Human Resource Management Gaining a Competitive Advantage Chapter 1 Human Resource Management: Gaining a Competitive Advantage

Learning Objectives After reading this chapter, you should be able to: Discuss the roles and activities of a company’s human resource management function Discuss the implications of the economy, the makeup of the labor force, and ethics for company sustainability Discuss how human resource management affects a company’s balanced scorecard Discuss what companies should do to compete in the global marketplace Identify the characteristics of the workforce and how they influence human resource management Discuss human resource management practices that support high-performance work systems Provide a brief description of human resource management practices

Introduction Competitiveness – a company’s ability to maintain and gain market share Human resource management – the policies, practices, and systems that influence employees’ behavior, attitudes, and performance Competitiveness refers to a company’s ability to maintain and gain market share in its industry --It is related to company effectiveness Human resource management refers to the policies, practices, and systems that influence employees’ behavior, attitudes, and performance --Many companies refer to HRM as involving “people practices"

Responsibilities of HR Departments Employment and recruiting Training and development Compensation Benefits Employee services Employee and community relations Personnel records Health and safety Strategic planning This slide shows the responsibilities of HR departments.

What Roles Do HR Departments Perform? Business Partner Services Administrative Services and Transactions Human Resources Strategic Partner One way to think the roles and responsibilities of HR department is to consider HR as a business within the company with three product lines. 1. Administrative services and transactions which includes compensation, hiring, staffing. 2. Business partner services includes developing effective HR systems and helping implement business plans, talent management, and 3. Strategic partner includes contributing to business strategy based on considerations of human capital, business capabilities, readiness, and developing HR practices as strategic differentiation.

What Competencies Do HR Professionals Need? Figure 1.3 shows the six competencies that are needed for the HR profession. 1. Credible activist: delivers results with integrity, shares information, builds trusting relationships, and influences others, providing candid observation, taking appropriate risks. 2. Cultural steward: facilitates change, develops and values the culture, and helps employees navigate the culture. 3. Talent manager/organizational designer: develop talent, design reward systems, and shapes the organization. 4. Strategic architect: recognizes business trends and their impact on the business, evidence-based HR, and develops people strategies that contribute to the business strategy. 5. Business Ally: understands how the business makes money and the language of the business. 6. Operational executor: implements workplace policies, advances HR technology, and administers day-to-day work of maintaining people.

How is the HRM Function Changing? Time spent on administrative tasks is decreasing and its roles as a strategic business partner, change agent, and employee advocate are increasing This shift presents two important challenges: Self-service – giving employees online access to information about HR issues Outsourcing – the practice of having another company provide services The amount of time that the HRM function devotes to administrative tasks is decreasing and its roles as a strategic business partner, change agent, and employee advocate are increasing In shifting the focus from current operations to strategies for the future and preparing non-HR managers to develop and implement HR practices, HR managers face two important challenges: Self-service refers to giving employees online access to information about HR issues Outsourcing refers to the practice of having another company provide services

How is the HRM Function Changing? As part of its strategic role, one of the key contributions that HR can make is to engage in evidence-based HR. Evidence-based HR – demonstrating that human resource practices have a positive influence on the company’s bottom line or key stakeholders. As part of its strategic role, one of the key contributions that HR can make is to engage in evidence-based HR. Evidence-based HR – demonstrating that human resource practices have a positive influence on the company’s bottom line or key stakeholders.

The HRM Profession HR salaries vary depending on education and experience as well as the type of industry The primary professional organization for HRM is the Society for Human Resource Management (SHRM) HR salaries vary depending on education and experience as well as the type of industry --College degrees are held by the vast majority of HRM professionals --Professional certification is less common than membership in professional associations The primary professional organization for HRM is the Society for Human Resource Management (SHRM)

Competitive Challenges Influencing HRM Three competitive challenges that companies now face will increase the importance of HRM practices: The Challenge of Sustainability The Global Challenge Three competitive challenges that companies now face will increase the importance of HRM practices: The Challenge of sustainability – includes providing a return to shareholders, providing high quality products and services and experiences for employees, social responsibility, and effectively using new work arrangements. The Global Challenge - In order to survive, U.S. companies must, improve HRM practices, develop global markets and better prepare employees for global assignments. The technology challenge – with advances in technology, companies must change employees and managers work roles, create high performance work systems, and develop-commerce and e-HRM. The Technology Challenge

The Sustainability Challenge Sustainability refers to the ability of a company to survive and succeed in a dynamic competitive environment Stakeholders refers to shareholders, the community, customers, and all other parties that have an interest in seeing that the company succeeds Sustainability refers to the ability of a company to survive and succeed in a dynamic competitive environment Stakeholders refers to shareholders, the community, customers, and all other parties that have an interest in seeing that the company succeeds

