Chap 001

Chapter 01 - Strategic Human Resource Management in a Changing Environment
CHAPTER 1 STRATEGIC HUMAN RESOURCE MANAGEMENT IN A CHANGING ENVIRONMENT
CHAPTER OBJECTIVES: After reading this chapter, you should be able to: 1. Describe the field of HRM and its potential for creating and sustaining competitive advantage. 2. Describe discrepancies between actual HRM practices and recommendations for HRM practice from research. 3. Describe the major activities of HRM. 4. Explain important trends relevant to HRM, including the increasing globalization of the economy, changing technology, the role of regulations and lawsuits, the changing demographics of the workforce, and the growing body of research linking particular HRM practices to corporate performance. 5. Emphasize the importance of measurement for effective and strategic HRM. 6. Understand what is meant by competitive advantage, and why it is important for organizations.
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2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
CHAPTER 1 - SUMMARY
I. Overview A. Good measurement, allied with business strategies, will help organizations select and improve all of their HRM activities and provide a much stronger connection between HRM activities and organizational effectiveness. II. What is Human Resource Management? A. HR consists of all people who perform the organizations activities. 1. The HRM function involves all decisions that affect member of the work force 2. HRM is pervasive throughout the organization. 3. HRM is a business within the company with 3 distinct product lines 4. HRM functional departments provide tools, processes and data for organizational design, staffing, rewards, training, performance management and compliance 5. HRM can create and sustain competitive advantage; however, as practiced by line managers is often a weakness rather than a strength B. HRM and Corporate Performance 1. High performance work practices" (HPWP) are HR practices that have been shown to have a significant effect on corporate performance. 2. They are characteristics designed to enhance employees competencies and productivity so that employees can be a reliable source of competitive advantage. i. Valid staffing and promotion systems ii. Formal mediation and grievance procedures iii. Training and development iv. Team-based work configurations v. Group-based rewards and skill-based pay at above market rates vi. Formal performance management and appraisal with a high % of jobs filled from within. 3. The most effective HRM functions are conceptualized in a business capacity, constantly focusing on the strategy of the organization and the core competencies of the organization. C. Effective HRM focus on strategy and core competencies 1. HRM specialists must demonstrate a positive impact on the company's bottom line. 2. Cost and efficiencies are criterion for evaluating HRM. III. Discrepancies between Academic Research and HRM Practice A. HR specialist must have knowledge and skills to identify best practices aligned with current research. 1. One study reinforced a knowledge gap between practitioners and academic findings B. Should be capable of conducting own research to evaluate off-the shelf-programs. 1. Must have the training to evaluate vendor claims of cost effectiveness and efficiency gains.
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C. Academic research offers objective evaluation of activities and programs. 1. There are discrepancies between findings of academic research versus current HR practice. 2. Necessary to regularly evaluate programs to be sure they continue to be valid and reliable. IV. The Domains of Human Resource Management (Figure 1-3) A. Five Major HRM domains are: 1. Organizational design; 2. Staffing; 3. Performance management and appraisal; 4. Employee training and organizational development; 5. Reward systems, benefits & compliance; i. Employer relations; and ii. Employee health and safety B. Organizational design is the arrangement of work tasks based on the interaction of people, technology, and the tasks to be performed in the context of the mission, goals, and strategic plan of the organization. 1. HRM activities include: i. Human resources planning, ii. Job and work analysis, iii. Organizational restructuring, iv. Job design, computerization, 2. Design drives staffing, training, performance management and compensation. i. Should almost always be the first issue addressed whenever significant change is necessary C. Staffing is flow of people into, through, and out of the organization. 1. Recruitment, outplacement, selection, promotion, and termination are among the functions. D. Performance management assesses individual, unit, or other aggregated levels of performance 1. Measures and improves work performance. 2. Includes employee discipline. E. Training and organizational development establish, foster and maintain employee skills 1. Management development 2. Career Planning 3. Attitude surveys 4. Employee assistance/counseling programs F. Reward systems and benefits have to do with any type of rewards or employee benefits. 1. Direct and indirect compensation, merit pay, profit sharing, health care, parental leave programs, vacation leave, pensions. 2. Compliance requirements of local, state and federal agencies. 3. Labor law, health and safety issues and unemployment policy 4. Union relationships and collective bargaining
