1. Meeting Present and Emerging Strategic Human Resources Challenges
Chapter 1
Meeting Present and Emerging Strategic Human Resources Challenges
Whether in good economic times or challenging ones, companies must compete for talent. In order to achieve and sustain a competitive advantage, companies that are capable and effective at attracting, retaining, and motivating good employees are more likely to succeed.
Chapter 1 is an overview of the challenges that organizations and Human Resources Managers face in any economic environment. In this chapter, we will define core human resources concepts and identify current issues. Following chapters will expand upon these core concepts. We’ll begin to see that Human Resources Management is a growing and dynamic field that is critical to the strategic partnership initiatives within companies.
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2. Chapter Challenges Understand the major challenges affecting HR
Develop competence in planning and implementing strategic HR policies
Develop competence in selecting HR strategies to increase firm performance
Become aware of HR best practices
The environmental dynamics within which an organization must operate are challenging. Rapid technological changes, globalization, legislative changes, and evolving work and family roles are just some of the challenges that organizations face and that human resources managers are involved in working with.
In Chapter 1, we will look at the importance of HR planning and implementation of strategic initiatives in order for an organization to operate efficiently and effectively, while achieving a competitive advantage. We will also look at some of the best HR practices identified.
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3. Chapter Challenges
Understand the need to establish a close partnership between the HR department and managers
Recognize career opportunities in various human resources management subfields
Additionally, in Chapter 1, we’ll look at the necessity of HR in establishing key partnerships with all managers within an organization. All strategic decisions involve current and future needs of the organization, and HR managers need to be a part of the processes in planning and initiating those strategic initiatives.
Finally, we’ll also learn about the many subfields of human resources management and how each fits within the organization.
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4. Types of Employees Managers Line employees Junior employees
Staff employees
Exempt employees
There are many different types of employees and they all play different roles in the organization.
Managers are people in charge of others and who are responsible for the timely and correct execution of actions that promote their units’ successful performance.
Line employees are directly involved in producing the company’s good(s) or delivering its service(s). In other words, line employees are directly in the front lines of the organization.
Staff employees are those who support the line function. For example, HR departments are considered staff employees.
Senior employees are those who have been with the company longer and have more responsibility than junior employees.
Exempt employees (sometimes called salaried employees) are those who do not receive extra pay for overtime work (beyond 40 hours per week).
Nonexempt employees are employees who receive overtime compensation.
Senior employees
Nonexempt employees
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5. Human Resources Strategy
Human resources strategy refers to a firm’s deliberate use of human resources to help it gain or maintain an edge against competitors in the marketplace
In this course we’ll be learning about how people work within organizations. We’ll also use the term “human resources,” which denotes “people” as an organization’s resources.
Human resources strategy is about looking at the whole picture of an organization’s strategy and how people are coordinated to help an organization either maintain or gain a competitive advantage in the workplace.
Needless to say, it is very important for an organization to obtain reliable, effective, and loyal employees, and a human resources strategy can be a part of making that happen.
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6. Key HR Challenges
Organizations today must be aware of all dimensional forces that affect the organization and its strategies. Environment: These are forces external to the organization that affect the organization’s performance, but are beyond the control of management. These forces include globalization, natural disasters, skill shortages, technological changes, and workforce diversity, to name a few. Human resources managers must be aware of these challenges and work with the organization while adapting to changes that occur rapidly and increasingly.
Organization: Because of the environmental challenges, organizations must adapt to survive within the environmental changes. For example, downsizing or organizational restructuring may be needed in order for the organization to survive.
Individual: Human resource issues at the individual level address the decisions most pertinent to specific employees. Individual challenges almost always reflect what is happening in the larger organization. For example, technology affects individual productivity. Note that there is a two-way relationship between the organization and individual challenges. How the organization treats its individuals will affect the organization when key employees leave for personal evolving family roles or leave to work for competitors.
Overcoming the challenges is what HR department does in working with managers. For example, using the Internet to help screen applicants is just one way to work with the changes and challenges of the environment.
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7. Organizational Culture
Organizational culture refers to the basic assumptions and beliefs shared by members of an organization
Organizational culture refers to the basic assumptions and beliefs shared by members of an organization.
These beliefs operate unconsciously and include the norms that hold the organization’s view of itself and its environment. Let’s now look at a few elements of organizational culture.
