CONCLUSION & REVIEW:Strategies for Gaining Competitive Advantage, High-performance Work System

<< INTERNATIONAL DIMENSIONS OF HRM:Global Corporation, Type of staff members, Approaches to Global Staffing

Human Resource Management (MGT501)

Lesson 45

CONCLUSION & REVIEW

In today's lecture, we will be having overview of the entire course we have covered in previous modules and

will consider the reasons of importance of HRM.

A. Human Resource Management

A managerial function tries to match an organization's needs to the skills and abilities of its employees.

Attracting developing, motivating and retaining required talent and people in organization carries out this

function. Workforce of the organization is also being utilized as a source of competitive advantage by

acquiring financial or economic capabilities, product capabilities, technological or process capability,

organizational capability.

B. Strategies for Gaining Competitive Advantage

Competitive advantage refers to a company's ability to maintain market share and profitability. Any

competitive advantage enjoyed by an organization tends to be short-lived because other companies are

likely to imitate it. This is as true for HR advantages as for technological and marketing advantages. For

example, many high-tech firms have "borrowed" reward programs for key scientists and engineers from

other successful high-tech firms. The challenge from an HR perspective is to develop strategies that offer

the firm a sustained competitive advantage. For instance, a company may develop programs that maximize

present employees' potential through carefully developed career ladders while at the same time rewarding

them generously with company stock with strings attached (for example, a provision that they will forfeit

the stock if they quit before a certain date).

Cost leadership A cost leadership strategy is a competitive strategy in which a company

aims to become the low-cost leader in the industry by emphasizing the attainment of

absolute cost advantages from any and all sources. Requires a balance between low costs

and acceptable quality.

b. Differentiation A differentiation strategy is a competitive strategy in which a company

seeks to be unique in its industry in a way that is valued by the customers. HR strategies

that fit a differentiation strategy emphasize innovation, flexibility, and renewal of the work

force by attracting new talent from other firms, opportunities for mavericks, and

reinforcement (rather than discouragement) of creative flair. The specific HR strategies

that are likely to benefit differentiators include the use of broad job classes, loose work

planning, external recruitment at all levels, team-based learning, emphasis on what the

individual can do (rather than on the job title held) as a basis for pay, and reliance on

performance appraisal as a developmental (rather than a control) device.

Focus Strategy: A focus

strategy is a competitive

strategy in which a

company selects a market

segment and serves the

customers

that

particular market niche

better or cheaper than its

competitors. The focus

strategy relies on both a

low-cost position and

differentiation, with the

objective of serving a

narrow target market

better than other firms.

The firm seeks to achieve

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differentiation either from better meeting the needs of the particular target, or from

lowering costs in serving this target, or both. The HR strategies likely to fit the focus

strategy best would be somewhere in the middle of those described for low-cost producers

and differentiators.

C. The Strategic Management Process

Strategic planning is the process of identifying the business of the firm today and the business of the firm

for the future, and then identifying the course of action it should pursue. Strategic planning includes the

first five strategic management tasks: evaluating the situation, defining the business, developing the mission,

translating the mission into goals, and then crafting a course of action. Strategic management includes the

implementation phase. The strategic management process is the continuous process of identifying and

pursuing the organization's mission by aligning internal capabilities with the external demands of the

environment.

Step 1: Define the Business and Its Mission: The strategic management process begins with answering

the question, in what business should we be? Defining a company's business involves identifying several

things: product scope, vertical integration, geographic scope, how they compete. A vision is a general

statement of the organizations desired direction that evokes emotional feelings in its members. A mission

statement outlines the organization's future path and it communicates its purpose. Managers base their

strategic plans on methodical analyses of their internal and external situations.

IV. Step 2: Translate the mission into strategic goals: Top management's vision and mission are

translated into operational strategic goals.

V. Step 3: Formulate a strategy to achieve the strategic goals: A strategy is a course of action that

explains how the organization will move to achieve its strategic goals given its internal strengths

and weaknesses and its external opportunities and threats. Implementation of the strategy means

translating the plan strategy into actions and results, which requires drawing on the planning,

organizing, leading, and controlling functions of management. Top companies craft strategies

whose basic principles are easy to communicate.

VI. Step 4: Structure: Some HR strategies fit very well with highly formalized organizations that are

divided into functional areas (for example, marketing, finance, production, and so on) and that

concentrate decision making at the top. The HR strategies appropriate for this type of firm include

a control emphasis, centralized pay decisions, explicit job descriptions, and job-based pay.

VII. Step 5: People: People in organization mean to have workforce in organization to perform

different functions. Different set of HR strategies, include informal hiring and socializing of new

employees, decentralized pay decisions, broad job classes, and individual-based pay.

Managers must be alert to opportunities and threats that might require modifying or totally redoing their

strategies. Strategic control is the assessing of progress towards strategic goals and taking corrective action

as needed and keeping the strategy up-to-date.

