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  2. 2. 2-2 2 A Strategic Management Approach to HRM McGraw-Hill/Irwin Human Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
  3. 3. 2-3 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 outset The strategic management process helps determine: What must be done to achieve priority objectives How they will be achieved
  4. 4. 2-4 Introduction Many strategic plans use: A three to five year timeline Annual monitoring and modification Good HR strategy results in a fit between organiza-tional strategy and HRM policies and programs Recruitment, selection, outsourcing, telecommuting, performance evaluation, compensation
  5. 5. 2-5 A Model to Organize HRM ARDM means: Acquiring Rewarding Developing Maintaining and protecting The goals of the ARDM model are: Socially responsible and ethical practices
  6. 6. 2-6 A Model to Organize HRM The eventual success of any HRM activity is: The organization's employees are the best qualified They perform jobs that suit their needs, skills, and abilities Matching people and activities in order to accomplish goals is easier with a diagnostic approach
  7. 7. 2-7 Taking a Diagnostic Approach to HRM The ARDM model has four specific steps: Diagnosis Prescription Implementation Evaluation Managers typically diagnose a work situation by observing and identifying key factors A prescription is then made to translate the diagnosis into action Most human resource problems are too complex to have a single correct prescription
  8. 8. 2-8 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
  9. 9. 2-9 External Environmental Influences HRM processes are influenced by both the internal and external environments External influences include: Government laws and regulations Union procedures and requirements Economic conditions The labor force HR planning must operate within: Guidelines Limits of available resources Competencies
  10. 10. 2-10 External Environmental Influences HRM is one important function among others: Finance Accounting Research and development Marketing Production The interaction of these internal programs sets the tone for the entire organizational system
  11. 11. 2-11 Government Law and Regulations Government regulations affect: Hiring Promotion Managing diversity Downsizing Discipline Major areas of legislation and regulation include EEO and human rights legislation These directly affect recruiting, selection, evaluation, and promotion
  12. 12. 2-12 Government Law and Regulations EEO and human rights legislation indirectly affects: Employment planning Orientation Career planning Training Employee development
  13. 13. 2-13 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
  14. 14. 2-14 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
  15. 15. 2-15 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
  16. 16. 2-16 The Union A union directly affects most aspects of HRM, including: Working conditions Wages and salaries Fringe benefits Employees’ rights Grievance processes Work hours There are cooperative unions and combative unions
  17. 17. 2-17 The Union Unions were once concentrated in a few sectors of the economy Today, the fastest-growing sectors are the public sector and the third sector It 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
  18. 18. 2-18 Economic Conditions Two economic factors affect HRM programs: Productivity The 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
  19. 19. 2-19 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
  20. 20. 2-20 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
  21. 21. 2-21 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
  22. 22. 2-22 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 sector Private- and third-sector HRM are structured similarly HRM in the public sector is structurally different A manager moving from the private or third sector to the public sector finds a more complicated job Politicians, the public, special interest groups, and reporters all exert outside pressure
  23. 23. 2-23 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
  24. 24. 2-24 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?