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8. Key Elements of Organizational Culture
Observed behavioral regularities
Norms
Dominant values
Philosophy
Rules of the game
Feeling of climate
Organizational culture can be recognized by observed behaviors such as the language used and the rituals demonstrated. Sayings and slogans such as Hewlett-Packard’s “The HP way” are examples of observed behavior.
Norms: These are the unwritten agreed-upon values an organization shares. For example, the norm for a fair day’s work or fair day’s pay is viewed in a certain way for a particular organization. Some firms may expect a salaried employee to work as necessary to get a project done, even if it takes work on weekends to do so.
Usually, the organizational culture can be seen in the dominant values an organization espouses, such as product quality or low prices.
Philosophy: A firm’s philosophy can be seen in its slogans, frequent sayings, and even the mission statement. The philosophy guides the organization’s policy toward its customers and employees.
Rules of the game: Usually refers to “the ropes,” or the norms a newcomer must learn to be an accepted member.
Feeling of climate: Is the feeling conveyed to others in an organization by the physical layout and the way in which members of the organization interact with one another, customers, and outsiders.
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9. Strategic HR Policies: Benefits
Encouraging Proactive Behavior
Communicating Company Goals
Stimulating Critical Thinking and Examination of Assumptions
Identification of Gaps Between Current Situation and Future Vision
Encouragement of Line Managers’ Participation
Identification of HR Constraints and Opportunities
Creating Common Bonds
The process of formulating HR strategies and establishing programs or tactics to implement them is called strategic human resources planning. When done correctly, strategic HR planning provides direct and indirect benefits.
As a part of planning, HR managers and organizations must be proactive rather than reactive to stay ahead, competitively. An example of this could involve finding creative ways to hold on to key employees during challenging times for the organization.
Communication of company goals yields all organizational members being “in the know” and productively aligning with organizational goals.
Critical thinking and examining assumptions are key to organizational success. Examining new problems, while abandoning assumptions can help managers see more clearly what’s going on and then be able to resolve those problems. Forming strategic committees involving HR can help in examining current problems.
Identification of gaps: Asking the questions “where are we today?” and “where do we want to be?” is the first step in strategic planning that will help members see the identified gaps between the two.
Line manager participation: This aspect is key, because they know what’s going on in the organization because they live it day to day.
Identification of HR constraints and opportunities: When overall business strategy planning is done in combination with HR strategic planning, firms can identify the potential problems and opportunities.
Creating common bonds: Research shows that those organizations that have a strong sense of “who they are” tend to outperform those that do not.
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10. Strategic HR Policies: Challenges
Maintaining a Competitive Advantage
Reinforcing Overall Business Strategy
Avoiding Excessive Concentration on Daily Problems
Develop HR Strategies Suited to Unique Organizational Features
Coping with Environment
Securing Management Commitment
Translating the Strategic Plan into Action
Combining Intended and Emergent Strategies
Accommodating Change
Strategic HR policy challenges involve:
Maintaining a competitive advantage: Other companies will always try to imitate a company that performs well. It’s a moving target and must be maintained.
Reinforcing overall business strategy: Coordinating strategies among all units is challenging, but must be done to align with overall organizational strategies. Silo-type thinking doesn’t work in a competitive environment; all must be on the “same page.”
Avoiding excessive concentration on daily problems: Short- term, daily problems must be addressed without the lost foresight of future needs.
Develop HR strategies suited to unique organizational features: No two firms are alike; thus, different strategies apply.
Coping with environment: Different organizations operating within different industries face unique challenges. For example, the electronics industry must adopt to rapidly changing technology whereas a food processor is generally under a more stable environment.
Securing management Commitment: Top-executive support and all the way down support is a must.
Translating the strategic plan into action: The strategic plan must work or else others will not follow.
Combining intended and emergent strategies: People agree that organizations have both intended and emergent strategies, and both are necessary. Static plans are necessary, but so are those that are flexible.
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11. Strategic HR: Choices Work Flows Staffing Employee Separations
Performance Appraisal
Training and Career Development
Compensation
Employee Rights
Employee and Labor Relations
International Management
Strategic HR choices are the options an organization has in designing its human resources system. Work flows: These are the ways tasks are organized to meet production.
