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STRATEGIC HUMAN RESOURCE MANAGEMENT MGMT 950 Lecture 2 Outline Strategic role of HRM Measuring HRM’s contributions Job analysis Competency modeling Strategic HRM Mission and Vision of an Organization Mission Spells out who the organization is, what it does, and where it’s headed. Vision A general statement of the intended direction of the organization. Strategy A strategy is a course of action. The company’s long-tem plan for how it will balance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage. A SWOT Chart SWOT Analysis The use of a SWOT chart to compile and organize the process of identifying company Strengths, Weaknesses, Opportunities, and Threats. Figure 3–2 Strategic Human Resource Management Strategic Human Resource Management Formulating and executing HR systems—HR policies and activities—that produce the employee competencies and behaviors the company needs to achieve its strategic aims. Strategies in Brief Company Strategic Principle Dell Be direct eBay Focus on trading communities General Electric Be number one or number two in every industry in which we compete, or get out Southwest Airlines Meet customers’ short-haul travel needs at fares competitive with the cost of automobile travel Vanguard Unmatchable value for the investor-owner Wal-Mart Low prices, every day Source: Arit Gadiesh and James Gilbert, “Frontline Action,” Harvard Business Review, May 2001, p. 74. Figure 3–3 Translating Strategy into HR Policy and Practice Basic Model of How to Align HR Strategy and Actions with Business Strategy Source: Adapted from Garrett Walker and J. Randal MacDonald, “Designing and Implementing an HR Scorecard,” Human Resources Management 40, no. 4 (2001), p. 370. Figure 3–9 Strategic Human Resource Management at Lucent & Quartum 1. 2. 3. 4. 5. What are the internal & external environmental changes that necessitated a new HR perspective? What are the key company priorities? What are the key strategies? What are the key corporate values? How does HR help the company to achieve its strategic objectives? Describe activities in each HR function. SHRM @ Lucent Spun-off from AT&T in 1996; trying to create a new organization that is more flexible and accountability-oriented (rather than entitlement-oriented) than the AT&T heritage. HR is taking a leadership role in managing this culture change. Strategy: Unleashing the power of people for competitive advantage and superior business results. HR strategy: The new HR has to be fast, focused on business needs, and flexible. Pursue operational excellence and value creation. Create high performance operating environment through GROWS. Move HR functions to units; reduce the HR fix cost Acquisition, development and retention of talent that creates value for shareholders. Compensation and perf management Building and operating style and culture to support the mission and strategy. High impact HR policies Internal client-model; business partner focus (problems are handled on the first call; days of service reduced; customer satis. increased; work closely with top mgmt; find HR practices that no longer add value to shareholders; get in touch with line managers to tell HR how to design better motivational programs for sales force, new competencies based on future oriented thinking). HR Competencies for partner role: what are the KS and commitments that will enable the business partner to deliver upon their customer’s (internal client) expectations? Talent acquisition: Develop staffing model based on benchmarked workforce productivity numbers (revenue per employee); avoid overstaffing and downsizing! Creating a high performance culture: Overcoming an entitlement culture; no tolerance for poor performance; no equal pays and stock options for execs. Compensation: No Hay system. Compensation is strictly based on performance. Managerial bonuses are based on financial, customer and people satisfaction. SHRM @ Quantum Acquisition of Digital equipment increased the size from 2500 to 10000 employees; after the spin-off with the Japanese partner, total employment is now 6800. This industry operates with thin profit margins; survival is an issue. Notoriously short product life cycle; time-to-volume: rapid product development w/o sacrificing the quality. Strategy: Consistently meet customer needs across 3 criteria: quality, time-tovolume, and being easy to do business with. Product development and operations teams – constant reorganizations is a challenge for HR. All assignments are temporary; glue is the culture. Extraordinary environment: disdain formal bureaucracy (not much rules; flexible working hours), employees feel valued, sense of pride of association with the company, sense of camaraderie, self-actualization, fun and excitement. High impact HR: Establish and communicate the HR mission, vision and values. 