D. Strategic Management Role:

Strategic management role is used to link the firm's HR policies and practices to the broader,

longer-term needs of the firm and its stakeholders. Main responsibilities include Setting the direction

Crafting corporate- and business-level plans developing and implementing functional plans measuring,

evaluating, revising and refocusing, the fit between HR & business strategy

a. Enabler and Consultant Role: This role is used to enabling line managers to make things happen

main responsibilities include, Training, assisting with problem diagnosis developing solutions with

managers being accessible and attuned to employee needs and concerns

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Human Resource Management (MGT501)

Monitoring and Maintaining Role: Continuous monitoring is required to have compliance with

legal regulations and effectiveness of HR activities and this is ensured by the monitoring role by HR

department. Main activities performed in this role include monitoring morale, providing support

during change and uncertain times

d. Innovator Role: Improving productivity and quality of work life it includes: Adapting to an

environment of uncertainty, energy conservation, and international competition, justifying the

benefits and costs of programs

Change and Knowledge Facilitator Role: This role is played in order to facilitate organizational change

and to maintain the organizational flexibility. It includes focusing on the future, guiding the flow of

knowledge, information and learning throughout the organization.

E. High-performance Work System (HPWS)

A specific combination of HR practices, work structures, and processes that maximizes employee

knowledge, skill, commitment, and flexibility is called high performance work systems. This system is

composed of many interrelated parts that complement one another to reach the goals of an organization,

large or small. This system is based upon the principles of

Developing

shared information, knowledge development, performance

High-Performance

reward linkage and social equality. High performance

Work Systems

work system can bring many advantages to

Liinkages

Lnkages

organization they mainly include:

SysttemDesiign

Sysem Desgn

tto

Employee Benefits: High performance

··Worrkfflow

Wok low

Sttrategy

Srategy

work systems are beneficent for employee in

··HRM prractices

HRM pactices

absence that they are provided with

··Supporrt

Suppot

ttechnology

echnology

opportunity of more involvement in

Prrnciples off

Piinciples o

High

organization,

experience

growth

and

Involvementt

Involvemen

satisfaction specifically through organizational

The Implementtaton

The Implemenatiion

training and developmental policies and can

Prrocess

Pocess

OUTCOMES

become

contributors

towards

··Organzattonall

Organiizaiiona

achievement of goals and mission of the

··Employee

Employee

organization.

Organizational Benefits: Organization can improve and increase the productivity; it can

ensure quality, flexibility in system in order to have more satisfied customers.

F. Selecting HR Strategies to Increase Firm Performance

No HR Strategy is "good" or "bad" in and of itself. The success of HR strategies depends on the situation

or context in which they are used. In other words, an HR strategy's effect on firm performance is always

dependent on how well it fits with some of the factors. Fit refers to the consistency or compatibility

between HR strategies and other important aspects of the organization

a. Fit with Organizational Strategies

Organizational strategies may be examined at two levels: corporate and business.

Corporate strategy refers to the mix of businesses a corporation decides to hold and the flow of resources

among those businesses. This involves decisions pertaining to acquisition, divestment, diversification, and

growth. At one end of the spectrum is the evolutionary business strategy; at the other end is the steady-

state strategy. Business unit strategies refer to those established by firms or autonomous units of the

corporation. Well-known business strategies were formulated by Porter (overall cost leadership strategy,

differentiation business strategy, and focus strategy) and Miles and Snow (defender strategy and prospector

strategy).

b. Fit with the Environment

HR strategies should help the organization better exploit environmental opportunities or cope with the

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Human Resource Management (MGT501)

unique environmental forces that affect it. The environment can be examined on four dimensions,

including (1) degree of uncertainty, (2) volatility, (3) magnitude, and (4) complexity.

c. Fit with Organizational Characteristics

To be effective, HR strategies must be tailored to the organization's personality. The features of an

organization's personality are its (1) production process for converting inputs into output, (2) market

posture, (3) overall managerial philosophy, (4) organizational structure, and (5) organizational culture.

d. Fit with Organizational Capabilities

An organization's capabilities are its distinct competencies. HR strategies make a greater contribution to a

firm's performance (1) when they help to exploit the firm's specific advantages or strengths while avoiding

its weaknesses, and (2) when they assist in better using its own unique blend of human resource skills and

assets.

e. Choosing Consistent and Appropriate HR Tactics to Implement HR Strategies

Even the best-laid strategic HR plans may fail when specific HR programs are poorly chosen or

implemented. A firm's HR strategies must be mutually consistent. That is, HR strategies are more likely to

be effective if they reinforce one another rather than work at cross-purposes.

