Strategic Human Resource Management

Management Principles

Craig W. Fontaine, Ph.D.

History of HRM’s Organizational Role

Formerly (HRM):• Administration• Employee relations• BenefitsNow:

• Business Partner• Gaining Strategic Advantage

Models of Strategy

• Industrial Organization (O/I) Model• External environment is primary determinant of organizational

strategy • 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

Models of Strategy• Resource-Based View

• An organization’s resources & capabilities, create competitive advantage

• 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

Both are Right…!

• Research provides support for both positions• Acquire resources to support strategy• Determine strategy based on resources

Strategy Human Resource Management addressed both approaches

Strategic HR Management

• Strategic Human Resource Management– Aligning initiatives and practices involving how

people are managed so that they support the organizational mission and business strategy

Core competencies should drive business strategy….

A Core Competency is a deep proficiency that enables a company to deliver unique value to customers.

• It embodies an organization’s collective knowledge.• Its creates sustainable competitive advantage for a company and helps

it branch into a wide variety of related markets. • It’s hard for competitors to copy or procure. • Understanding Core Competencies allows companies to invest in the

strengths that differentiate them and set strategies that unify their entire organization.

Example of Core Competencies

• Walt Disney World Parks and Resorts– Animatronics and Show Design– Story Creation and Themed Attractions– Efficient operation of theme parks

Strategic HRM Approach• 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

Distinctive Human Resources

• How can HRM practices specific to an organization create a competitive advantage?

Examples of HRM Practices

HRM practices can allow and motivate individuals to support an organization’s strategic objectives

– Hiring Practices• Who do we hire• Where do we look for workers

– Performance Management Practices• On what criteria are workers assessed

– Compensation and Reward Practices• What behaviors/actions are rewarded

HRM Practices - Exercise

– Hiring Practices• Who do we hire• Where do we look for workers

– Performance Management Practices• On what criteria are workers assessed

– Compensation and Reward Practices• What behaviors/actions are rewarded

Two Watch Companies

Rolex

Timex

• Very expensive• Hand Made

• Inexpensive• Mass Produced

Simple Concepts…

• People are the essential capital of all organizations

• Humans create organizational innovations and accomplishments

• Organizational success depends upon careful attention to human capital

But harder than you think…

Challenges: Economic

• Global Trade Challenge– Jobs and prosperity depend upon international trade– Job migration to South East Asia and China

• Challenge of Productivity Improvement– Productivity = outputs/inputs ratios– Essential for long-term success– Requires strategic thinking and creative responses– Understanding motivation

Challenges: Technological

• Computerization– Impacts virtually all aspects of work and life– Provide large amounts of data at great speed to managers– Flexibility e.g. telecommuting

• Automation– Potential benefits include speed, better customer service,

predictability and production quality– Use robots for hazardous or boring jobs

Challenges: Cultural

• Work related attitudes– Changing attitudes toward work and leisure– Demand for ethical conduct of business

• Ethnic diversity– Cultural mosaic

• Attitudes toward governments:– Divided population

Challenges: Demographic Trends

• Increasing number of women in the workforce• Shift toward knowledge workers• Educational attainment of workers (Bi-modal)• Employment of older workers• More part-time, contract and contingent workers

Objectives of SHRM: Organizational

• Contribute to organizational effectiveness• Means of helping the organization to achieve its primary

objectives• Provide level of service appropriate to the organization

Objectives of SHCM: Employee

• Assist employees in achieving their personal goals– Employee performance may decline or employees may

leave the organization if personal objectives are not considered

Objectives of HRM: Societal

• Respond to the needs and challenges of society• Minimize negative impacts on the organization• Reflect society’s concerns e.g. ecological

Goals of Strategic HCM

• Attract, retain, and motivate employees• Direct employee efforts toward goals of organization• Assist in the development of the strategic direction of the

organization• Provide the organization a source of competitive

advantage– Example: Watch Industry

Steps in Strategic HRM

EnvironmentalAnalysis

EnvironmentalAnalysis

OrganizationalMission &

GoalsAnalysis

OrganizationalMission &

GoalsAnalysis

Analysis ofOrganizational

Strengths &Culture

Analysis ofOrganizational

Strengths &Culture

Analysis ofOrganizational

Strategies

Analysis ofOrganizational

Strategies

Choice &Implementation

Of HCMStrategies

Choice &Implementation

Of HCMStrategies

Review & Evaluation of

HCM Strategies

Review & Evaluation of

HCM Strategies

Activities in Human Resource Management

• HC strategy formulation• Recruitment and selection (staffing)• Performance appraisal• Training and development• Compensation and benefits• Employee rights• Labor/management relations (if union)

Today’s Workforce Realities:

• Decade of boom & bust leaves working families with:– Stagnant, declining incomes– Increased inequality– Longer working hours– Less retirement savings; fewer health care benefits– Broader job insecurity– Loss of worker voice in society

• Current government policies producing:– Further cuts in services & jobs – Tax policies that further increase inequality– Deep divisions over war policies – Direct attacks on workers, unions, and core values

Job Satisfaction – Declining!

• The U.S. has seen a trend of increasingly high job dissatisfaction.

• Only 45 percent of Americans were satisfied with their jobs.

• A decrease from a 61 percent satisfaction rate in 1987

• Job dissatisfaction is highly correlated with a negative impact on organizational effectiveness

• Management must respond