9 key behaviors (valued behaviors) in creating the extraordinary environment. HR communicates them to employees; upward feedback; 50 % of perf. evaluation is linked to valued behaviors. Team-based product development and operational (product) teams. Teams are rewarded on the basis of the success of the product that they develop. Hiring on the basis of team competencies. Training on teams. Provide a flexible office environment for mobile teams; reward not individual but team performance. Teams have their own HRM system and fulltime HR people to support them. Selection: Behaviorally based, structured interviews. No honeymoon period; coaching. Performance management and incentives compensation process: feedback be direct, open, and honest; firm’s perf. And financial data are open to everyone. Half of the bonuses are based on results, other half on valued behaviors. Not only what, but also how. Team perf is assessed rigorously. HR infrastructure: HRIS. On-line competency modeling soon. M&A: Combining both cultures. HR’s Contributions REACTIVE PROACTIVE OPERATIONAL Implements the Improves the basics basics STRATEGIC Makes strategy Creates happen strategic alternatives If HR were Really Strategically proactive (Brockbank, 1999) 1. 2. Operationally reactive HR (early 80s). Implementing the basics including activities such as administering benefits, maintaining market-based salary grid, hiring, providing basic skill training, and so on. Operationally proactive HR (late 80s - early 90s). Focus on improving the efficiency of their HR departments and the quality of their HR practices. Do more with less by using automation and technology. Outsourcing, work elimination, reallocation of activities to the line, creation of HR service centers. Apply TQM principles to HR. Set clear standards to measure HR practices. Improve internal customer satisfaction: ‘surprise and delight’ and ‘error-free HR work’. 3. Strategically Reactive HR. Support the execution of strategy; develop the cultural and technical capabilities for long-term success. - Tactical support that are aligned with the strategy. E.g., how many people do we need? Where do we get them? What trainings are required? Etc. - Creating a strategy-focused culture. Step 1: Identify and prioritize the firm’s sources of competitive advantage. Step 2: Define the required culture and technical KSAs that are required to create and support the sources of competitive advantage identified earlier. Step 3: Identify the cultural characteristic that the firm should reduce / eliminate. Step 4: Design the HR practices that will have the greatest impact on creating the desired culture. Step 5: Establish action plans. Step 6: Develop means by which effectiveness of the process is measured - Management of change. 4. Strategically Proactive HR. HR’s role is to create strategic alternatives by learning enough about the other functional areas and expanding the scope of HR agenda. - Create culture of creativity and innovation. Enhance the firm’s probability that innovative breakthroughs will occur. Remove obstacles to creativity. Focus on communication, staffing, T & D, measurement and rewards. - Involve in full breath of merges and acquisition activities. 65 % of the M&A failed to achieve the financial objectives due to problems with managing people and culture. HR can help define the corporate portfolio (e.g. core competencies, KSAs, culture), strengths and needs. Identify the potential M & A candidates accordingly. Evaluate the technical, market, financial, cultural, and managerial capabilities of the candidates. Assess the compatibilities and gaps. Determine salary and staffing strategies. Develop managers’ negotiation skills. - Create internal capabilities based on future external environmental requirements. Link external human requirements with the internal human capabilities. HR’s goal should be to make employees happy who are happy to making the marketplace happy. Ensure that employees are customer-oriented. Follow macro-societal trends. HR’S Strategy Implementation Role HR professionals should be part of the firm’s strategic planning executive team. Identify the human issues that are vital to the business strategy. Help establish and execute strategy. Communicate the vision & strategies and ensure the alignment in the organization. Plan and execute organizational change. HR Involvement in Mergers Source: Jeffrey Schmidt, “The Correct Spelling of M & A Begins with HR,” HR Magazine, June 2001, p. 105. Figure 3–7 HR’s Strategy Formulation Role HR helps top management formulate strategy in a variety of ways by: Supplying competitive intelligence that may be useful in the strategic planning process. Supplying information regarding the company’s internal human strengths and weaknesses. Build a persuasive case that shows how—in specific and measurable terms—the firm’s HR activities can and do contribute to creating value for the company. Measuring HR’s Contribution The HR Scorecard Shows the quantitative standards, or “metrics” the firm uses to measure HR activities. Measures the employee behaviors resulting from these activities. Measures the strategically relevant organizational outcomes of those