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V.
Trends Enhancing the Importance of HRM A. Trend #1: The Increased Globalization of the Economy 1. Opportunity for global workforce and labor cost reduction i. Development of a worldwide labor market for US companies ii. Easy to move work around when it can be digitized iii. Decrease the cost of labor iv. HRM is more complicated v. Increased union activities & resistance. vi. Corporate downsizing linked to new technology 2. Increasing global competition for US products & services i. Barriers to entry have been reduced, increasing international competition from firms and individuals alike. ii. Requires constant vigilance over productivity and customer satisfaction 3. Opportunity for expansion that presents global changes for HR i. US exports now generate about one in six American jobs, an increase of over 20% in just 10 years ii. U.S. firms are expanding in new countries and new markets iii. Restructuring/downsizing a. Large corporations have reduced work forces by more than 10% in the last decade. b. HRM specialists experts in organizational restructuring c. Conduct vocational counseling for displaced d. Assist in developing new staffing plans e. Help in a legal defense against allegations of discrimination. B. Trend #2: Technological Changes, Challenges and Opportunities. 1. Great opportunities presented by Web-based systems i. Products and services can be delivered more effectively through an optimal combination of people, software and equipment; thereby, increasing productivity. ii. Maximize profit margins and sustained customer value iii. Automation of HRM activities/transactions a) Electronic tracking of HR activities such as turnover and performance reviews. Software is easily customized to each organization. b) Computer search of a potential applicant pool. c) Standardized resumes in database. d) Fast, convenient and efficient recruiting of core personnel e) Announcement and responses through electronic mail. f) Increased speed of communication across organization. g) Worldwide virtual teams h) Computer based testing and interviewing. 2. New Threats: Increased focus on security of personnel information and intellectual property i. ensuring employee privacy and confidentiality ii. protecting intellectual property a) Email/ electronic communication policies b) Banning cell phones/cameras & instant messaging
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c) Policies regarding personal communication devices and social media and networking C. Trend #3: Increase in Litigation & Regulation Related to HRM 1. Federal, state & municipal lawsuits on the increase i. Federal lawsuits increased over 125% since 1991. ii. Jury awards have gotten much larger: 2010, 32% of judgments were $1 million or more iii. Expected increase in age discrimination lawsuits due to aging of workforce and recent Supreme Court rulings. iv. Federal protection against employer use of genetic information v. State laws regarding corporate acquisitions and mergers, AIDs victims and sexual orientation, family leave benefits, and video displays vi. Health and safety regulations, employee pensions and other compensation programs, plant closures, mergers and acquisitions, new immigration laws, and equal opportunity laws and guidelines. 2. Wrongful discharge; negligent hiring and retention lawsuits D. Trend #4: Changing Characteristics of the Workforce 1. Growing workforce diversity, which complicates HRM i. more diverse HRM systems & practices increases the probability of litigation ii. Estimated that by 2016 US workforce will be 80% white, 12% African American and 5% Asian iii. Greater proportion of women and minorities have entered male-dominated positions iv. Nearly 90% of the growth in the US workforce from the first part of the 21st century came from women, immigrants, African-Americans, Hispanic and Asians. v. More dual-career couples in the labor force vi. Fewer than 20% of the workforce fit the male, white, single-earner household mold vii. May 2008: 11.6% of US population foreign born about half of the youngest 100 million Americans are immigrants and their US born children. 2. Labor shortages/aging workforce vs. Millennials rising i. Baby Boomers: a) Baby Boomer generation (born between 1946-64) retirements expected to create a shortage of skilled workers and perhaps affect economic output By 2030, Boomers make will up 20% of population Increase social security and Medicare costs/contributions Some experts predict enough Boomers will remain in the workforce to make up for any shortfall of workers and reduce the projected govt. unfunded obligations. 2008 economic turmoil will likely impact Baby Boomer retirement plans Generational conflicts may continue Age discrimination litigation is expected to increase o 2008 Supreme Court ruling on age discrimination changed the burden of proof needed to prove age discrimination and may further increase ligation ii. Generation Y/ Millennials / Net Generation a) estimated in 2014 there will be almost 63 million Gen Y (born 1979-1995) in the workforce while Boomers will decline to less than 48 million
