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1.READING 4.1: Distinctive Human Resources Are Firms’ Core Competencies READING 4.2: Employee Engagement and Commitment To be a true strategic partner, does HR need to take on a more generalized or specialized approach to its work? Why? (Critical Thinking Question 5, page 168, in the textbook.) (Prepare a 600 word paper explaining the answer)
2.READING 5.1: Diverse Succession Planning: Lessons From the Industry LeadersREADING 5.2: The Annual HR Strategic Planning Process: Design and Facilitation Lessons from Corning Incorporated Human Resources Why are aggregate and succession planning of critical importance? How might failures in these areas impact an organization’s ability to compete? (Critical Thinking Question 2, page 215, in the textbook.)(Prepare a 600 word paper explaining the answer.)
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The Context of Strategic Human Resource Management
T
he role of HR management in organizations has been evolving dramatically in recent years.
The days of HR as the “personnel department”—performing recordkeeping, paper pushing, file
maintenance, and other largely clerical functions—are over. Any organization that continues to
utilize its HR function solely to perform these administrative duties does not understand the contributions that HR can make to an organization’s performance. In the most financially successful
organizations, HR is increasingly being seen as a critical strategic partner and assuming farreaching and transformational roles and responsibilities.
Taking a strategic approach to HR management involves abandoning the mindset and practices
of “personnel management” and focusing more on strategic issues than operational issues. Strategic
HR management involves making the function of managing people the most important priority in
the organization and integrating all HR programs and policies within the framework of a
company’s strategy. Strategic HR management realizes that people make or break an organization
because all decisions made regarding finance, marketing, operations, or technology are made by an
organization’s people.
Strategic HR management involves D
the development of a consistent, aligned collection of practices,
programs, and policies to facilitate the achievement
of the organization’s strategic objectives. It considers
A
the implications of corporate strategy for all HR systems within an organization by translating company
I systems. The specific approach and process utilized will
objectives into specific people management
vary from organization to organization, but
L the key concept is consistent; essentially all HR programs
and policies are integrated within a larger framework facilitating, in general, the organization’s mission
Y
and, specifically, its objectives.
Probably, the single-most important caveat of strategic HR management is that there is no one
,
best way to manage people in any given organization. Even within a given industry, HR practices
can vary extensively from one organization to another, as seen in Reading 4.1, “Distinctive Human
Resources Are Firms’ Core Competencies,” and in any organization, a critical prerequisite for success
R support the organization’s mission and strategy.
is people management systems that clearly
Establishing a strong HR strategy Y
that is clearly linked to the organization’s strategy is not
enough. HR strategy needs to be communicated, practiced, and—perhaps most important—spelled
out and written down. A recent study A
by global consulting firm Pricewaterhouse Coopers found
that those organizations with a written HR strategy tend to be more profitable than those without
N
one.2 It appears that writing down an organization’s HR strategy facilitates the process of
involvement and buy-in on the parts of both senior executives and other employees. The study
found that organizations with a specific written HR strategy had revenues per employee that are 35
2 a written strategy and that those organizations with a
percent higher than organizations without
3
written strategy had 12 percent less employee
6 absenteeism and lower turnover.
7
5
Strategic HR at General Electric
With revenues exceeding $100 billionBannually, General Electric (GE) operates in more than
100 countries, employing more than 290,000 people, including 155,000 in the United States.
U belief that the HR function is a critical factor in drivA key component to GE’s success is the
ing its performance, worldwide. The importance of GE’s people to the attainment of its corporate objectives is echoed at even the highest levels of the organization. Former GE CEO
Jack Welch, in his annual letter to shareholders, refers to GE as “evolving to a company of
A’ products and A’ services delivered by A’ players.”
Susan Peters, vice president of HR at GE Appliances, has noted that at GE, the HR
function is “truly a value-added business partner who is a fully participating member of the
business decision making team.” At GE, HR executives are expected to have a keen understanding of the factors that are critical to the success of the business, including finance, marketing, and operations issues. Top management feels that it would otherwise not be possible
to develop HR programs and policies that support business goals.
To support this need, newly hired HR professionals attend a comprehensive Human
Resources Leadership Program (HRLP), designed to allow them to assume this critical role
9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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The first role involves becoming a partner in strategy execution. Here, HR is held responsible
for the organizational architecture or structure. HR would then conduct an organizational audit to
help managers identify those components that need to be changed to facilitate strategy execution.
HR should then identify methods for renovating the parts of the organizational architecture that
need it. Finally, HR would take stock of its own work and set clear priorities to ensure delivery
of results. These activities require HR executives to acquire new skills and capabilities to allow
HR to add value for the executive team with confidence.
For decades, HR professionals have fulfilled an administrative function within their organizations. In the administrative expert role, these individuals should shed their image of rule-making
police while ensuring that the required routine work still gets done effectively and efficiently.
This requires improving or “rethinking” a number of traditional HR functions, such as benefits
and selection, which now can be automated by using technology and therefore be more costefficient. Such streamlining of functions would help HR professionals become strategic partners
in their organizations and enhance their credibility.
