Workforce Differentiation MGN443 Talent Management Workforce Differentiation Week 2

MGN443 Framework Talent Management Overview HR Differenti-ation Approaches HR Architecture

Talent Management . . the activities and processes that involve the systematic identification of key positions which differentially contribute to the achievement of sustainable competitive advantage, the development of a talent pool of high potential and high performing incumbents to fill these roles, and the design and development of a differentiated human resource architecture to support these aims (Collings & Mellahi, 2009)

Strategy Strategy is concerned with creating competitive advantage-doing things that your customers value in new, different ways. Doing exiting things differently Doing new things Strategy is about differentiating on the outside To successfully differentiate on the outside, you need to differentiate on the inside (workforce differentiation, how you execute your strategy)

Three basic paths to Competitive Advantage Operational Excellence Low cost provider via operational systems that continually reduce cost/price, while offering a quality product that consistently adds greater value than its competitors. E.g., Federal express, Wal-Mart, Dell, Home Depot Product Leadership Requires innovation in product and/or services to create its competitive advantage. E.g., 3M, Nike, Glaxo, Apple. Customer Intimacy Firms following a customer strategy offer unique solutions that enable their products or services to be readily customised at the lowest level of customer interface. E.g., Four Seasons, McKinsey & Co, PWC. (Treacy & Wiersema, 1995)

Strategy and Workforce Differentiation Following successfully differentiation on the outside (strategy), you need to differentiate on the inside - how you execute your strategy. WD: Disproportionate investments in human resources where you expect disproportionate returns. Not all employees possess skills that are equally unique and/or valuable to a particular firm. So the investment in human capital will vary for different types of human capital Firms can optimize their investments in HR when it is differentially invested. (Becker et al., 2009; Boudreau & Ramstad, 2007)

Strategy and Differentiation Operational excellence Product leadership Customer intimacy Strategy Workforce Strategy Stage 1 Stage 2 Stage 3 Stage 4 Differentiation

Four Stages of Differentiation Source: Becker at al. (2009)

Stages of Workforce Differentiation One size fits all HR best practices HR bundles High-performance work systems (HPWS) (Wu et al., 2015) Generic fit Begins to achieve a fit between business strategy and HR strategy Diff. by strategic capabilities Business processes (inc. org. systems and talents) absolutely essential to executing a firm’s strategy Ex: R&D process, logistics and distribution capability Diff. by jobs within strategic capabilities Continues from stage 3 to differentiate at the level of the job. A, B and C jobs

Article (Treacy & Wiersema, 1995)

Strategic Capabilities Business processes that execute the firm’s strategy and are the source of any competitive advantage. An organizational asset that combines talent, information, technology, and routines. Ex: alliance management, acquisitions and mergers, supply-chain management

Strategic capabilities Differentiation Strategy Strategic capabilities Strategic positions Players A, B and C Action plan

Differentiation Determine strategic choice Identify strategic capabilities Identify strategic positions Assess players in positions Plan action for all players in strategic positions Operational excellence Product leadership Customer intimacy List possible strategic capabilities Review strategic capability criteria Assess each for present and future strategic impact Determine 3-5 strategic capabilities List positions within each strategic capability Assess each position on strategic impact and performance variability Finalise strategic positions Review other positions (not in strategic capability for strategic impact potential) Develop A, B and C Apply A, B and C criteria to all positions List all positions by A, B and C designation Assess all employees in positions Determine percentage of A, B and C players in all positions Remove C positions Remove C players from A positions Put A players in A positions Develop B players in A positions into As

References Becker, B., Huselid, M. A., & Beatty, R., W. (2009). The Differentiated workforce: transforming talent into strategic impact. Boston, MA: Harvard Business School Publishing. Boudreau, J. & Ramstad, P. (2007). Beyond HR. The new science of human capital. Boston, Massachusetts: Harvard Business School Press. Collings, D.G., & Mellahi, K. (2009). Strategic talent management: A review and research agenda. Human Resource Management Review, 19(4), 304–313. Treacy, M., & Wiersema, F. (1995). How market leaders keep their edge. Fortune, 131(2), 52-57. Wu, N., Hoque, K., Bacon, N., Llusar, B., & Carlos, J. (2015). High‐performance work systems and workplace performance in small, medium‐sized and large firms. Human Resource Management Journal, 25(4), 408-423.