G. Expectations for HR Professionals

Today's dynamic environment places some expectations upon the HR professional to meet the changing

environment and contingencies these expectations are enlisted as following:

· Understand problems assigned

· Stay competent and professional through study and research

· Maintain high standards of personal honesty and integrity

· Consider the personal interests, welfare, and dignity of all employees affected by recommendations

and actions

· Ensure organizations maintain high regard for public interest and personal interests and dignity of

employees

H. Current HRM Challenges

a. Managing Teams

Team building--activities aimed at improving the internal work and relationship processes of teams--

requires attention to both task and interpersonal relationships. In team building, organizations apply the

principles of group dynamics to select complementary members, support more cohesion, manage stages of

group development, and establish constructive norms that foster high performance. Membership in teams is

based on expertise in areas that are necessary for task accomplishment. Trust is the key to team members'

commitment to a common goal, mutual accountability, and collaboration. Trust is built on six

interdependent factors: the integrity of the members; open communication; mutual respect and support;

fairness and equity; competence and hard work; and reward for cooperation. In addition, clear goals are a

requirement for effective teamwork. Members of effective teams play eight different roles, all of which are

necessary for a complete team and for synergy

b. Managing Diversity

A diverse workforce refers to two or more groups, each of whose members are identifiable and

distinguishable based on demographic or other characteristics like gender age group, education etc. Several

barriers in dealing with diversity include stereotyping, prejudice, ethnocentrism, discrimination, tokenism,

and gender-role. Managing diversity means planning and implementing organizational systems and practices

to manage people so that the potential advantages of diversity are maximized while its potential

disadvantages are minimized. Managers are striving for racial, ethnic, and sexual workplace balance as a

matter of economic self-interest. A study found that cultural diversity contributes to improved productivity,

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Human Resource Management (MGT501)

return on equity, and market performance.

Managing Globalization

One of the most dramatic challenges facing as they enter the twenty-first century is how to compete against

foreign firms, both domestically and abroad. Many companies are already being compelled to think globally,

something that doesn't come easily to firms long accustomed to doing business in a large and expanding

domestic market with minimal foreign competition.

Weak response to international competition may be resulting in upwards layoffs in every year. Human

resources can play a critical role in a business's ability to compete head-to-head with foreign producers. The

implications of a global economy on human resource management are many. Some firms try to develop a

global company identity to smooth over cultural differences between domestic employees and those in

international operations. Minimizing these differences increases cooperation and can have a strong impact

on the bottom line. Some firms actively engage in international alliances with foreign firms or acquire

companies overseas to take advantage of global markets. Making such alliances work requires a highly

trained and devoted staff. These illustrations show how firms can use HR strategies to gain a worldwide

competitive advantage.

d. Managing Change

Many organizations face a volatile environment in which change is nearly constant. If they are to survive

and prosper, they need to adapt to change quickly and effectively. Human resources are almost always at the

heart of an effective response system. Here are a few examples of how HR policies can help or hinder a

firm grappling with external change:

I. Code of Ethics for HR Professionals:

Ethics related problems are faced by the organizations whenever there is a practice of using favoritism

rather than ability or job performance for managerial decisions regarding employment, promotion, pay and

discipline. These problems can be reduced and eliminated by maintaining the highest standards of

professional and personal conduct, encouraging employers to make fair and equitable treatment of all

employees a primary concern, maintaining loyalty to employers and pursue company objectives in ways

consistent with the public interest, upholding all laws and regulations relating to employer activities, and

maintaining the confidentiality of privileged information. People's expectations that their employers will

behave ethically are increasing, so much that many firms and professional organizations have created codes

of ethics outlining principles and standards of personal conduct for their members. These negative

perceptions have worsened over the years. The widespread perceptions of unethical behavior may be

attributed to the fact that managerial decisions are rarely clear-cut. Except in a few blatant cases (such as

willful misrepresentation), what is ethical or unethical is open to debate. Even the most detailed codes of

ethics are still general enough to allow much room for managerial discretion. In other words, many specific

decisions related to the management of human resources are subject to judgment calls. Workplace

Flexibility: collaborative work in a virtual office

How Can You Gain Support for "Best HR Practices?"

Managers can gain support for best HR practices by linking the use of HR practices to the solution of real

business problems, and to achieving tangible business goals. This achievement of goals requires selection of

well defined and specific, measurable and realistic goals and communicating the expected standard of

performance to workers. Managers should demonstrate how the benefits outweigh the costs of using "best

HR practices." Speak the language of business people, i.e., money, not correlation coefficients! Etc.

K. Future HR Trends:

Workplace Flexibility: collaborative work in a virtual office as well as flexible work hours is

one of future HR trends.

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Human Resource Management (MGT501)

Global Business: borderless business requires a global workforce to perform the function at

international business level.

Work & Society: working to live, not living to work

Workforce Development: constant learning in a just-in-time format, learning organization &

high skill utilization

Definition of Jobs: jobs get bigger & broader

Strategic Role of HR: becoming leaders, not just partners

The Value of Predicting: having a vision & a way to achieve it.

Key issues of the organization are to achieve efficiency, effectiveness and competitiveness and this can be

done by using not ignoring the Knowledge and experience are available. Because most of the time Best HR

Practices are not used because of Resistance to change, Ignorance on the part of decision makers and

Political considerations. By overcoming these three factors we can have more effectively managed

organizations by using HR practices.

THE END

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