  25. 25. 2-25 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
  26. 26. 2-26 Competitiveness Activities that can enhance and sustain competitive advantage: Employment security Selective recruiting High wages Incentive pay Employee ownership Information sharing Participation and empowerment Teams and job redesign
  27. 27. 2-27 Competitiveness Activities that can enhance and sustain competitive advantage (continued): Training as skill development Cross-utilization and cross-training Symbolic egalitarianism Wage compression Promotion from within Long-term perspective Measurement of practices Overarching philosophy
  28. 28. 2-28 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
  29. 29. 2-29 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 military Employed or actively seeking work As of 2004, over 146 million Americans were in the workforce
  30. 30. 2-30 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 opportunities However, they still face workplace discrimination There are signs that more women will have professional jobs
  31. 31. 2-31 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 jobs Historically, the most recent immigrant groups take the lowest-level jobs Minorities were living in the U.S. long before the immigrants arrived
  32. 32. 2-32 Older Employees The percent of older employees is growing One 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 faculties This is an ongoing process The key is to match employees with jobs
  33. 33. 2-33 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 rate When total performance is considered, older employees are just as effective as younger ones
  34. 34. 2-34 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
  35. 35. 2-35Geographic Location of the Organization The location of the organization influences hiring practices and HRM activities Rural versus urban International versus local Education Behavior Legal-political factors Economics Inter-cultural training
  36. 36. 2-36 Internal Environmental Influences HRM programs are influenced by: Strategy Goals Organizational culture Nature of the task Work groups The leader’s style and experience
  37. 37. 2-37 Strategy A strategy: Indicates what an organization's key executives hope to accomplish in the long run Is 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
  38. 38. 2-38 Goals Organizational goals differ within and among departments Most 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)
  39. 39. 2-39 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
  40. 40. 2-40 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
  41. 41. 2-41 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
  42. 42. 2-42 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
  43. 43. 2-43 Nature of the Task HRM is the effective matching of the nature of the task (job) with the nature of the employee
  44. 44. 2-44 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 job Degree of variety in the task Task identity Task differences and job design
  45. 45. 2-45 Work Group An employee’s experiences are largely influenced by the work group A 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
  46. 46. 2-46 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
  47. 47. 2-47 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
  48. 48. 2-48 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 activities If a group opposes HRM programs, it can ruin them Consider permitting work-group participation in designing and implementing HRM
  49. 49. 2-49 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
  50. 50. 2-50 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 Rewards Appraisal Development
  51. 51. 2-51 Strategic HRM: A Key to Success Strategic HRM planning leads to: Growth Profits Survival 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
  52. 52. 2-52 Strategic HRM: A Key to Success Organizational strategic plans permit HR to prepare for internal and external environment changes Each organization should adopt a strategy that best fits its goals, environment, resources, and people An organization must match its: Strategic plan Employees' characteristics HRM activities
  53. 53. 2-53 Strategic HRM: A Key to Success The days of viewing HRM as only a highly specialized and technical staff are over HRM must be involved in all aspects of an organization's operation It must make everyday contributions to the organization HRM programs must be: Comprehensive Adapted to the organization's culture Responsive to employee needs
  54. 54. 2-54 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
  55. 55. 2-55 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
  56. 56. 2-56 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 workforce Women are entering the workforce in record numbers The number of Hispanic, Asian, and older workers will continue to rise
  57. 57. 2-57 Building a Cooperative Workforce The changing look, age, and needs of the workforce have resulted in more concern about: Child care Elder care Diversity understanding and training Understanding diversity is an obvious need Most firms are not yet "diversity-friendly” The negative financial impact can be significant There will be increased demand for fair, ethical, and prompt handling of diversity issues
  58. 58. 2-58 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 skills Strategic HR planning models must carefully weigh deficiencies and shortages in skills The skills gap impacts more than HRM Whole societies must face the consequences of not having the workforce needed to compete in a global economy
  59. 59. 2-59 Restructuring and Downsizing Facts about downsizing: Half of all downsized firms end up with at least as many employees again within a few years Downsizing 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
  60. 60. 2-60 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
  61. 61. 2-61 Contingent Workers Contingent workers include: Temporaries Part-timers Contract or leased workers Others who are hired to handle extra tasks or workloads The number of contingent workers has increased steadily since the early 1970s
  62. 62. 2-62 Contingent Workers Outsourcing means hiring another firm to do work This 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
  63. 63. 2-63 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: Abilities Attitudes and preferences Styles Intellectual capacities Ways of doing the job
  64. 64. 2-64 Abilities of Employees Abilities or skills are classified as: Mechanical Motor coordination Mental Creative Abilities that are the result of genetic factors can rarely be changed through training Abilities such as interpersonal skills and leadership are more subject to change
  65. 65. 2-65 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
  66. 66. 2-66 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
  67. 67. 2-67 Motivation of Employees Motivation is a set of attitudes that predisposes a person to act in a specific, goal-directed way It is an inner state that energizes, channels, and sustains human behavior to achieve goals Work 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
  68. 68. 2-68 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
  69. 69. 2-69 Personality of Employees Personality is how a person thinks and behaves It includes the person's: Traits Values Motives Genetic blue print Attitudes Emotional reactivity Abilities Self-image Intelligence Visible 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
  70. 70. 2-70 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:  Personality Abilities Attitudes Motives
  71. 71. 2-71 Desirable End Results HRM must make decisions and solve problems in a socially responsible and ethically sound way It must help the firm satisfy its customers and employees It is a demanding job, but an exciting challenge
  72. 72. 2-72 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