Chapter 1 Kleiman

Human Resource Management & Competitive Advantage

HR & Competitive Advantage

• Non-human resources—such as land, capital and equipment

• Managing human resources is essential in order for a business to thrive and survive.

• People determine the organization’s goals and of course people run the organization to ensure goals are met/exceeded

• People are the competitive advantage to an organization’s success

HRM

• In HR we deal with issues such as pre-selection, selection, and post-selection

• Pre-selection we plan—organizations decide what types of jobs are going to exist and what are the qualifications.

• During the selection phase, the organization selects the employees:– Recruiting applicants– Assessing their qualifications– Selecting those most qualified

HRM

• Post-selection phase the organization develop sound HR practices for effectively managing their key talent

• The firm provides them with training and development opportunities to have the necessary skills to perform at satisfactory levels. (Mission, Vision, Strategic Business Objectives)

HRM

• Chapter 3 we talk about HR Planning. Here managers anticipate and meet changing needs relating to acquisition, deployment, and utilization of its employees

• The strategic planning process takes shape here• Demand and supply forecasting we determine

the number and types of employees we need (i.e. electrical engineers recruitment process)

HRM

• Chapter 4 we discuss job analysis a process for gathering, analyzing and documenting information about specific jobs

• Steps:

--Determining job qualifications for recruitment purposes

--Choosing the most appropriate selection techniques

--Developing training programs

HRM

• Steps:

--Developing performance appraisal rating forms

--Helping to determine pay rates

--Setting performance standards for productivity improvement programs (i.e. assessment testing for administrative positions)

HRM

• Selection Practices we mean policies and procedures used by organizations to staff positions

• Chapter 5 Recruitment to locate and attract applicants for specific positions (local, regionally, or nationally)/ internally

• Our goal is to identify a suitable pool of applicants quickly, cost efficiently, and legally

HRM

• Selection involves assessing and choosing job candidates. Again this process needs to be sound and legal

• HRM Post-Selection Practices—these practices maintain or improve a company’s worker’s job performance levels:– Training & Development (Chapter 7)—

planned learning experiences that teach workers to perform their current or future jobs effectively

HRM

• Training focuses on one’s current job and development focuses on possibly preparing employees for future jobs.

• What is the organizational goal? The improvement of organizational performance to meet/exceed goals and objectives

HRM

• HRM Post-Selection Practices:

--Performance Appraisal (Chapter 8)—

--where we measure an employee’s job performance and communicate on an on-going basis (“how of performance”, “what of performance” and development plan)--Decisions on promotions, demotions, discharges, and pay raises

HRM

• Compensation (Chapter 9)—

--entails pay and benefits. Pay refers to the wage or salary an employee earns

--Benefits are a form of compensation in addition to pay, such as health insurance or employee discounts

--Goal is to maintain a competent and loyal workforce at an affordable cost

HRM

• Productivity Improvement Programs (Chapter 10)--Tie behavior to rewards. We can have financial rewards (e.g., bonuses, pay raises) or non-financial (i.e., improved job satisfaction)--Goal of such programs is to motivate employees to engage in appropriate behaviors

HRM

• HRM is also influenced by external factors

--Legal & Environmental Issues (Chapter 2)

--federal, state and local laws (rights to fair and safe treatment)

--selection process must be conducted by “the book” (what are the needed job

qualifications and choose selection

methods that accurately measure those

qualifications

HRM

• Social, economic, and technological events that influence HRM:--cultural diversity of workforce--work and family issues--part-time temporary workers--emphasis on quality and teamwork--mergers and acquisitions--downsizing and layoffs--rapid advances in technology--continuous quality improvement--high rate of illiteracy in the workforce

HRM

• How do these events influence HRM?

--families-through maternity leave, child care, flextime, and job sharing

--older workers through skill upgrading and training handle new techniques

--educating employees on basic reading and writing, and math skills keep up with rapidly advancing technologies (Motorola)

HRM

• Workplace Justice Laws (Chapter 11)– Addresses the issue of employee rights—treat

workers in a non-discriminatory manner

--workplace rules, disciplinary and discharge procedures

• Union Influences (Chapter 12)– Adherence to written contracts (i.e., discipline,

promotions, grievance procedures, and overtime allocations

HRM

• Safety & Health Concerns (Chapter 13)– Legal, social, and political pressures on

organizations to ensure the health and safety of their employees

– Wellness and Employee Assistance Programs

(EAP)

HRM

• International Influences (Chapter 14)– Globalization has required companies to enter

foreign markets in order to compete as part of the globally interconnected set of business markets

– Managers need to be more globally oriented (i.e., understanding foreign cultures and languages and the dynamics of foreign marketplaces)

