Professional Documents
Culture Documents
By Amit Saxena
Socio Cultural
Task Environment
Suppliers
Economic Forces
Customers Creditors
Internal
Employees
Trade Associations
Government
Lolitical legal
Competitors
Technological Forces
Employees are human assets that increase in value to the organization and the marketplace when investments of appropriate policies and programs are applied. Effective organizations recognize that their employees do have value, much as same as the organizations physical and capital assets have value. Employees are a valuable source of sustainable competitive advantage.
Technical Knowledge
Markets, Processes, Customers, Environment Openness to new ideas Acquisition of knowledge and skills
Strategic Management
Strategic Decision
Rare : The Decisions are that one of the Many Consequential : The outcome of the decision requires Management Support and Commitment. The resulting actions require high investment in time and emotion Directive : These actions help the organization to meet its Goals and Objectives
The action helps the organization to develop specific Core Competencies which will help the organization to place itself favorably over the competition
In today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.
Objectives of Firm
Market Leadership
Determination of compensation
Internal and external equity for employees in return for their contributions to the organization. Organization placement of resources and returns on employee development are aligned and well-matched.
Developing current employees creates motivation and permits promotion from within.
Advancement opportunities
Effective means of retaining valuable employees allows for the recapture of the invested costs of their development.
Investment Orientation
Organizational Characteristics
Sees people as central to its mission/strategy. Has a mission statement and strategic objectives that espouse the value of human assets in achieving goals. Has a management philosophy that encourages the development and retention of human assets and does not treat or regard human assets in the same ways as physical assets.
HR is multidisciplinary: It applies the disciplines of Economics (wages, markets, resources), Psychology (motivation, satisfaction), Sociology (organization structure, culture) and Law (min. wage, labor contracts, EEOC) HR is embedded within the work of all managers, and most individual contributors due to the need of managing people (subordinates, peers and superiors) as well as teams to get things done.
Rewards
External Environment Social: social values, roles, trends, etc. Political: political forces, changes. Ex. Bush presidency and its agenda for Social Security. Legal: laws, court decisions, regulatory rules. Economic: product, labor, capital, factor markets.
Demographics
What are a firms distinctive competencies? What is the basis that competitive strategy be sustained? What are a firms strategic objectives? Compare corporate and Business strategies.
Physical layout/employee proximity Required employee skills Ease of monitoring employees input
Technological Advancement
Strategic HRM
Globalization
Strategic human resource management has been defined as the linking of human resources with strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation and flexibility Strategic HR means accepting the HR function as a strategic partner in the formulation of the companys strategies as well as in the implementation of those strategies through HR activities such as recruiting, selecting, training and rewarding personnel. HR Strategies refers to specific HR courses of action the company plans to pursue to achieve its aims
Perceived resistance to change by older workers. Increased health-care costs for senior workers Blocking advancement opportunities for younger workers Higher wage and salary costs for senior workers
As productive or more productive than younger workers Have more organizational loyalty than younger workers Possess broader industry knowledge and professional networks
In excess supply in middle management ranks HR challenge is to manage plateaued workers Are career bottlenecked by the Boomers Who have skills in high demand are doing and will do well Have life-long exposure to technology and constant change Seek self-control, independence, personal growth, creativity Are not focused on job security or long-term employment.
Use of project teams Staying with employers for shorter periods; demanding more meaningful work and involvement in organizational decisions More single-parent families, dual-career couples, and domestic partners Part-time, consulting, and temporary employment flexibility Outsourcing and entrepreneurial opportunities
Strategic Management
Involves aligning initiatives involving how people are managed with the organizational mission and objectives. Determining what needs to be done (how) to achieve corporate objectives over a three- to five year time span. Examining the organization and the competitive environment. Establishing a strategic (optimal) fit between the organization and its environment that engenders success. Reviewing and revising the strategic plan as necessary.
Models of Strategy
The external environment is the primary determinant of organizational strategy rather than the internal decisions of its managers. The environment presents threats and opportunities. All competing organizations control or have equal access to resources. Resources are highly mobile between firms. Organizational success is achieved by offering goods and services at lower costs than competitors or by differentiating products such that they bring premium prices.
Benefits
Internal Methods
Penetration of existing markets Developing new markets Developing new products or services for existing or new markets
Gaining economies of scale in operations and functions Enhancing competitive position vis--vis industry competitors Providing opportunities for employee professional development and advancement Planning for new hiring Alerting current employees Ensuring quality and performance standards are maintained
External Methods
Acquiring other organizations Vertical integration
HR Issues
HR Issues
Merging organizations Dismissing redundant employees
Stability
Maintaining the status quo due to limited environmental opportunities for gaining competitive advantage. Few employees will have opportunities for advancement. Critical that management identify key employees and develop specific HR retention strategies to keep them. Downsizing or streamlining the organization in a cost-cutting attempt to adjust to the competitive environment. Few opportunities and many environmental threats. Important to develop HR practices to manage the survivors.