Staffing: Finding the right employees at the right place and time are key to HR strategies.
Employee separations: May be voluntary or involuntary. Include activities such as early retirement options, hiring freezes, providing support to terminated employees, or rehiring.
Performance appraisals: Managers assess how well employees are performing assigned duties.
Training and career development: These activities are designed to help organizations meet their needs. Training may be in-house or externally sourced.
Compensation: This is payment employees receive in exchange for their labor (wages and benefits are some examples).
Employee rights: Concern the relationship between employee and organization. Developing policies that protect all interests is key.
Employee and labor relations: Refers to the interaction between workers and management. Some organizations have unions to support such relationships.
International management: Many organizations operate outside the domestic boundaries and face a set of strategic HR options regarding how to manage human resources on a global basis.
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12. Selecting HR Strategies
To increase firm performance
HR strategies should fit with other organizational aspects
An HR strategy’s effect on an organization’s performance depends on how well it fits with other factors. A company’s “fit” leads to better performance. Fit refers to the compatibility between HR strategies and other important aspects of the organization. The better match between the HR strategy and the firm’s overall organization strategies, the better the performance. HR strategies must be attuned to the environment.
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13. HR Fit with Organizational Strategies
Corporate Strategies
Evolutionary Business
Steady State
Porter’s Business Unit Strategies
Cost Leadership
Differentiation
Focus
The strategies adopted by human resources need to fit with organizational strategies.
Corporate strategy: Refers to the mix of businesses a corporation decides to hold and the flow of resources among those businesses.
Evolutionary business strategy: Engage in aggressive acquisitions of new businesses, even if they are totally unrelated.
Steady state strategy: Organizations are very choosy about how they grow.
Porter’s business unit strategies: include cost leadership (focus is on lower-cost structures), in which HR strategies align to focus on low overhead costs and efficiencies;
differentiation (focus is on unique product or service), in which HR strategies align to focus on innovation, flexibility, and attracting higher-skilled employees;
and focus (relies on both low cost and differentiation), in which HR strategies will need to combine both.
Miles & Snow’s business strategies: Another classification of business unit strategy.
Defenders: Conservative business units that prefer to maintain a secure position in relatively stable product or service areas instead of looking to expand in unchartered territories.
Prospectors: Emphasize growth and innovation, development of new products, and an eagerness to be the first in new-product or market areas.
Thus, HR strategies must align with the organizational strategies.
Miles & Snow’s Business Strategies
Defender
Prospector
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14. Miles & Snow’s Business Strategies
See the HR strategies aligned with each particular Miles & Snow orientation.
For the defender strategy, the work-flow focus is efficiency, control, and detailed work planning. Comparatively, the prospector strategy work flow is focused on flexibility, innovation, and loose work planning. The two strategy orientations are quite different and give us an idea to the differences in each, and the different tasks and initiatives that HR will have to work within.
Let’s compare the rest: staffing, employee separation, performance appraisal, training, and compensation. The juxtaposition of the two strategies shows such extreme differences in the HR strategies among the two.
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15. HR Fit with Environment
Degree of Uncertainty
Magnitude of Change
Volatility
Complexity
In addition to reinforcing overall organizational strategies, HR strategies should help the organization better exploit environmental opportunities or cope with unique environmental forces that affect it. The four dimensions of environment are:
Degree of uncertainty
Magnitude of change
Volatility
Complexity
Now let’s look at each of these dimensions as they relate to a firm’s rating of “high” or “low” on different environmental characteristics.
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16. HR Fit with Environment
Degree of uncertainty: The degree to which a firm has available and accurate information in making business decisions.
For example, when there is low uncertainty, firms are able to work under more stable conditions and thus rely on fixed pay and detailed work planning. Conversely, firms operating under high degrees of uncertainty must allow for loose work plans and variable pay.
Volatility: Refers to how often the environment changes. For firms operating under low volatility, again, there’s more stability and control and thus allowance for fixed pay. On the other hand, firms operating in high volatility must be flexible, innovative, and allow for variable pay.
Magnitude of change: Refers to how drastic the changes are within the environment. For example, firms operating in low environments of change can have explicit job descriptions and uniform appraisal procedures because the environment is more stable. However, with firms operating in high-change environments, high-skilled employees are sought at a higher price, and appraisals are more customized to meet the changing needs of the environment.
