementing the optimal program/initiative contingent on the organization and its people, mission and culture.

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CHAPTER 3:

STRATEGIC PLANNING
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Strategic Management
Strategic Human Resource Management
Involves aligning initiatives involving how people are managed with organizational mission & objectives

Strategic Management Process

Determining what needs to be done to achieve corporate objectives over 3 - 5 years Examining organization & competitive environment Establishing optimal fit between organization & its environment Reviewing & revising strategic plan

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Models of Strategy
Industrial Organization (O/I) Model
External environment is primary determinant of organizational strategy rather than internal decisions of managers Environment presents threats & opportunities All competing organizations control or have equal access to resources Resources are highly mobile between firms Organizational success is achieved by
Offering goods & services at lower costs than competitors Differentiating products to bring premium prices
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Models of Strategy
Resource-Based View (RBV)
An organizations resources & capabilities, not external environmental conditions, should be basis for strategic decisions Competitive advantage is gained through acquisition & value of organizational resources Organizations can identify, locate & acquire key valuable resources Resources are not highly mobile across organizations & once acquired are retained Valuable resources are costly to imitate & non-substitutable
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Contrasting the Two Approaches

Research provides support for both positions What drives strategy?
I/O: External considerations RBV: Internal considerations

I/O: Strategy drives resource acquisition RBV: Strategy determined by resources

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The Process of Strategic Management

Mission statement Environmental analysis Organizational self-assessment Establishing goals & objectives

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Process of Strategic Management

Exhibit 3-1

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Mission Statement
Explains purpose & reason for existence Usually very broad No more than a couple of sentences Serves as foundation for everything organization does

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Solectron Mission Statement

Our mission is to provide worldwide responsiveness to our customers by offering the highest quality, lowest total cost, customized, integrated, design, supply-chain and manufacturing solutions through long-term partnerships based on integrity and ethical business practices.

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Analysis of Environment
Critical components of external environment
Competition Industry structure Government regulations Technology Market trends Economic tends

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Organization Self-Assessment
Identify primary strengths & weaknesses Find ways to capitalize on strengths Find ways to improve or minimize weaknesses Examine resources
Physical Human Technological Capital
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Organization Self-Assessment

Examine internal management systems

Culture Organization structure Power dynamics & policy Decision-making processes Past strategy & performance Work systems
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Establishing Goals & Objectives

Goals should be:

Specific Measurable Flexible

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Corporate Strategies: Growth

Benefits
Gaining economies of scale in operations & functions Enhancing competitive position vis--vis industry competitors Providing opportunities for employee professional development & advancement

Internal Methods
Penetration of existing markets Developing new markets Developing new products or services for existing or new markets

External Methods
Acquiring other organizations Vertical integration

HR Issues
Planning for new hiring Alerting current employees Ensuring quality & performance standards are maintained
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HR Issues
Merging organizations Dismissing redundant employees

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Corporate Strategies: Stability

Maintaining status quo due to limited environmental opportunities for gaining competitive advantage Few employees will have opportunities for advancement Critical that management identify key employees & develop specific HR retention strategies to keep them
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Corporate Strategies: Turnaround or Retrenchment

Downsizing or streamlining organization in cost-cutting attempt to adjust to competitive environment Few opportunities & many environmental threats Important to develop HR practices to manage survivors

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Business Unit Strategies: Cost Leadership

Increases in efficiency & cutting of costs, then passing savings to consumer Assumes price elasticity in demand for products or services is high Assumes that customers are more price sensitive than brand loyal HR strategy focuses on short-term performance measures of results & promoting efficiency through job specialization & cross-training

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Business Unit Strategies: Differentiation

In order to demand a premium price from consumers
Attempting to distinguish organizational products or services from other competitors or Creating perception of difference

Organization offers employees incentives & compensation for creativity HR strategy focuses on external hiring of unique individuals & on retaining creative employees

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Business Unit Strategies: Focus

Business attempts to satisfy needs of only a particular group or narrow market segment Strategic intent is to gain consumer loyalty of neglected groups of consumers Strategic HR issue is ensuring employee awareness of uniqueness of market segment
Thorough employee training & focus on customer satisfaction are critical factors Hiring members of target segment who are empathetic to customer in target segment
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Dyer & Holders Typology of Strategies

Exhibit 3-3 (page 1)

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Dyer & Holders Typology of Strategies

Exhibit 3-3 (page 2)

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Benefits of a Strategic Approach to HR

Facilitates development of high-quality workforce through focus on types of people & skills needed Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest cost Facilitates planning & assessment of environmental uncertainty & adaptation of organization to external forces
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Reading 3.1

Human Resources & Resource Based View

People management systems construct

Not all competitive advantage begins with people management systems These systems create value to extent that they impact stock, flow, & change of intellectual capital/knowledge Basis of core competencies

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Reading 3.1

Human Resources & Resource Based View

Skill concept expanded to consider stock of intellectual capital in firm Behavior concept reconceptualized as flow of knowledge within firm through its creation, transfer, & integration Core competence arises from combination of firms stock of knowledge & flow of knowledge through creation, transfer, & integration in a way that is valuable, rare, inimitable, & organized

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Reading 3.1

Human Resources & Resource Based View Dynamic capability construct illustrates interdependent interplay between workforce & core competence as it changes over time

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Reading 3.2

Distinctive Human Resources

Flexibility dimension associated with prospectors Established markets category linked to classifications like defenders Employment practices are difficult to change & transfer Core competencies should drive business strategy & not vice versa
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Reading 3.2

Distinctive Human Resources If competencies are available to everyone on open market, how can they generate a unique competency & competitive advantage for any one firm?

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Reading 3.3

The Five Ps Model of SHRM

Philosophy
Statements of how organization values & treats employees; essentially culture of the organization

Policies
Expressions of shared values & guidelines for action on employee-related business issues

Programs
Coordinated & strategized approaches to initiate, disseminate, & sustain strategic organizational change efforts necessitated by strategic business needs

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Reading 3.3

The Five Ps Model of SHRM

Practices
HR practices motivate behaviors that allow individuals to assume roles consistent with organizations strategic objectives Three categories of roles:
Leadership Managerial Operational
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Reading 3.3

The Five Ps Model of SHRM

Processes
Continuum of participation by all employees in specific activities to facilitate formulation & implementation of other activities

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Reading 3.3

The Five Ps Model of SHRM

Successful SHRM efforts begin with identification of strategic needs Employee participation is critical to linking strategy & HR practices Strategic HR depends on systematic & analytical mindset Corporate HR departments can have impact on organizations efforts to launch strategic initiatives

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