employee behaviors. HR Metrics Absence Rate [(Number of days absent in month) ÷ (Average number of employees during mo.) × (number of workdays)] × 100 Cost per Hire (Advertising + Agency Fees + Employee Referrals + Travel cost of applicants and staff + Relocation costs + Recruiter pay and benefits) ÷ Number of Hires Health Care Costs per Employee Total cost of health care ÷ Total Employees HR Expense Factor HR expense ÷ Total operating expense Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13– 20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey; www.shrm.org. Figure 1–5 HR Metrics (cont’d) Human Capital ROI Revenue − (Operating Expense − [Compensation cost + Benefit cost]) ÷ (Compensation cost + Benefit cost) Human Capital Value Added Value of workforce’s knowledge, skills, and performance. Illustrates how people add value to the organization. Time to fill Total days elapsed to fill requisitions ÷ Number hired Employee satisfaction and productivityFigure 1–5 (cont’d) HR Metrics (cont’d) Training Investment Factor Total training cost ÷ Headcount Turnover Costs Cost to terminate + Cost per hire + Vacancy Cost + Learning curve loss Turnover Rate [Number of separations during month ÷ Average number of employees during month] × 100 Workers’ Compensation Cost per Employee Total WC cost for Year ÷ Average number of employees Figure 1–5 (cont’d) Job Analysis & Competency Modeling Job Analysis The procedure for determining the duties and skill requirements of a job and the kind of person who should be hired for it. Uses of Job Analysis Information Job Analysis Job Description and Job Specification Recruiting and Selection Decisions Figure 3-1 Performance Appraisal Job Evaluation— Wage and Salary Decisions (Compensation) Training Requirements What Information does it contain? Work activities (cleaning, selling, teaching, etc.) Human behaviors (communicating, deciding, writing, etc. plus job demands such as lifting) Machines, tools, equipment and work aids (Products made, materials processed, knowledge, services) Performance standards Job context (Working conditions, schedule, organizational context, social context) Human requirements Job-related knowledge and skills (education, training, work experience) Personal attributes (Aptitudes, physical characteristics, personality, interests) Collecting Job Analysis Information Joint effort between HR / I&O, the worker and the supervisor “SME’s” (Subject Matter Experts) Phases of Job Analysis Detecting the areas that job analysis will be used for. Gathering information about the organization Organization scheme, work schedule, social structure Gathering data for job analysis Interview, survey, observation Employees, supervisors, analysists, observers Revision of collected data Employees and supervisors Development of job description and job requirements Methods of Collecting Job Analysis Information The interview Questionnaire Observation Participant diary/logs Multiple sources of information Widely Used: The Interview Individual interviews with each employee Group interviews with groups of employees who have the same job Supervisor interviews with one or more supervisors who know the job. Sample Interview Questions What is the job being performed? What are the major duties of your position? What exactly do you do? What physical locations do you work in? What are the education, experience, skill, and [where applicable] certification and licensing requirements? In what activities do you participate? What are the job’s responsibilities and duties? What are the basic accountabilities or performance standards that typify your work? What are your responsibilities? What are the environmental and working conditions involved? What are the job’s physical demands? The emotional and mental demands? What are the health and safety conditions? Are you exposed to any hazards or unusual working conditions? Quantitative Job Analysis Techniques Position Analysis Questionnaire Functional job analysis Writing Job Descriptions 1. Job Identification Title, date, approvals, supervisor’s title, salary, grade level 2. Job Summary General nature, major functions or activities, includes general statements 3. 4. 5. 6. Relationships Responsibilities and Duties Standards of Performance Working Conditions and Physical Environment Sample Job Summary Relationships Statement for Human Resource Director Vice President Employee Relations Works with all department managers and executive management Human Resource Director Department Secretary Human Resource Clerk Test Administrator Labor Relations Manager Works with employment agencies, recruiters, union reps, state and federal agencies, vendors Responsibilities and Duties Examples Establishes marketing goals to ensure share of market Maintaining balanced and controlled inventories Defines the limits of job holder’s authority Purchasing authority Discipline Interviewing and hiring Standards of Performance Example Duty: Meeting Daily Production Schedule Work group produces no fewer than 426 units