Complexity: Refers to how many different elements in the environment affect the firm. For firms operating in stable and low-complexity environments, emphasis is on internal recruitment and centralized pay decisions. However, in high-complexity environments, firms seek flexibility, decentralized pay, and external recruitment.
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17. HR Fit with Organizational Characteristics
Production Process
Firm’s Market Posture
Firm’s Overall Managerial Philosophy
Firm’s Organizational Structure
Firm’s Organizational Culture
To be effective, HR strategies must be tailored to the organization’s personality. The features of the organization’s personality can be broken into five major categories:
Productive process: Firms with routine production processes tend to benefit from HR strategies that emphasize control, such as explicit job descriptions and job-specific training.
Firm’s market posture: Firms that experience high sales growth and product innovation tend to benefit from strategies that support growth and entrepreneurial activities.
Firm’s overall managerial philosophy: Firm’s whose top executives are risk averse tend to operate under autocratic-style leadership, for example. Firm’s organization structure: A firm is either centralized or decentralized in structure; thus HR strategies must align with either way.
Firm’s organizational culture: A firm’s climate dictates the way in which to operate within it. For example, a firm could foster an entrepreneurial climate that would work well under strategies of looser control and more informal structures.
So, we see that HR strategies must mirror the environment in which they operate. Furthermore, as we have seen, the environments are diverse and call for different strategies.
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18. HR Fit with Organizational Capabilities
Distinctive Competencies
Competitive edge
HR Strategies should
Help firm exploit its competencies
Assist the firm to help use its HR skills
Distinctive competencies are those characteristics (technical ability, management systems, and reputation) that give the firm a competitive edge. An example would be Mercedes-Benz automobiles that are known for their superior quality of design and engineering. Because the company’s product is known for its distinctiveness qualities, Mercedes-Benz has a competitive edge against other competitors.
HR strategies make a greater contribution to firm performance the greater the extent to which (1) they help the company exploit its specific advantages or strengths while avoiding weaknesses and (2) they assist the firm in better utilizing its own unique blend of human resource skills and assets.
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19. HR Department Managers: An Important Partnership
To foster effective partnerships, companies should:
Analyze the people side of productivity
View HR roles as consultants
Instill a shared sense of common fate
Require HR training to include managerial experience
Actively involve top corporate and divisional managers in HR plans
The role of the HR department is to support managers.
Companies can take certain steps to foster an effective partnership between managers and HR department by:
1. Analyzing the people side of productivity rather than depending solely on technical solutions to problems
2. Viewing HR professionals as internal consultants who can provide valuable advice and support that improve the management of operations
3. Instilling a shared sense of common fate in the firm rather than a win/lose perspective among units
4. Requiring some managerial experience as part of the training of HR professionals. This requirement should make HR staff more sensitive to and cognizant of the problems managers face.
5. Actively involving top corporate and divisional managers in formulating, implementing, and reviewing all HR plans and strategies.
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20. HR Audit Periodic HR Audits should ask:
Is the turnover rate exceptionally low or high?
Are employees who quit good employees or marginal?
What is the firm’s ROI regarding recruitment, training, and performance plans?
Is the firm complying with government regulations?
Companies should periodically conduct an HR audit to evaluate how effectively they are using their human resources. These types of questions include all of the above.
The HR audit addresses these and other important issues systematically so that effective programs can be maintained and ineffective programs corrected or eliminated.
How well is the company managing employee diversity?
Are HRM policies and procedures helping the firm reach long-term goals?
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21. Summary and Conclusions
HR Challenges Facing Managers
Environmental Challenges
Organizational Challenges
Individual Challenges
Planning and Implementing Strategic HR Policies
Policies and procedures should be congruent
Selecting HR Strategies to Increase Firm Performance
The Important Partnership of HR and Managers
To summarize, there are many challenges and unique environments in which HR managers operate. It is vitally important for HR managers to partner with strategic organizational team members and actively participate in all initiatives of the firm. It is clear that HR strategies must be aligned and congruent with and organization’s strategies.
Because of the many organizational challenges, it is very important for HR managers to work closely with the organization in aligning the human resources to meet the challenges and objectives of the organization in an efficient and effective manner.
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22. Pearson Education, Inc. Copyright
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