Chapter 02

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A Strategic Management Approach to HRM

McGraw-Hill/IrwinHuman Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Introduction

Taking a strategic HRM approach means:Making human resources management a top priority Integrating HRM with the company’s strategy,

mission, and goals HRM can make significant contributions if included

in the strategic planning process from the outsetThe strategic management process helps determine:

What must be done to achieve priority objectivesHow they will be achieved

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Introduction

Many strategic plans use:A three to five year timelineAnnual monitoring and

modification

Good HR strategy results in a fit between organiza-tional strategy and HRM policies and programsRecruitment, selection, outsourcing, telecommuting,

performance evaluation, compensation

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A Model to Organize HRM

ARDM means:AcquiringRewardingDevelopingMaintaining and protecting

The goals of the ARDM model are:Socially responsible and ethical practices

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A Model to Organize HRM

The eventual success of any HRM activity is:The organization's employees are the best qualifiedThey perform jobs that suit their needs, skills, and

abilities

Matching people and activities in order to accomplish goals is easier with a diagnostic approach

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Taking a Diagnostic Approach to HRM

The ARDM model has four specific steps:DiagnosisPrescriptionImplementationEvaluation

Managers typically diagnose a work situation by observing and identifying key factors A prescription is then made to translate the diagnosis

into actionMost human resource problems are too complex to

have a single correct prescription

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Taking a Diagnostic Approach to HRM

Implementing a solution is the next step, followed by evaluation Evaluation tells managers whether improvement in

the ARDM process is needed

If an organization teaches its members to focus on ARDM plus the environment, it is likely to achieve: Socially responsible, ethical behaviors Competitive, high-quality products and services

The ARDM model calls for thorough, timely, and systematic review of each situation

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External Environmental Influences

HRM processes are influenced by both the internal and external environmentsExternal influences include:

Government laws and regulations Union procedures and requirements Economic conditionsThe labor force

HR planning must operate within:GuidelinesLimits of available resourcesCompetencies

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External Environmental Influences

HRM is one important function among others: FinanceAccountingResearch and developmentMarketingProduction

The interaction of these internal programs sets the tone for the entire organizational system

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Government Law and Regulations

Government regulations affect: HiringPromotionManaging diversityDownsizingDiscipline

Major areas of legislation and regulation include EEO and human rights legislation These directly affect recruiting, selection, evaluation,

and promotion

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Government Law and Regulations

EEO and human rights legislation indirectly affects:Employment planningOrientationCareer planningTrainingEmployee development

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Government Law and Regulations

Other areas of legislation and regulation include:Employment of illegal aliens Discrimination based on sex, age, and disability Compensation regulation Benefits regulation Workers' compensation and safety laws Labor relations laws and regulations Privacy laws

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Government Law and Regulations

Government regulation has increased substantially In 1940, the U.S. Dept. of Labor administered

18 regulatory programs In 2004, it administered more than 135

And that is just one government agency

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Government Law and Regulations

Government regulation impacts a manager’s job: Regulation encourages simplistic thinking on

complicated issues Designing and administering regulations is

complex, leading to slow decision making Regulation leads to complicated legal maneuvering Many regulations are out of date and serve little

social purpose There is regulatory overlap and contradiction among

regulatory agencies

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The Union

A union directly affects most aspects of HRM, including:Working conditionsWages and salariesFringe benefitsEmployees’ rightsGrievance processesWork hours

There are cooperative unions and combative unions

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The Union

Unions were once concentrated in a few sectors of the economyToday, the fastest-growing sectors are the public

sector and the third sectorIt is no longer useful to think of unionized employees

as blue-collar factory workers Engineers, nurses, teachers, secretaries, salespersons,

college professors, professional football players, and even physicians belong to unions

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Economic Conditions

Two economic factors affect HRM programs: ProductivityThe work sector of the organization

Productivity is:An important part of a nation's economic condition Representative of an organization’s overall efficiency The output of goods and services per unit of input

(resources) used in a production process

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Economic Conditions

Before productivity can be managed and improved, it must be measured Isolate the outputs Determine the costs that went into producing the

output Compare the current year's figures with those of the

previous year Productivity measures are crude and subject to

short-term error, but over time can show a trend

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Economic Conditions

Suggested solutions for increasing productivity:Reduce government controls Develop more favorable income tax incentives Reindustrialize the business-industrial complex