The Sustainability Challenge Sustainability includes the ability to: provide a return to shareholders provide high-quality products, services, and work experiences for employees increase value placed on intangible assets and human capital social responsibility Adapting to changing characteristics and expectations of the labor force Legal and ethical issues Effectively use new work arrangements As mentioned before: Sustainability includes the ability to: provide a return to shareholders provide high-quality products, services, and work experiences for employees increase value placed on intangible assets and human capital social responsibility Adapting to changing characteristics and expectations of the labor force Legal and ethical issues Effectively use new work arrangements

The Sustainability Challenge The changing structure of the economy Skill demands for jobs are changing Knowledge is becoming more valuable Intangible assets -- human capital, customer capital, social capital, and intellectual capital Knowledge workers – employees who contribute to the company through a specialized body of knowledge Empowerment – giving employees responsibility and authority to make decisions regarding all aspects of product development or customer service Learning organization There are several changes in the economy that has implications for HR: --Impact of September 11, 2001 – companies are spending more on security --The competition for labor – affected by the growth and decline of industries and availability of number and skills of persons. Also, skill demands for jobs are changing. Knowledge is becoming more valuable --Intangible assets refer to a type of company asset including human capital, customer capital, social capital, and intellectual capital --Knowledge workers are employees who contribute to the company not through manual labor but through a specialized body of knowledge --Empowerment means giving employees responsibility and authority to make decisions regarding all aspects of product development or customer service A learning organization embraces a culture of lifelong learning, enabling all employees to continually acquire and share knowledge

The Sustainability Challenge Changes in Employment Expectations: Psychological contract Alternative work arrangements Changes in Employment Expectations: The need for companies to make rapid changes are reshaping the employment contracts. The psychological contract describes what an employee expects to contribute and what the company will provide to the employee for these contributions Alternative work arrangements include independent contractors, on-call workers, temporary workers, and contract company workers

The Balanced Scorecard The balanced scorecard gives managers the opportunity to look at the company from the perspective of internal and external customers, employees and shareholders. The balanced scorecard should be used to: Link human resource management activities to the company’s business strategy. Evaluate the extent to which the human resource function is helping the company’s meet it’s strategic objectives. The balanced scorecard gives managers the opportunity to look at the company from the perspective of internal and external customers, employees and shareholders. The balanced scorecard should be used to: -- Link human resource management activities to the company’s business strategy. -- Evaluate the extent to which the human resource function is helping the company’s meet it’s strategic objectives. Measures of human resource practices primarily relate to productivity, people, and processes.

The Balanced Scorecard How do customers see us? What must we excel at? Can we continue to improve and create value? How do we look to shareholders? To show that HRM activities contribute to a company’s competitive advantage, managers need to consider the questions shown here from Table 1.9 and be able to identify critical indicators or metrics related to HR. Examples are provided in the table on page 25 of the text.

Customer Service and Quality Emphasis Total Quality Management (TQM) Core values of TQM include: designing methods and processes to meet the needs of internal and external customers all employees receive training in quality promotion of cooperation with vendors, suppliers, and customers management gives feedback on progress Customer excellence requires attention to product and service features as well as to interactions with customers. Total Quality Management (TQM) is a company-wide effort to continuously improve the ways peoples, machines, and systems accomplish work Core values of TQM include: designing methods and processes to meet the needs of internal and external customers all employees receive training in quality promotion of cooperation with vendors, suppliers, and customers management gives feedback on progress

Customer Service and Quality Emphasis Malcolm Baldrige National Quality Award ISO 9000:2000 Six Sigma process The emphasis on quality is seen in the following: Malcolm Baldrige National Quality Award established in 1987 to promote quality awareness, to recognize quality achievements, and to publicize successful quality strategies. ISO 9000:2000 quality standards adopted worldwide. Six Sigma process system of measuring, analyzing, improving, and controlling processes once they meet quality standards.

Changing Demographics Diversity of the Workforce Internal labor force is the labor force of current employees External labor market includes persons actively seeking employment The U.S. workforce is aging rapidly Internal labor force is the labor force of current employees External labor market includes persons actively seeking employment The U.S. workforce is aging rapidly The 55-year-old and older group is projected to increase by 49 percent between 2004 and 2014 Worker performance and learning are not adversely affected by aging

Managing a Diverse Workforce To successfully manage a diverse workforce, managers must develop a new set of skills, including: Communicating effectively with employees from a wide variety of cultural backgrounds Coaching and developing employees of different ages, educational backgrounds, ethnicity, physical ability, and race Providing performance feedback that is based on objective outcomes Creating a work environment that makes it comfortable for employees of all backgrounds to be creative and innovative To successfully manage a diverse workforce, managers must develop a new set of skills, including: Communicating effectively with employees from a wide variety of cultural backgrounds Coaching and developing employees of different ages, educational backgrounds, ethnicity, physical ability, and race Providing performance feedback that is based on objective outcomes Creating a work environment that makes it comfortable for employees of all backgrounds to be creative and innovative