Turnaround or Retrenchment
Increases in efficiency and cutting of costs; then passing the savings to the consumer. Assumes price elasticity in demand for products or services is high; small change in price will cause large increase in demand. Assumes that customers are more price sensitive than brand loyal. HR strategy focuses on short-term performance measures of results and promoting efficiency through job specialization and cross-training.
Attempting to distinguish organizational products or services from other competitors or creating the perception of a difference in order to demand a premium price from consumers. Organization offers employees incentives and compensation for creativity. HR strategy focuses on external hiring of unique individuals and on retaining creative employees.
Business attempts to satisfy the needs of only a particular group or narrow segment of the market. Strategic intent is to gain consumer loyalty of neglected groups of consumers. Strategic HR issue is ensuring employee awareness of uniqueness of market segment.
Thorough employee training and a focus on customer satisfaction are critical factors. Hiring members of the target segment who are empathetic to customer in the target segment.
Facilitates the development of a high-quality workforce through its focus on the types of people and skills needed. Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally the greatest cost. Facilitates the planning and assessment of environmental uncertainty and the adaptation of the organization to the external forces that impact the organization.
Philosophy
Statements of how the organization values and treats employees; essentially the culture of the organization. Expressions of shared values and guidelines for action on employee-related business issues. Coordinated and strategized approaches to initiate, disseminate, and sustain strategic organizational change efforts necessitated by strategic business needs.
Policies
Programs
Practices
HR practices that motivate behaviors that allow individuals to assume roles consistent with the organizations strategic objectives. The continuum of participation by all employees in the specific activities of to facilitate the formulation and implementation of other activities.
Processes
Involves the development of a consistent, aligned collection of practices, programs, and policies to facilitate the achievement of the organizations strategic objectives. Requires abandoning the mindset and practices of personnel management and focusing on strategic issues than operational issues. Integration of all HR programs within a larger framework, facilitating the organizations mission and its objectives.
Barriers to Strategic HR
Becoming a partner with senior and line managers in strategy execution. Becoming expert in the way work is organized, delivering administrative efficiency to ensure that costs are reduced while quality is maintained. Becoming a champion for employees, representing their concerns to senior management and working to increase employee contributions. Becoming an agent of continuous transformation by shaping processes and organizational culture.
Globalization Profitability through Growth Technology Intellectual Capital Change, Change, and More Change
HR is responsible for defining an organizational structure as the model for the companys way of doing business. HR must be accountable for conducting an organizational audit. HR is to identify methods to renovate part of the organizational architecture. HR must take stock of its own work and set clear priorities.
Defining and clarifying the concept of cultural change. Articulating why cultural change is central to business success. Defining a process for assessing the current culture and the desired new culture, as well as measuring the gap between the two. Identifying alternative approaches to creating culture change.
How senior operating management can create an environment in which HR becomes focused on outcomes instead of activities:
Communicate to the organization that the soft stuff matters. Explicitly define the deliverables from HR, and hold HR accountable for results. Invest in innovative HR practices. Upgrade HR professionals.
To become effective human capital managers, HR mangers must develop competencies in:
Knowledge of the business. Human resource functional expertise. The management of change.
HR must focus on business level outcomes rather than HR level inputs. HR must become a strategic core competency rather than a market follower. Strategic competencies are more important than functional competencies. The most important missing element in the HR function expertise is a systems perspective.
How is performance defined, measured and rewarded in the organization? How are information and resources allocated and managed in the organization? What is the operational philosophy of the organization with regard to risk-taking, leadership, and concern for overall results? Does the organization regard its human resources as costs or assets?
Which components of the culture are misaligned? What priorities should be assigned each of the gaps between what the culture is and what people feel that it should be? What resources are needed and how should they be used to change the culture? How should the change effort be managed and who does what? What role should HR strategy play in signaling, making and reinforcing the necessary changes?
Compensation
Impacts an employers ability to attract and retain employees. Ensure optimal levels of employee performance in meeting the organizations strategic objectives. Compensations components
Base pay (hourly, weekly, and monthly) Incentives (sales bonuses and or commissions)
Legally required benefits (e.g., Social Security) Optional (e.g., group health benefits)
Equity Theory
Internal equity
Fairness of pay differentials between different jobs in the organization can be established by job ranking, job classification, point systems and factor comparisons. Fairness of organizational compensation levels relative to external compensation is assessed by collecting wage and salary information to guide in setting the organizations pay strategy to lead, meet or lag labor market wages.
External equity
Individual Equity
Fairness about pay differentials among individuals who hold the same job in the organization is established by using:
Seniority-based pay systems that reward longevity with the organization. Merit-based pay systems that reward employee performance. Incentive plans that allow employees to receive part of their compensation based on their job performance. Skills-based pay systems where compensation is based on employees possessing skills that the firm values. Team-based pay plans that encourage cooperation and flexibility in employees.
Protects workers rights to fair treatment. Requires equal pay for equal work.
Comparable Worth
Argues that standards of equal pay for equal work should be replaced with the doctrine of equal pay for equal value. Objective, measurable data to support an assessment of the value of different jobs is lacking. There is no basis in current law for the arguments of comparable worth.
