1. Building Human Capital OS352 HRM Fisher January 12, 2005

2. Agenda Review goals of HRM Why manage human resources? Linking HRM and strategy

3. Goals of HRM Ensure the organization has the workforce required to create products/services – Attract, motivate, and retain qualified employees Establish and administer fair personnel policies Ensure compliance with labor laws And ultimately to support a successful business!

4. Strategy and human capital Overall, strategy involves developing and sustaining a competitive advantage – Source of value – Rare – Difficult to copy Highly skilled, motivated employees can meet these resource characteristics – Human capital

5. Developing human capital How do each of these systems contribute to the development of human capital? – Recruitment – Selection – Training – Performance management – Compensation Retention is key

6. Human Resource Strategy A firm ’ s deliberate use of human resources to help it gain or maintain an edge against its competitors in the marketplace.

7. HR can respond to strategy … Three general business strategies (can be combined) – Operational excellence – Product leadership – Customer intimacy How would HR respond to each strategy? Based on Beatty, R.W., Huselid, M.A., & Schneier, C.E. (2003). New HR Metrics: Scoring on the Business Scorecard. Organizational Dynamics, 32, 107-121.

8. ….or inform strategy Organization ’ s internal strengths and weaknesses often inform strategic decisions Identify areas of competitive advantage – Core skill areas – Corporate culture – Labor/management relations Use those to inform strategic decisions

9. HR responds to external forces Labor market demands Competitors ’ actions Regulatory environment Industry best practices

10. But must also consider internal factors Best practices may not be effective due to characteristics of the organization – Industry – Size – History – Culture Need to tailor HR activities HR activities must be aligned

11. HR as a competitive advantage: Fortune 100 Best Places to Work Annual listing of top organizations – Evaluation of policies and culture – Turnover, job growth, pay – Employee opinions on things like management, job satisfaction, and camaraderie This year ’ s winners are: – Wegman ’ s (benefits for part-timers) – W.L. Gore (informal org structure) – Republic Bancorp (35 days paid time off) How do high ratings help create competitive advantage?

12. Measuring Outcomes How do we know if the HR function is operating effectively? What kinds of outcomes could we measure?

13. Some quantitative metrics Range from simple to more complex Simpler metrics include number of HR staff compared to total employment; recruiting cost per hire Human Capital ROI Revenue – Nonhuman expenses Pay and Benefits Initiatives to improve performance of salesforce Dollars invested in training and incentives Increase in sales

14. For next class Read Noe pages 49-55, 527-531 How is IT affecting HR? – Enterprise resource planning systems (such as SAP) – Other types of technology