Legal and Ethical Issues Five main areas of the legal environment have influenced HRM over the past 25 years Equal employment opportunity legislation Employee safety and health Employee pay and benefits Employee privacy Job security Women and minorities still face the “glass ceiling” Sarbanes-Oxley Act of 2002 There are five main areas of the legal environment that have influenced HRM over the past 25 years: Equal employment opportunity legislation Employee safety and health Employee pay and benefits Employee privacy Job security Women and minorities still face the “glass ceiling” The Sarbanes-Oxley Act of 2002 sets strict rules for corporate behavior and sets heavy fines for noncompliance, especially in regards to accounting practices

Legal and Ethical Issues Ethical HR practices: HRM practices must result in the greatest good for the largest number of people Employment practices must respect basic human rights of privacy, due process, consent, and free speech Managers must treat employees and customers equitably and fairly Human resource managers must satisfy three basic standards for their practices to be considered ethical: HRM practices must result in the greatest good for the largest number of people Employment practices must respect basic human rights of privacy, due process, consent, and free speech Managers must treat employees and customers equitably and fairly

The Global Challenge To survive companies must compete in international markets Be prepared to deal with the global economy. Offshoring – exporting of jobs from developed countries to less developed countries Onshoring – exporting jobs to rural parts of the United States Companies are finding that to survive they must compete in international markets as well as fend off foreign corporations’ attempts to gain ground in the United States Every business must be prepared to deal with the global economy. This is made easier by technology Offshoring refers to the exporting of jobs from developed countries to less developed countries Onshoring refers to exporting jobs to rural parts of the United States

The Technology Challenge The overall impact of the Internet The Internet has created a new business model – e-commerce – in which business transactions and relationships can be conducted electronically Technology has reshaped the way we play, plan our lives, and where we work The overall impact of the Internet The Internet has created a new business model – e-commerce – in which business transactions and relationships can be conducted electronically

The Technology Challenge Advances in technology have: changed how and where we work resulted in high-performance work systems increased the use of teams to improve customer service and product quality changed skill requirements increased working partnerships led to changes in company structure and reporting relationships Advances in technology have: changed how and where we work resulted in high-performance work systems, which maximize the fit between the company’s social system and technical system increased the use of teams to improve customer service and product quality changed skill requirements increased working partnerships led to changes in company structure and reporting relationships

The Technology Challenge Advances in technology have: increased the use and availability of Human Resource Information Systems (HRIS) increased the use and availability of e-HRM increased the competitiveness in high performance work systems Advances in technology have: increased the use and availability of Human Resource Information Systems (HRIS), which are used to acquire, store, manipulate, analyze, retrieve, and distribute HR information increased the use and availability of e-HRM, which is the processing and transmission of digitalized information used in HRM increased the competitiveness in high performance work systems

Meeting Competitive Challenges Through HRM Practices HRM practices that help companies deal with the four competitive challenges can be grouped into four dimensions The human resource environment Acquiring and preparing human resources Assessment and development of human resources Compensating human resources HRM practices that help companies deal with the four competitive challenges can be grouped into four dimensions: A. Managing the Human Resource Environment—HRM practices should be linked to strategy, legal compliance must be assured, and work should be designed to maximize employee effectiveness and motivation. B. Acquiring and Preparing Human Resources—Human resource planning must occur, employees must be recruited and placed in appropriate jobs, methods of employee selection must be determined, and ensuring employees have skills to perform particular jobs. C. Assessment and Development of Human Resources—This area of HRM deals with measuring employee performance, preparing employees for future work roles, identifying and responding to employee interests, and creating a beneficial and effective work environment. D. Compensating Human Resources—Appropriate pay systems must be developed, employee contributions must be rewarded, and employees must be provided with benefits.

Meeting Competitive Challenges Through HRM Practices Managing internal and external environmental factors allows employees to make the greatest possible contribution to company productivity and competitiveness Customer needs for new products or services influence the number and type of employees businesses need to be successful Managing internal and external environmental factors allows employees to make the greatest possible contribution to company productivity and competitiveness Customer needs for new products or services influence the number and type of employees businesses need to be successful

Meeting Competitive Challenges Through HRM Practices Managers need to ensure that employees have the necessary skills to perform current and future jobs. Besides interesting work, pay and benefits are the most important incentives that companies can offer employees in exchange for contributing to productivity, quality, and customer service Managers need to ensure that employees have the necessary skills to perform current and future jobs. Besides interesting work, pay and benefits are the most important incentives that companies can offer employees in exchange for contributing to productivity, quality, and customer service