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b) Expected to have greater career vs. personal demands career vs. child/elder care c) More racially and ethnically diverse than Boomers and Gen Xers more comfortable working in a diverse environment iii. HRM must develop and implement programs on diversity, more flexible work schedules, better training programs, child and elder care arrangements, and career development strategies a) HRM must build and sustain a quality workforce in the face of increased diversity b) Millennials have increased racial and ethnic diversity and are more comfortable working in a diverse environment. E. Summary: HR consultants have been instrumental in helping companies discover their core competencies and then developing optimal work design and HR strategies. 1. Competition for HR related projects can result in outsourcing and has reduced the size of many HR departments VI. The Importance of HRM Measurement in Strategic Thinking A. A workforce than can execute strategy is the most critical and underperforming asset in most organizations. 1. Three challenges to maximizing workforce potential to meet strategic objectives: i. view the workforce in term of contributions rather than cost ii. use measurement as a tool for differentiating contributions to strategic impacts iii. hold line and HR mgt responsible for getting the workforce to execute strategy 2. Six general steps of a workforce scorecard i. identify critical and carefully defined outcome measures that really matter ii. translate the measures into specific actions and accountabilities iii. employees receive detailed descriptions of what is expected and how improved can be facilitated iv. identify high and low performing employees and establish differentiated incentive system v. develop supporting HR management and measurement systems vi. specify the roles of leadership, the workforce, and HR in strategy execution 3. Three challenges for successful workforce measurement & management i. Perspective challenge ii. Metrics challenge iii. Execution challenge
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B. The key is linking measurement to strategic goals 1. Link measurement to goals and make connections to leading and lagging indicators. C. Chain of relationship: 1. Turnover, long-term profitability, growth and HRM practices are driven by customer satisfaction 2. In the past HRM interventions were rarely linked to financial measures or cost figures in order to show a reliable financial benefit D. Develop clear criteria linked to strategic goals is critical for managerial success and should be a major driver of HR policy 1. Requires sound measurement 2. Should try to quantify all facets of HR to determine what works and what doesnt work; while focusing on the big picture
VII.
Competitive Advantage A. Competitive advantage is organizational placement in favorable position relative to other companies in industry B. Customer Value 1. If customer perceive they receive more value from their transaction with an organization than from its competitors. 2. Value chain analysis assesses amount of added value produced by each position, program, activity and unit; allows the organization to refocus on its core competencies and requirements. 3. Reputation of the organization/ How a company treats its employees is important for avoiding lawsuits and bad publicity C. Customer Value related to Corporate Social Responsibility 1. Many customers seek out products and services at least to some extent as a function of the reputation of the organization selling the product or service 2. Some companies believe that social responsibility figures into the calculation of their value (i.e. Special Olympics, Environmental Policies, International labor conditions, employee relations, etc). 3. Evidence indicates that corporate CSR is related to financial performance. i. Socially responsible investing ii. Corporate Sustainability Movement iii. Employer-Employee Relations 4. Maintaining Uniqueness i. Uniqueness defined as cannot easily imitate or copy ii. ie. Apples product lines 5. Sources of Uniqueness i. Ensure uniqueness lasts over time ii. Four mechanisms to offer customers uniqueness:
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a) Financial or economic capability derives from an advantage related to costs: produce a good/service more cheaply; the overriding cost equation. b) Strategic or product capability: differentiated products or services. c) Technological or operational capability: a distinctive process. d) Organizational capability: matching customer and strategic needs through work structure and design. VIII. Summary A. Human resource management is concerned with any decision that affects workforce and potential workforce 1. Line management is still primarily responsible for HRM 2. Trends underscore the importance of HRM 3. Organizations need competent personnel trained in HRM and motivated managers to recognize the importance of HRM B. Focus HR programs on "leading indicator" measurement 1. Measured in the context of the mission and strategic objectives 2. Enhance competitive position by focusing on customers and offering uniqueness. C. Four capabilities provide uniqueness and competitive advantage: financial, strategic or product, technological or operational, and organizational. D. Organizational capability derives from the organizations HRM practices E. HRM professionals need up-to-date knowledge of HRM research and the regulatory environment.
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CHAPTER 1 - IMPORTANT TERMS

