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.
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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
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
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
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
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
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
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?
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
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
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”?
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
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
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
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)