D its employees are committed to and fully engaged in the
An organization cannot thrive unless
organization and their jobs. In the new
Arole of employee champion, HR professionals are held
accountable for ensuring that employees are fully engaged in and committed to the organization.
I management to enhance employee morale and training
This involves, in part, partnering with line
line managers to recognize—and avoid—the
L causes of low morale, such as unclear goals, unfocused priorities, and ambiguous performance management. It also involves acting as an advocate
Y their voice with senior management, particularly on
for employees, representing them and being
decisions that impact them directly.
,
The pace of change experienced by organizations today can be dizzying. As a change agent,
HR has to be able to build the organization’s capacity to embrace and capitalize on new situations,
ensuring that change initiatives are defined, developed, and delivered in a timely manner. HR also
needs to help the organization plan for R
and overcome any resistance to change that might present
itself. Particularly challenging are any efforts
Y to alter the organization’s culture.
A
HR Roles at Mercantile Bank
N
One organization that has effectively redesigned its HR function to assume all four roles is
Mercantile Bank. Headquartered in St. Louis, Missouri, Mercantile Bank is a multibank hold2 and more than 10,000 employees. The bank strateing company, with $131 billion in assets
gically redesigned its HR function during the 1990s, when it went through more than
6
39 mergers and acquisitions. As part of this process, Mercantile’s HR function moved beyond
traditional recordkeeping and compliance
7 to become more strategic in nature. This transformation happened through streamlining work processes, eliminating unnecessary activities,
5 nonstrategic functions. Furthermore, some retained
reevaluating technology, and outsourcing
HR functions remain centralized at headquarters;
others are deployed to operating divisions.
B
Consequently, Mercantile’s HR function is able to assume the roles of strategic partner,
change agent, administrative expert, U
and employee champion simultaneously.6
A number of other models have been developed relative to the portfolio of roles that HR can
and/or should play in becoming a strategic partner in the knowledge-based economy. LengnickHall and Lengnick-Hall found that for HR to build strategic credibility, new roles needed to be
assumed that expanded both the methods and processes traditionally used in HR.7 These roles
include human capital steward, knowledge facilitator, relationship builder, and rapid deployment
specialist, as illustrated in Exhibit 4.2.
The human capital steward role involves the creation of an environment and culture in
which employees voluntarily want to contribute their skills, ideas, and energy. This is based on
the premise that unlike raw materials, plant, and equipment, human capital is not “owned” by
the organization; it can move freely from organization to organization at the employee’s whim.
9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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The Context of Strategic Human Resource Management
programs related to staffing, performance management, and employee development. The fifth—HR
technology—involves using technology to improve the organization’s management of its people.
Although the SHRM study identifies a set of competencies that all HR executives will need,
others conclude that HR roles may need to become more highly specialized. One set of roles
identifies five competencies that might easily become areas of specialization.8 The first role is
“chief financial officer” for HR, an individual who is an expert at metrics and financial analysis
and can argue the cost-effectiveness of various HR programs. The second role is “internal
consultant,” an individual who trains and empowers line managers to assume much of the
day-to-day responsibility for managing employees and understanding the legal aspects of the
employment relationship. The third role is “talent manager,” an individual who focuses on
finding, developing, and retaining the optimal mix of employees to facilitate the organization’s
strategic objectives. The fourth role is “vendor manager,” an individual who determines which
functions can be better handled internally or externally and assumes the responsibility for
sourcing and selecting vendors as well as managing vendor relations. The fifth role is
D oversees the technology applications of HR management,
“self-service manager,” an individual who
including all aspects of e-HR.
A
I
Strategic HR at Google
L
Internet products and services provider
Y Google has developed its HR function, known as
“People Operations” around a “three-thirds” model whereby three different complimentary
, organization, which competes for talent in a very
teams work to staff the rapidly growing
competitive environment. Approximately one-third of the People Operations team have
backgrounds in HR, including specialized expertise in employment law and compensation
and benefits. This group identifies R
trends and issues regarding HR, allowing Google to
respond in a proactive manner.
Another third have little to no Y
HR background and were recruited from strategic consulting firms or from Google operating
Adivisions, such as engineering and sales. This group is
embedded within business units and contributes knowledge and problem-solving skills
N organization which are incorporated into HR-related
regarding the macro perspective of the
programs and solutions. The final third is a workforce analytics team that consists of individuals who hold advanced degrees in statistics, finance, and organizational psychology. They
determine appropriate metrics to allow
2 Google to remain competitive in its search for talent,
including appropriate compensation, interview processes, and factors that relate to employee
6
retention.
Google’s rapid growth rate requires
7 an accelerated rate of professional staff development, and most of its People Operations staff participate in a yearlong “base camp” training
that combines HR specialist training5
with an MBA-like program in which participants work
on Internet consulting projects aimed at solving business problems.9
B
U
So far, our discussion has focused on roles that HR needs to assume and competencies that
need to be demonstrated to ensure that HR be seen as a true strategic partner as well as to facilitate high performance. This discussion has ignored the fact that different organizations engage in
different types of employment in pursuing their strategies. To better understand these employment
models, a system was developed by Lepak and Snell that identifies four different employment
models and examines the types of HR systems required by each.10
Lepak and Snell first analyzed the characteristics of human capital by using two dimensions.
