What is Strategic HRM?

1. What is Strategic HRM? • HRM- the bundle of org. practices and policies, including: recruitment, selection, orientation, compensation, training, evaluation, career planning & job design, aimed at efficiently utilizing the human resources of an org. Has largely been seen as an administrative function and as a cost center • SHRM- Attracting, developing, retaining, deploying, evaluating, and motivating human resources to: • Further the accomplishment of org. strategy • Generate and sustain competitive advantages Seen as an investment and as a value-added activity

2. Central Themes of SHRM • Expanded Role of HR • Administrative Expert • Employee Champion • Strategic Partner • Change Agent • Emphasis on HR and general management competencies • Focus on customers, the value chain & deliverables; not on HR practices • HR seen as a source of strategic advantage; is increasingly important • People are an investment • HR can have a HUGE effect on the bottom line • HR practices can and must be costed and evaluated

3. A Model of the HR-Shareholder Value Relationship Employee Skills Design of Productivity Business Human Employee Improved Profits Market and Strategic Resource Motivation Creativity Operating and Value Initiatives Management Performance Growth System Job Design Discretionary & Work Effort Structures

4. SHRM Challenges • The need to be flexible in response to changing business environments • Increasing int’l competition and the expanding global economy • Increased litigation related to HRM • Rapid technological developments • Mergers & Acquisitions • Changing characteristics of the workforce • Older & more diverse • Generational values • Projected Labor Shortfall • Changing Expectations b/t employers & employees

5. High-Performance Work Practices • Large Investment in Training • Performance-Based Pay and Bonuses • Internal Promotions • Value and Attitude Fit as part of Selection • Long-Term Commitment to Employees • Generous Benefits

6. The Benefits of Putting People First • A One Standard Deviation Increase (from 50%ile to 84%ile) in these Practices is Associated with: • 7% decrease in turnover • $27,000 more in sales per employee • $18,000 more in market value per employee • $4,000 more in profits per employee • $41,000 more in shareholder wealth per employee • 10% greater chance of 5 year IPO survival

7. Overarching Themes • The Performance Equation • The job of managers is to enhance the performance of their people. HR must support managers in this endeavor • Performance is a function of: • Ability • Effort • Opportunity to Perform • Appropriate technology, tools, systems, resources, political cover • 80% of variance in performance is system-based (Deming) • How can HR affect these three levers?

8. SHRM & Alignment • Slate of HR Practices should be aligned with Org. Strategy, in particular, these 5 Forces: • Environment • Social, legal, economic & competitive forces • Org. Strategy • How does org hope to achieve competitive advantage? Distinct competencies • Org. Culture • Norms, values and assumptions that govern org behavior • Technology/Type of Job • How inputs are converted to outputs; Formal org structure, decision latitude, specialization, cooperation, layout, workgroup interdependence • Workforce Characteristics • Demography, labor market, skills

9. A Quick Review of Strategy • Strategic Management is aimed at identifying (formulation) and executing (implementation) activities designed to generate a sustainable competitive advantage • Porter’s Generic Strategies: • Cost vs. Differentiation • Focused vs. Broad • Miles & Snow Typology: • Prospectors, Defenders, Analyzers & Reactors • SWOT Analysis- • Scan the org and its environment to identify Strengths, Weaknesses, Opportunities & Threats • Development of Core Competencies • Development of rare, inimitable, non-substitutable and valuable resources

10. Internal Alignment Slate of HR Practices should be aligned with and complement each other • If not, fail to reap full benefit • E.g., Development & low turnover • Reinforces management’s message • Do we really value empowerment? • Employees (and prospective employees) know the lay of the land • ASA model; alignment of efforts • Increases Internal Equity • Alignment w/in employee, across employees, across time • Is too much alignment a bad thing? • Wage compression, external equity • Do we want “class distinctions”?

11. Strategic Focus Strategic Partner Align HR and business strategy Change Agent Ensure change capacity and lead change Processes People Admin. Expert Build efficient infrastructure Employee Champion Listen & respond, increase commitment Traditional HR Perceptions Operational Focus The Roles of SHRM • Must manage both people and processes • Must have both day-to-day/operational focus and a strategic/future focus

12. The Role of Strategic Partners • Create and manage processes to meet strategic goals and business requirements • HR follows from Strategy, but also shapes it over time • Three approaches to Strategy & HRM: • “Add-on” approach- Mgt makes business decisions, using market, product & technology input. Give plan to HR to help implement • “Isolated” approach- HR works on a plan, presents to mgt for approval, and then implements • “Integrated” approach- Mgt and HR work together to develop plans to highlight HR activities that help the business achieve goals • Only the 3rd approach ensures Alignment & Partnership

13. Challenges for SP’s • Following Through on Strategy Execution • Failing to Measure Deliverables • A “Balanced Scorecard” approach: • Economic value-added (EVA) • Customer value-added (CVA) • People (emp.) value added (PVA) • Relying on Quick Fixes- • the “benchmarking trap” & Fads • Overcome these through: • Proving worthy of and demanding participation in business DM process • Learning about the whole business • Management by Walking Around • Thorough diagnosis and follow-through • Publicize accomplishments: Becoming recognized for deliverables • Encouraging “org. learning”, shaping culture

14. Org. Diagnosis • Strategic Alignment is accomplished by conducting and continually updating an “organizational audit” • A systematic assessment and alignment of org. practices to business goals 4 Steps: • Define an “org. architecture” • Specify the major systems that compose the org. • Work with mgt. to set priorities & goals • Create an assessment process • Goals, gaps, types of data to be used, accountability • Provide leadership in improvement practices (lead by example)