Reducing legislative controls can adversely affect the quality of life and society for decades to come Toxic waste, radiation, air pollution, and other forms

of destruction must be carefully controlled

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Economic Conditions

Managers can influence productivity through sound HRM programs Diagnosis, prescription,

implementation, and evaluation Recruitment and selection Motivational and compensation

techniques Training and development

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The Work Sector of HRM

60 percent of HR specialists work in the private sector 30 percent work in the public sector;

10 percent work in the third sectorPrivate- and third-sector HRM are structured

similarlyHRM in the public sector is structurally different

A manager moving from the private or third sector to the public sector finds a more complicated jobPoliticians, the public, special interest groups, and

reporters all exert outside pressure

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Competitiveness

At the macroeconomic level, competitiveness is:The degree to which a nation can, under free and fair

market conditions, produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens

If you substitute organization for nation, and employees for citizens, you have the definition of organizational competitiveness

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Competitiveness

At the organizational level, competitiveness is an important issue How effectively do workers produce the product? How good is the quality of the services or goods? Can employees handle new technology and produce

the product at lower costs? Does the firm have the human resources needed to

increase manufacturing to a global level? Will the push to work harder and faster raise

turnover, absenteeism, and the number of defects?

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Competitiveness

A competitive advantage means having a superior marketplace position relative to competitors A sustainable competitive advantage means dealing

effectively with employees, customers, suppliers, and competitors

The way HRM activities are implemented and modified can provide competitive advantages

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Competitiveness

Activities that can enhance and sustain competitive advantage:Employment securitySelective recruitingHigh wagesIncentive payEmployee ownershipInformation sharingParticipation and empowermentTeams and job redesign

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Competitiveness

Activities that can enhance and sustain competitive advantage (continued):Training as skill developmentCross-utilization and cross-trainingSymbolic egalitarianismWage compressionPromotion from withinLong-term perspectiveMeasurement of practicesOverarching philosophy

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Competitiveness

Competitors can adopt and/or improve on successful HRM activities A firm with fair and equitable treatment of human

resources is less susceptible to losing its competitive advantage

A few HRM activities can be copied, but imitation of an entire culture and system of HRM is difficult

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Composition & Diversity of Labor Force

The labor force of the United States comprises all people age 16 years or older who are:Not in the militaryEmployed or actively seeking work

As of 2004, over 146 million Americans were in the workforce

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Women in the Workforce

In 2002, about 47 percent of the full-time U.S. workforce consisted of women This is a 235 percent increase since 1947 The number of married male employees has increased

by only 30 percent

Women should have equal job opportunitiesHowever, they still face workplace discrimination

There are signs that more women will have professional jobs

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Minorities in the Workforce

The situation for racial and ethnic minorities in the U.S. is similar to that for women Few Hispanics, African-Americans, or Native

Americans are found in high-status, high-paying jobsHistorically, the most recent immigrant groups take

the lowest-level jobsMinorities were living in the U.S. long before the

immigrants arrived

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Older Employees

The percent of older employees is growingOne of the toughest employment problems today is

the older employee who loses a job through no personal fault

Higher insurance premiums for older employees make them more costly to employ

As we age, we lose some of our facultiesThis is an ongoing processThe key is to match employees with jobs

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Older Employees

Contrary to stereotypes:Employees 45+ have no

more accidents than younger ones

Until age 55, absenteeism rates are the same or lower Employees under 35 have the worst accident rateWhen total performance is considered, older

employees are just as effective as younger ones

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Employment Projection

The ten fastest-growing occupations:Computer software, engineers, applicants Computer support specialists Computer software, engineers, systems software Network and computer system administrators Network systems and data communication analysts Desktop publishers Database administrators Personal and home care aides Computer systems analysts Medical assistants

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Geographic Location of the Organization

The location of the organization influences hiring practices and HRM activitiesRural versus urbanInternational versus local

EducationBehaviorLegal-political factorsEconomicsInter-cultural training

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Internal Environmental Influences

HRM programs are influenced by:StrategyGoalsOrganizational cultureNature of the taskWork groupsThe leader’s style and experience

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Strategy

A strategy: Indicates what an organization's key executives hope

to accomplish in the long runIs concerned with competition and aligning the

resources of the firm

Some companies believe long-term success is linked to helping employees achieve work-life balance