Baby-Boomers - People born between 1946- 1964 Core Competencies - What a company does best and the essence of its business. Correlation - Statistical relationship between two or more variables (-1 to 1.0) Customer Value - Customers perceive that they receive more value for their transaction from an organization than that of its competitors. Competitive Advantage - customers perceive they receive more value from their transactions with an organization than from its competitors. Corporate social responsibility (CSR) - when an organization considers the interests of society and the impact of their activities on stakeholders and the environment (source: Wikipedia). Corporate Sustainability Movement - companies making a profit while not sacrificing the resources of its people, the community and the planet. Diversity - In context of this chapter refers to growing number of women and minorities entering the workforce. Effectiveness - Meeting or exceeding customer requirements. Efficiency - In context of this chapter refers to meeting customer requirements at the lowest cost possible. Employee training and organizational development - Programs concerned with fostering and maintaining employee skills based on organizational and employee needs. Employee Engagement - an employee's involvement with, commitment to, and satisfaction with work Execution challenge - Workforce scorecard challenge; Does management have access to the data and motivation to use the data in decision making? Financial or Economic Capability - A business receives special access to financial funding or is able to produce a good or service cheaper than that of its competitors. Generation X - people born between 1965 1976 Generation Y (Millennials) - people born between 1977 - 1994 High Performance Work Practices (HPWP) - HR practices that are correlated with financial performance, productivity, product and service quality, and cost control. Intellectual Property Information that a company considers to be confidential including such things as patents, financial information and customer lists
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Human Resources - consist of all people who perform an organization activities Human Resources Management - concerns the personnel polices and managerial practices and system that influence the workforce Lagging Indicators - Traditional financial performance measures such as return on equity (ROE), stock price, and return on investment (ROI). Leading Indicators - Indicators shown to predict lagging indicators. Meta-analyses - The quantitative analyses of a research topic. Metrics challenge - Workforce scorecard challenge; Has the organization identified and collected the right measures of success? Millennials (Generation Y) - born between 1977 - 1994 Organizational Capability - Businesss ability to manage organizational systems and people in order to match customer and strategic needs. Outsourcing moving a function out of the organization to be handled by a company specializing in that function Organizational design - Involves the arrangement of work tasks based on the interaction of people, technology, and the tasks to be performed in the context of the mission, goals, and strategic plan of the organization. Performance appraisal and management - Include assessments of individual, unit, or other aggregated levels of performance to measure and improve work performance. Perspective challenge - Workforce scorecard challenge; Does management fully understand how workforce behaviors affect strategy execution. Quantitative capable of being measured; based on math, numbers and mathematical modeling Reward systems, benefits, and compliance - Refers to type of rewards or benefits that may be available to employees.
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Society for Human Resource Management - 190,000-member society for HRM which established the Human Resources Certification Institute Staffing - Has to do with flow of people into, through, and out of the organization. Strategic or Product Capability - Business offering of a product or service that differentiates it from other products or services. Socially Responsible Investing - investors buy into companies with favorable corporate social/environmental performance. Technological or Operational Capability - Business that has a distinctive way of building or delivering is products or services. Turnover employees who exit the organization Uniqueness - offering a product or service that your competitor cannot easily imitate or copy. Validity shown to predict something important Workforce scorecard - six steps for managing human capital to execute strategy.
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CHAPTER 1 - DISCUSSION QUESTIONS