per working day Next workstation rejects no more than an average of 2% of units Weekly overtime does not exceed an average of 5% Using web-based systems http://www.job-analysis.net/ http://www.paq.com/ www.onetcenter.org www.jobdescription.com www.iskur.gov.tr Job Analysis in a “Jobless” World From specialized to enlarged jobs Why managers are “de-jobbing” their companies From Specialized to Enlarged Jobs Job enlargement Assigning workers additional same level activities, thus increasing the number of activities they perform. Job enrichment Redesigning jobs in a way that increases the opportunities for the worker to experience feelings of responsibility, achievement, growth, and recognition. Job rotation Why Managers Are Dejobbing Their Companies Dejobbing Broadening the responsibilities of the company’s jobs Encouraging employee initiative. Internal factors leading to dejobbing Flatter organizations Work teams External factors leading to dejobbing. Rapid product and technological change Global competition Deregulation, Political instability, Demographic changes Rise of a service economy. Limitations in traditional JA Employee resistance Jobless work Updating job descriptions is a burden Teamwork Change in organizational structure Lack of flexibility Employees may be Concerned Because of – Lack of trust of consequences Resistance to change Possible changes to job duties Changes to pay The same job title may have different responsibilities and pay rates in different departments Traditional Organization Chart President Chief Executive Officer Executive Assistant Vice President Sales Director East Region Vice President Marketing Director West Region Director Public Relations Vice President Human Resources Director Compensation and Benefits Manager Manager Manager Clerk Manager Manager Manager Administrator Vice President Operations Vice President Finance Director Training and Development Director Manufacturing Driector Audit and Accounting Manager Logistics Tax Plant Manager Finance Plant Manager Accounting Tech. Writer Manager Manager Sr. Trainer Manager Manager Sr. Trainer Sales Sales Sales Sales Sales Clerk Accounting Accounting Flatter Organizations Executive and Operations Team Technical Development Team Manufacturing Engineering Team People Systems Team Finance Team Purchasing and Suppllier Quality Team Sales, Service and Marketing Team Organization Strategies and Competencies Mission Strategies Competencies HRM Vision practices Competency: A set of observable performance dimensions that are linked to high performance of the organization. Core competencies: Qualities that are required for the high performance of all employees. Functional competencies: Qualities required for the high performance of specific jobs. Competency-based HRM practices A competency is a set of observable performance dimensions, including individual knowledge, skills, attitudes, and behaviors as well as collective team, process, and organizational capabilities that are linked to excellent performance, and provide the organization with sustainable competitive advantage and uniqueness. Differences between JA and CM: JA focuses on ‘what’ is accomplished; CM focuses on ‘how’ it is accomplished. While JA identifies specific KSAOs for each job or job family, competencies are identified to apply to employees in all jobs in the organization (‘core competencies’). KSAOs are identified by job analysts, whereas CM is conducted with the participation of all employees. CM is conducted in accordance to organizational mission and culture, while there is no such link in JA. JA is relatively stable, fix and narrowly defined; CM is dynamic and broad. JA focusing on job-related KSAs; CM focuses on ability to change, adapt, learn, and develop. JA is limited to a set of narrowly defined jobs; CM is based on the assessment of the ‘whole-person’. CM creates a common language and serves the creation of the organizational culture; also contributes to the integration of HR functions. Trends in the CM 1. Demand for more participative approaches 2. Shift towards short-cycle CMs 3. Increasing emphasis on emerging future competencies 4. Increasing focus on team and process competencies 5. Transition to an organizational learning perspective An example of dictionary of competencies http://www.wilkes.edu/include/aboutwilkes/ hr/perfmgmt_dictionary.doc Key take aways from Lecture 2 HRM departments have to provide administratively excellent services (operational function). This is necessary but not sufficient. They have to be involved in strategy implementation (strategically reactive) as well as strategy formulation (strategically proactive). HR’s performance should be assessed against whether or not they contribute to strategy implementation. Job analysis and competency modeling are the basis of all other HR functions. HR is responsible for the accuracy and level of detail involved in job descriptions. Strategic alignment is the key: do job descriptions and competencies reflect the desired organizational culture?