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Goals

Organizational goals differ within and among departmentsMost departments have similar goals Differences arise from the importance placed on the

goals In organizations where profits take precedence,

HRM goals receive little attention This results in effectiveness problems (absenteeism,

performance decrements, high grievance rates)

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Goals

Diversity refers to any mixture of themes characterized by differences and similarities Diversity in organizations is more than demographics Dealing with workforce diversity means focusing on

the collective picture of differences and similarities

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Goals

Wisconsin Power and Light uses a six-step approach to diversity training: Form a diversity steering team Create a diversity training team Select a diversity training project manager Complete a cultural audit Design a training program Implement and evaluate the training

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Organization Culture

A firm's organizational culture is shown by: The way it does business How it treats customers and employees The autonomy or freedom that exists in the

departments or offices The degree of loyalty expressed by employees

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Organization Culture

Organization culture represents the perceptions held by the employees There is no one "best" culture for the development of

human resources

Culture can: Impact behavior, productivity, expectations Provide a benchmark for standards of performance

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Nature of the Task

HRM is the effective matching of the nature of the task (job)

with the nature of the employee

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Nature of the Task

Job factors that attract or repel workers: Degree of knowledge and ability to use information Degree of empowerment Degree of physical exertion Degree of environmental unpleasantness Physical location of work Time dimension of work Human interaction on the jobDegree of variety in the task Task identity Task differences and job design

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Work Group

An employee’s experiences are largely influenced by the work groupA group is two or more people who:

Consider themselves a group Work interdependently to accomplish a purpose Communicate and interact with one another on a

continuous basis In many cases, work next to each other

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Work Group

An effective group is one in which:Members function and act as a team Members participate fully in group discussion Group goals are clearly developed Resources are adequate to accomplish group goals Members furnish suggestions leading to achievement

of goals

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Work Group

Most most effective work groups: Are small (7 to 14 members) Have stable membership

Members:Have eye contact and work closely together Have similar backgrounds Depend on the group to satisfy their needs

Effective groups support management and the organization's goals, unless it conflicts with their own

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Work Group

Changing the group's norms and behavior requires:The manager's leadership The manager's power to reward or discipline The transfer of some group members

Work groups are directly related to the success of HRM activitiesIf a group opposes HRM programs, it can ruin them Consider permitting work-group participation in

designing and implementing HRM

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Leader’s Style and Experience

The experience and leadership style of the operating manager directly affects HRM activities Orchestrating the skills, experiences, personalities,

and motives of individuals Facilitating interaction within work groups Providing direction, encouragement, and authority to

evoke desired behaviors Reinforcing desirable behavior

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Strategic HRM: A Key to Success

Three levels of strategy apply to HRM activities: Strategic (long term) Managerial (medium term) Operational (short term)

The HRM activities are: Employee selection/placement RewardsAppraisalDevelopment

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Strategic HRM: A Key to Success

Strategic HRM planning leads to:GrowthProfitsSurvival

Planning also:Expands awareness of possibilities Identifies strengths and weaknesses Reveals opportunities Points to the need to evaluate the impact of internal

and external forces

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Strategic HRM: A Key to Success

Organizational strategic plans permit HR to prepare for internal and external environment changesEach organization should adopt a strategy that best

fits its goals, environment, resources, and people An organization must match its:

Strategic planEmployees' characteristicsHRM activities

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Strategic HRM: A Key to Success

The days of viewing HRM as only a highly specialized and technical staff are overHRM must be involved in all aspects of an

organization's operation It must make everyday contributions to the

organization

HRM programs must be:ComprehensiveAdapted to the organization's cultureResponsive to employee needs

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Strategic Challenges Facing HRM

Global competition has become intense HRM professionals are now being asked to optimize

the skills, talents, and creativity of every employee Failure to do so will mean the firm cannot compete in

a globally interconnected world

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Strategic Challenges Facing HRM

Technology trends: Growth in knowledge needs Shift in human competencies Global market connection Business streamlining Rapid response Quicker innovation Quality improvement Industrial revolution

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Building a Cooperative Workforce

The U.S. workforce is changing in dramatic ways:There is a slower increase in the number of Caucasian

workers than other groups By 2006, white males will no longer dominate the

workforceWomen are entering the workforce in record numbers The number of Hispanic, Asian, and older workers

will continue to rise

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Building a Cooperative Workforce