1. Describe the changing status of HRM. What factors have led to these changes?
HRM executives are now vice presidents and definitely do more than plan the company picnic. HR is often involved with company strategy, improving quality and production, reducing labor costs and increasing the bottom line and market share. This has happened because HRM professionals have been able to quantify its functions and tie their successes into the corporate mission and its companys competitive advantage. HRM has procured larger budgets and more clout in company decision-making processes. 2. How do productivity concerns influence organizational policies and procedures regarding HRM activities?
HR policies and practices can enhance productivity, product, and service quality, and can create and sustain a competitive advantage. HRM programs can be directly linked to substantial cost savings, financial performance, and increased productivity. Examples of recent HRM activities directed at these criteria include new programs instituted by Owens Corning, John Hancock, RJR Nabisco, and Office Depot through its HRM division. These programs reduce the number of workers while increasing productivity. Additional programs that cross-train and test employees instituted at Frito-Lay, AMC Theaters and Blockbuster Video have reduced turnover, reduced theft, and increased productivity. 3. Describe the major HRM activities conducted in an organization. Provide an example of each from a company with which you are familiar.
The specific examples will vary; however, the answers will be represented in Figure 1-3. The major HRM activities include organizational design staffing performance management & appraisal employee training and organizational development reward systems, benefits and compliance 4. What impact should the composition of the workforce have on HRM practices or activities? What future trends do you see that will influence HRM activities? Why is the growing cultural diversity of the workforce a management challenge?
In the past the typical worker was a male (often white) who was a member of a single-income household- fewer than 20% of todays employees fit this description. By 2010 only 15% of the US workforce will be native-bon white males. A greater proportion of women and minorities have entered traditional male-dominated positions. Nearly 90% of the growth in the workforce from 1995-2008 came from women, immigrants, African Americans, Hispanic and Asians. In addition, growing rates of Baby-Boomers are retiring while the rate of Gen Y entering the workforce increases.
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Today's HRM professionals must deal with a growing variety of workers who each bring with them their own special needs and ideas. To accommodate the new workforce, organizations are offering more flexible work schedules, better training programs, flexible travel plans, child-care arrangements, elder-care arrangements, and career development strategies so that work and nonwork responsibilities can be better integrated. Compliance with EEO laws has become more challenging with a probability of lawsuits increasing due to a more diverse workforce (aging baby-boomers). The ability to create innovative programs to train, compensate, assess and develop employees for the competitive advantage of the company is a challenge HRM will increasingly have with the growing diverse workforce. The future trends that will influence HRM activities are the increased globalization of the economy, changing technology, the need to be flexible to changing business environments, increases in litigation related to HRM, changing characteristics of the workforce and more emphasis on bottom line contribution. HRM may be required to develop programs to better train employees in tune to globalization i.e., many customers from different countries may require different training for customer service representatives. Many employees may be from different cultures requiring application of different laws for fair treatment compliance. HRM may have to train employees to work with the changing technology. In addition, HRM may have to use the changing technology to job match, interview, apply workforce reduction requirements, retrain employees that are cut due to the technological change, etc. As companies identify and develop core competencies, outsourcing activities increases. 5. Why is the support of line management critical to the effective functioning of HRM practices in an organization? Provide some suggestions for ensuring that this support is maintained.
To the extent that management is motivated by an agenda that is incompatible with the agenda of the HRM function, the effectiveness of that system may be seriously jeopardized. Specifically, without cooperation from line management, HRM activities are likely to fail. HRM professionals need to convince line managers of the value of HRM activities for meeting organizational goals and for creating and sustaining a competitive edge. Instilling in line managers and employees alike a sense of ownership in HRM practices can do this. Line management needs to recognize the importance of HRM activities. In addition, line management and HRM departments should work closely together to identify critical performance requirements of the personnel function necessary for meeting specific organizational business needs. In the past HRM interventions were rarely linked to macro productivity or cost figures in order to show a reliable financial benefit. Demonstrating a link with the "bottom line" can ensure respect for HRM practices. Moreover, by demonstrating the utility of HRM practices, HR professionals will likely have an easier time "selling" their products (e.g., selection systems) to an organization. Demonstrating utility also allows HR professionals to speak the language of their counterparts from other divisions in the organization. Finally, by demonstrating a link between the bottom-line and HRM practices, top management is less likely to severely cut HRM budgets in times of economic pressure.
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6.
Why does the number of qualified applicants for each strategic position relate to corporate effectiveness? How can HRM enhance this?
The number of qualified applicants for strategic positions is considered a leading indicator for an HR department and being on the best place to work list makes recruiting easier. Research has tied selection ratio to HR activities to corporate financial performance. The primary route for enhancing this is to increase the applicant pool through a variety of recruitment sources. This includes the categories of sources such as newspapers, job fairs, and online recruiting, as well as targeted recruitment through race or ethnic-oriented media outlets, etc. 7. What are the sources of uniqueness that can aid a company seeking competitive advantage?
The four sources of uniqueness for competitive advantage are financial or economic capability, strategic or product capability, technological or operational capability, and organizational capability. HRM is critically tied to organizational capability and therefore can give the company a competitive advantage. Organizational capability may be critical to taking advantage of other sources of uniqueness. 8. Explain how Ford and GM have a competitive disadvantage related to financial capability.
Both Ford and GM have high legacy costs which include health insurance and pension commitments. GM is obligated to pay in the range of $60 billion in health care costs and $87 billion in pension costs to retirees alone. GM also has pension obligations to Delphi of between $1.5 billion and $11 billion (The Economist, October 2005). Meanwhile Ford is facing an unfunded postretirement healthcare bill of $32.8 billion, and an under funded pension to the tune of 10.8 billion (Standard & Poors Report, March 2006). As of the date of writing, GM was expected to run out of operating cash in early 2009 and the federal government was considering increasing the automotive industry bail out in-excess of the tentative $25 billion. It is yet unclear if the bail out monies will come with strings attached and increased government industry oversight and mandated restructuring. These legacy costs and lack of liquidity prevent research and development, expansion into foreign markets, and expansion of production capacity. Without this level of legacy costs rivals such as Toyota and Honda will be better equipped to weather difficult economic cycles, as well as experiment with new vehicles and business practices. Furthermore, Ford & GM may not be able to attract the R&D talent needed to develop more green technologies.
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Chapter 01 - Strategic Human Resource Management in a Changing Environment

CHAPTER 1 STRATEGIC HUMAN RESOURCE MANAGEMENT IN A CHANGING ENVIRONMENT

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

CHAPTER 1 - IMPORTANT TERMS

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

CHAPTER 1 - DISCUSSION QUESTIONS

Chapter 01 - Strategic Human Resource Management in a Changing Environment

Chapter 01 - Strategic Human Resource Management in a Changing Environment

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