© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. Chapter 1 Human Resource Management and Competitive Advantage

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. Chapter Outline 1-1 Human Resource Management 1-2 Who Is Responsible for Developing and Implementing HRM Practices? 1-3 Gaining a Competitive Advantage 1-4 Competitive Advantage and HRM

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-1 Human Resource Management Human resource management: Consists of practices that help the organization deal effectively with its people during the various phases of the employment cycle. Three phases of the employment cycle:  Pre-selection – Planning practices.  Selection – Recruiting applicants and selecting the most qualified.  Post-selection – Practices designed to maximize the performance and satisfaction levels of employees.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-1a HRM Preselection Practices Human resource planning: Anticipate and meet changing needs relating to the acquisition, deployment, and utilization of employees; accomplished through strategic planning and demand and supply forecasting. Job analysis: A systematic procedure for gathering, analyzing, and documenting information about particular jobs.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. Figure 4-1 Job Analysis

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-1b HRM Selection Practices Recruitment: Locate and attract job applicants for particular positions quickly, cost efficiently, and legally. Selection: Assessing and choosing job candidates through a technically sound and legal procedure.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-1c HRM Postselection Practices Training and development: Planned learning experiences that teach workers how to perform their current or future jobs effectively. Performance appraisal: Measures the adequacy of employees’ job performances and communicates these evaluations to them.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-1c HRM Postselection Practices (cont.) Compensation: Entails pay and benefits, and aims to establish and maintain a competent and loyal workforce at an affordable cost. Productivity improvement programs: Tie job behavior to rewards, and aim to motivate employees to engage in appropriate job behaviors.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-1d HRM Practices Influenced by External Factors Legal and environmental issues:  Federal, state, and local laws are designed to guarantee employees’ rights to fair and safe treatment.  Social, economic, and technological events also strongly influence HRM practices. Workplace justice laws: Addresses the issue of employee rights. Union influences: Regulate many HRM practices such as discipline, promotion, grievance procedures, and overtime allocations.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-1d HRM Practices Influenced by External Factors (cont.) Safety and health concerns: Institution of accident prevention programs, wellness programs, and employee assistance programs to ensure the health and mental well-being of employees. International influences: Development of globally oriented managers who understand foreign languages and cultures, as well as the dynamics of foreign marketplaces.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-2 Who Is Responsible for Developing and Implementing HRM Practices? Human resource professionals  Establish HRM procedures and methods.  Monitor and evaluate HR practices.  Advise and assist managers on HRM-related matters. Line managers  Direct employees’ day-to-day tasks.  Implement HRM practices.  Provide HR professionals with needed inputs for developing effective practices.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-3 Gaining a Competitive Advantage & 1-3a Competitive Advantage Defined Firms gain competitive advantage by effectively managing their human resources. Competitive advantage is a status achieved by a company when gaining a superior marketplace position relative to its competition. This is accomplished through cost leadership and product differentiation.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-3b Cost Leadership Cost leadership strategy: A firm provides the same services or products as its competitors, but produces them at a lower cost. A firm can reduce its per unit cost by increasing the value of Number of units produced/total cost of production. Per unit cost can be reduced by:  Using new technology.  Devising more efficient work methods.  Cutting overhead costs.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-3c Product Differentiation Occurs when a firm produces a product or service that is preferred by buyers. A firm can accomplish this aim by:  Creating a better quality product or service.  Providing innovative products or services.  Choosing a superior location.  Promoting and packaging its product to create a perception of higher quality. Creates a competitive advantage if the firm’s customers are willing to pay enough to cover extra production costs.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4 Competitive Advantage and HRM Studies have indicated:  A strong link between HRM effectiveness and productivity.  The impact of a broad range of HRM practices on shareholder return; 15–30 percent of the total value of a company could be attributed to the quality of its HRM practices.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4a Evidence Linking HRM Practices to Competitive Advantage Jeffrey Pfeffer identified 16 HRM practices:  Employment security  Selectivity in recruiting  High wages  Incentive pay  Employee ownership  Information sharing  Participation and empowerment  Teams and job redesign

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4a Evidence Linking HRM Practices to Competitive Advantage (cont.) Jeffrey Pfeffer identified 16 HRM practices (cont.):  Training and skill development  Cross-utilization and cross-training  Symbolic egalitarianism  Wage compression  Promotion from within  Long-term perspective  Measurement of practices  Overarching philosophy

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. Figure 1-4 A Model Linking HRM Practices to Competitive Advantage

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4b A Model Linking HRM Practices to Competitive Advantage Direct path: The way an HRM practice is carried out can, by itself, have an immediate impact on competitive advantage.  Cost leadership can be achieved through the use of effective HRM practices.  Firms doing the best job of containing HRM-related costs stand to gain a financial advantage over their competitors.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) Indirect path: An HRM practice can impact competitive advantage by causing certain outcomes, which, in turn, create competitive advantage.  HRM practices  Employee-centered outcomes  Employee-centered outcomes  Organization- centered outcomes  Organization-centered outcomes  Competitive advantage

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) HRM Practices  Employee-centered outcomes  Competence – Extent of knowledge, skills, and abilities possessed for the job.  Motivation – Willingness to exert necessary effort to perform the job well.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) HRM Practices  Employee-centered outcomes  Work-related attitudes – Extent of -Job satisfaction – Favorableness of employee attitudes toward their jobs. -Organizational commitment – Psychological attachment to, identification with, and involvement in the organization. -Organizational citizenship – Willingness to engage in behaviors that help the organization achieve its goals.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) Employee-centered outcomes  Organizational- centered outcomes  Output – Quantity, quality, and innovativeness of the product or service offered by a firm.  Employee retention – Amount of employee turnover.  Legal compliance – Conformance to various employment laws.  Company reputation/Image – Favorable view of the organization by potential applicants and customers.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) Achievement of employee-centered outcomes leads to favorable organization-centered outcomes.  Positive job attitude, motivation, and high productivity.  Reduction of HRM-related lawsuits.  Enhances the reputation of the company.  Helps the customers view the company positively.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) Organization-centered outcomes  Competitive advantage  Cost leadership – Achieved through using technology, minimizing turnover rates, and avoiding lawsuits resulting from noncompliance.  Product differentiation – Achieved through: -Individuals performing their jobs well. -Treating employees in a manner that helps retain long- term employees.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved. 1-4c HRM Practices and Sustained Competitive Advantage Management of human resources is less susceptible to imitation. The competitive advantage achieved through HRM practices is likely to be more sustainable.  Competitors rarely have access to a firm’s HRM practices; the practices are not very visible to outsiders.  Even when these practices are visible, their impact may not be as favorable when used by competitors.