The first is its strategic value, or the extent of its potential to improve efficiency and effectiveness,
exploit market opportunities, and/or neutralize potential threats. The authors found that as the
strategic value of human capital increased, the greater the likelihood that the organization would
employ it internally rather than externally. The second is its uniqueness, or the degree to which it
is specialized and not widely available. The authors found that the more unique an organization’s
9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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Strategic HR Management at Southwest Airlines
Southwest Airlines (SWA) was one of the most successful airline companies in the 1990s.
Throughout the decade, it was the only major domestic airline to turn a profit, and it consistently outperformed its competitors in customer service. A key factor in the success of SWA
has been its unique corporate culture and the HR management practices that have been
developed as part of this culture. These practices are integrated with each other and directly
developed under founding CEO Herb Kelliher and maintained as part of Southwest’s competitive strategy of delivering both low costs and superior service. These HR practices create
shareholder value through employees via low turnover and high productivity and allow
employees to experience significant job satisfaction.
Southwest’s success centers around a “value cycle”: Southwest first creates value through
its HR practices for employees; this value is then converted, in part, to customer value via the
design of specific operating processesDand then captured through the provision of low costs
and superior service relative to competitors. This cycle of creating, converting, and capturing
A but labor-intensive organizations in general. Other
value is unique among not only airlines
airlines have traditionally competed by creating barriers to entry via the development of
I
hub-and-spoke networks and by sophisticated customer segmentation and information processing via computer reservation systems.
L
Southwest sees its competition not as other airlines but rather the automobile. Most of
its flights are “short-haul” (less thanY
90 minutes) and involve quick turnaround of planes at
the gate and the use of less-congested
, airports. The company also restricts its growth relative to the rate at which it can hire and train new employees who fit with the company
culture.
Southwest practices an alternative strategy called value analysis. Here, a value chain is
R
created for the buyer, firm, and supplier. SWA does this by increasing its passengers’ willingness to pay, decreasing the price passengers
Y are charged, decreasing its own costs, and reducing employees’ opportunity cost. SWA increases its passengers’ willingness to pay by
A its competitors, offering more frequent departures,
providing a higher level of service than
and amusing its passengers, which N
makes the end of a long workday more entertaining.
SWA also attempts to offer the lowest airline fare in a specific market. This allows SWA to
differentiate itself from competitors that offer a relatively generic service.
Personnel is one of the most significant costs an airline incurs. At SWA, however,
2
employees are more productive than at other major airlines. Most SWA employees are
directly involved in moving passengers
6 from departure to destination as gate agents, ramp
agents, baggage handlers, flight attendants, or pilots. The result? An average airplane takes
7 only 17 minutes.
45 minutes to turnaround: SWA averages
SWA can turn around its aircraft5in 17 minutes for three reasons. First, it uses standardized aircraft—737s only. Second, no meals are provided on flights, enhancing efficiency and
B designed its work systems to allow cross-functional
reducing costs. Finally, the airline has
coordination by all its employees. From
U the moment an SWA flight touches down until the
minute it clears the gate, every member of the flight and ground crews does everything necessary to get the next flight segment out on time.
Southwest has a culture that stresses “LUV” and “FUN.” “LUV” refers to one of the
company’s core values, involving respect for individuality and a genuine concern for others.
“FUN” refers to the company’s philosophy of employees enjoying themselves at work and
creating an atmosphere that allows customers to also have fun. FUN and LUV are critical
elements of SWA’s culture and are embedded in the hiring process, with prospective employees being asked to describe their most embarrassing moment. FUN and LUV are also critical
components of SWA’s compensation system. Actual salaries are at the industry average, but
most employees consider SWA’s work environment to be a form of nonmonetary
compensation.
9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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the larger challenges it faces in its external environment by ensuring that the internal mechanisms
that facilitate change are in place.
Similarly, any initiatives for change coming from traditional HR are usually slow and fragmented, piecemeal, and not integrated with larger concerns. Strategic HR is more proactive and
systemic in change initiatives. Rectifying a specific employee discipline problem or moving to a
new sales commission system are examples of the former approach. Strategic HR is flexible
enough to consider the various time frames (short, medium, and/or long-run) as necessary to
facilitate the development of programs and policies that address the critical strategic challenges
being faced by the organization. At the same time, these strategically conceived initiatives must
be developed and implemented in concert with other HR systems.
As an example, the HR systems at Mercantile Bank were not developed independent of each
other. As the HR function evolved with subsequent mergers and acquisitions, HR initiatives were
developed in tandem with other HR programs and policies. For example, job analysis procedures
developed competencies that formed the basis for recruiting, testing, performance feedback, and
D feedback program was developed in tandem with a suc …
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