The changing look, age, and needs of the workforce have resulted in more concern about:Child careElder careDiversity understanding and training

Understanding diversity is an obvious needMost firms are not yet "diversity-friendly”The negative financial impact can be significantThere will be increased demand for fair, ethical, and

prompt handling of diversity issues

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Caliber of the Workforce

Recruiting and developing skilled labor is important A growing number of jobs require higher levels of

education, language, math, and reasoning skillsStrategic HR planning models must carefully weigh

deficiencies and shortages in skills

The skills gap impacts more than HRMWhole societies must face the consequences of not

having the workforce needed to compete in a global economy

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Restructuring and Downsizing

Facts about downsizing:Half of all downsized firms end up with at least as

many employees again within a few yearsDownsizing in manufacturing is not new It is positively correlated to foreign competition It encourages firms to reduce their costs Profits increase in the short-run, but not productivity It leads to lower compensation/wages within the

downsized firm

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Restructuring and Downsizing

Restructuring means changing the reporting and authority relationships within a firm

Downsizing is a reduction in a company's workforce Downsizing has a human face and can result in stress-

related health problems

There is a growing sense that job security is a thing of the past

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Contingent Workers

Contingent workers include:TemporariesPart-timersContract or leased workersOthers who are hired to handle extra tasks or

workloads

The number of contingent workers has increased steadily since the early 1970s

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Contingent Workers

Outsourcing means hiring another firm to do workThis includes HRM activities The outsource firm provides the employees to

complete the job

Professional employee organizations (PEOs) are growing in popularity because they can:Save a firm money Reduce its risks Improve efficiency Allow the company to focus on its core business

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People & the HRM Diagnostic Framework

Employees are the most important concern in the diagnostic model Even the best HRM activities can backfire if

adjustments for individual differences aren’t built in People differ in their:

AbilitiesAttitudes and preferences StylesIntellectual capacitiesWays of doing the job

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Abilities of Employees

Abilities or skills are classified as: MechanicalMotor coordinationMentalCreative

Abilities that are the result of genetic factors can rarely be changed through trainingAbilities such as interpersonal skills and leadership

are more subject to change

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Employee Attitudes and Preferences

An attitude is:A characteristic, long-lasting way of thinking,

feeling, and behaving toward an object, idea, person, or group

A preference means:Evaluating an object, idea, or person in a positive or

negative way

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Employee Attitudes and Preferences

Work:Allows for the expression of both aggressive and

pleasure-seeking drives Offers a way to channel energy Provides income Offers a justification for existence Is a way to achieve self-esteem and self-worth

The amount of energy directed toward work is related to the amount directed to family, interpersonal relations, and recreation

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Motivation of Employees

Motivation is a set of attitudes that predisposes a person to act in a specific, goal-directed wayIt is an inner state that energizes, channels, and

sustains human behavior to achieve goalsWork motivation channels a person's behavior toward

work and away from recreation or other areas of life The motivation to work changes as other life

activities change

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Motivation of Employees

Managers who can determine the work motivations of employees will make better HRM decisions Work-oriented, hard working employees are usually

motivated by incentive compensation systems Those consciously motivated to do a better job

benefit from performance evaluation techniques

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Personality of Employees

Personality is how a person thinks and behaves It includes the person's:

TraitsValuesMotivesGenetic blue printAttitudesEmotional reactivityAbilitiesSelf-imageIntelligenceVisible behavior patterns

Because each employee has a unique personality, it is unlikely that a single set of HRM activities or leadership approaches will be equally successful for all employees

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Personality of Employees

Behavioral scientists have found that:The employee is both rational and intuitive A person acts in response to internal inclinations,

choices, and environmental influences

Each person is unique and acts/thinks in a certain way because of: PersonalityAbilitiesAttitudesMotives

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Desirable End Results

HRM must make decisions and solve problems in a socially responsible and ethically sound wayIt must help the firm satisfy its customers and

employeesIt is a demanding job, but an exciting challenge

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Comments to Reflect On

Organizational effectiveness is critically influenced by HR management practices Improvements in productivity, quality, and customer

satisfaction typically depend on changes in multiple management systems

HR management systems drive behavior; they must align with other management systems

It is hard to improve organizational performance without paying attention to HR management

The HR department must be a central player in a company's competitive efforts