HRM

• Who is responsible for Developing & Implementing HRM Practices?– Most companies have an HRM department but there

is a shared partnership with the line organization (Reviews HR Models)

– Effective managers attempt to solve HR problems by:

--providing input into the selection decisions--trying to supervise people in a way that

creates a team feeling

HRM

– Effective managers attempt to solve HR problems by:

--providing training and coaching

--providing opportunities for employee advancement

--providing flexible scheduling for students and other part time workers

HRM

• HR consults to the line organization• Managers carry out many procedures and

methods devised by HR professionals:--Interview job applicants--Provide orientation, coaching, and on-the-job training--Provide and communicate job performance ratings--Recommend salary increases

HRM

• Managers carry out many procedures and methods devised by HR professionals:--Carry out disciplinary procedures--Investigate accidents--Settle grievance issues

• Gaining a competitive advantage:--Cost leadership strategy—firm provides the same services or products as its competitors, but produces them at a lower cost (Class discussion)

HRM

• Gaining a competitive advantage:– Product differentiation—occurs when a firm produces

a product or service that is preferred by buyers:--creating a better quality product or service than it’s competitors--providing innovative products or services that are not offered by its competitors--choosing a superior location—one more accessible to customers--promoting and packaging its product to create the perception of higher quality

HRM As A Competitive Advantage

• 1994 study examined the HRM practices and productivity levels of 968 firms across 35 industries– Effectiveness of each company’s set of HRM

practices was rated based on the presence of such things as:

• Incentive plans• Employee grievance systems• Formal performance appraisal systems• Workers participation in decision making

HRM: Competitive Advantage

• Strong link between HR competitiveness and productivity

--one standard deviation in HRM ratings translated to a productivity difference of 5%. Means that a company with a high HRM effectiveness ratings (e.g., 86th percentile) out-produced the “average” company by 5%


• Another study conducted by Chris Ryan and Associates evaluated the impact of a broad range of HRM practices on shareholder return. Found that 15-30% of the total value of a company could be attributed to the quality of HRM practices

• Where is the greatest impact?– Providing employees with effective orientation training– Letting employees know what is expected of them– Discharging employees that are chronically poor

performers


• Discuss Model on Linking HRM Practices to Competitive Advantage

• Direct Path—the way HRM practice is carried out can have an immediate impact on competitive advantage

• Indirect Path—an HRM practice can impact competitive advantage by causing certain outcomes, which, in turn, create competitive advantage


• Firms can achieve cost leadership through the use of effective HRM practices– HRM costs through recruitment, selection,

training and compensation—all big expenses for a firm

– Service industries 70% of their budget is made up of payroll


• Indirect Impact of HRM practices:– HRM practices------Employment centered

outcomes– Employment-centered outcomes---

Organization-centered outcomes– Organization-centered outcomes—

Competitive advantage


• Employee-centered outcomes:– Competence—knowledge, skills, and abilities

an employee has that the job requires– Motivation—is the employee willing to exert

the necessary effort to perform the job well– Work-related attitudes—is the employee

satisfied with their job, committed to the organization, and act as a good corporate citizen


• Employee-centered outcomes---organization-centered outcomes– Organization centered outcomes consist of

output, employee retention, legal compliance, and company reputation or image.

• Output refers to the quantity, quality, and innovativeness of the product or service offered by the firm

• Retention rates reflect the amount of employee turnover a firm experiences


Organization centered outcomes:• Retention rates reflect the amount of employee

turnover a firm experiences• Legal compliance concerns the issue of whether

the firm’s HRM practices conform to the requirements imposed by the various employment laws

• Company reputation concerns how favorably “outsiders”—potential applicants and customers—view the organization


• What drives employee retention?:– Career growth and learning opportunities– Fair pay– Company pride/organizational commitment– Employee empowerment– High involvement HR systems—let employees

use skills as they see fit or provide financial incentives


• Organization-Centered Outcomes---Competitive Advantage– Most common ways to cut HRM costs is to

employ technology to replace some of the more expensive HR professional-delivered services (i.e., e-learning vs. in class training)

– Low turnover of employees you will have better customer retention (recruiting, selection, and training costs of a new employee)


• Management of HR is less susceptible to imitation therefore competitive advantage achieved through HRM practices is likely to be more sustainable:– Competitors rarely have access to a firm’s HRM

practices– Even when practices are visible, their impact may not

be as favorable by competitors due to interrelated system (i.e., incentive pay system may only work when used in conjunction with selection practices that favor hiring risk takers. (Marriott Case Revisited)

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Chapter 1 Kleiman