Regulates the minimum wage Sets overtime policy (time and one-half after forty hours) Establishes exempt classes for managers and other professional employees.
Determining compensation relative to the market. Striking a balance between fixed and variable compensation. Deciding whether or not to utilize team-based versus individual pay. Creating the appropriate mix of financial and non-financial compensation. Developing a cost-effective compensation program that results in high performance.
Compensating Teams
Motivation comes from within the individual as opposed to the group. The development of skills and behaviors is an individual undertaking. Fairness in dealing with teams does not mean equal pay for all. Team compensation is not a payoff but a means of nurturing behavior that benefits the team.
Employee Seperation
Employee Separation
Pressures on firms to remain competitive and efficient Decline in employee commitment to individual employers Transitions of employees out of the firm go smoothly. Continuing operations of the firm are not disrupted. Important professional relationships are not damaged.
Types of separations
Reductions-in-Force (RIFs)
Causes of reductions:
Restructuring as a result of mergers and acquisitions Attempts to make the organization more cost competitive Adjustments to declining business environment conditions Inefficiency in operations Lack of adaptability in the marketplace A weakened competitive position in the industry
Reductions-in-Force (RIFs)
Requires employers with more than 100 employees to provide affected employees with a minimum of sixty days written notice of any facility closings or large-scale layoffs of 50 or more employees. WARN does no apply to governmental agencies. Exceptions to WARN:
EXHIBIT 13-1: STRATEGIES FOR MANAGING EMPLOYEE SURPLUSES AND AVOIDING LAYOFFS
Turnover
Involuntary turnover
Employees who are asked to leave the organization for cause (e.g., poor performance) or due to circumstances that cause a reduction-inforce. Employees who leave an organization on their own initiative.
Voluntary turnover
Beneficial turnover
When low performing employees depart and/or when new higher performing employees are promoted or hired as replacements.
Retirement
Prohibits an employer from setting a mandatory retirement age except in certain occupations such as airline pilots. Creates advancement opportunities for younger employees and reduces payroll costs. Can cause a loss of vital accumulated historical knowledge of the organization, its industry and the marketplace. Employers can offer part-time and consulting work to older workers to ease the transition to retirement.
Retirement
Increasing turnover rates are having a significant impact on organizational success. The costs associated with turnover, especially that of high performers, continues to escalate.
A pervasive belief that high turnover is inevitable in a strong economy. The failure of companies to develop effective strategies for managing employee turnover.
Selection and orientation of individuals who possess the skills needed to succeed and also fit with the organization. Training and career management to provide employees with growth and learning opportunities. Offering motivation and compensation packages that provide customized non-financial performance incentives and financial rewards for individual employees. Designing retention strategies that reflect the organizations particular situational factors and its goals.
skills and competencies) rather than for the value of a job they perform. Reward excellence through a pay for performance compensation that establishes a clear relationship between a significant amount of pay and attainment of organizational objectives. Individualize the pay system to give employees choices in how they are rewarded and what reward they receive.
Outsourcing
What is Outsourcing? Outsourcing is a strategic decision to give a task or activity to an independent contractor who determines how best to do the task or activity. The firm and the independent contractor become partners and may establish a long-term relationship. Examples of outsourced activities: IT, HR, Legal services, Manufacturing, R & D. Note: Outsourcing transactions are done in the market.
Outsourcing Advantages
Better quality people and knowledge may be applied to an activity or task by the outsourcing firm. Reduction in administrative costs may be possible when certain tasks are outsourced. Outsourcing certain activities and employees that do not fit with company culture may be used to preserve a strong culture or employee morale.
Outsourcing Disadvantages
Outsourcing may lead to loss of control of certain activities which may be a problem on time sensitive projects for example. Outsourcing an activity may result in loss of the opportunity to gain knowledge and information that may have general application to other key processes and activities.
Independent Contractor
Strategic Importance
???
Insource
Outsource
Low Low
Contingent employees
High
Interdependence
Outsourcing: Considerations
Does learning from this activity spill over to an important core activity? Can the outsourcing relationship be reversed and the work brought back inside when conditions change?
Outsourcing: Considerations
Can the outsource supplier adjust more quickly to changing labor or market demands than we can? Do we have a strong clan-like culture that would be weakened with employees who have different values or interests (such as IT employees)?
Outsourcing: Considerations
Outsourcing may not be appropriate when: 1. The task is a core activity critical to strategy or technology. 2. Task is highly interdependent with core activity due to technology or work design. 3. Task requires great deal of firm specific human capital or access to proprietary information. 4. Tasks where the employees work in close proximity to regular, core employees and are similar socially to them.
Non-financial Rewards
1. Intrinsic Rewards centers on the work itself 2. Praise, recognition, time off and other
Training
Overtime pay rules in contract
Culture
Merit pay reinforces performance culture
Labor Relation s
Rewards
Sign-on Bonus
Theoretical Models of Pay and Performance: Equity theory (Adams, 1963) Assumptions: People develop beliefs about what is a fair reward for ones job contribution - an exchange People compare their exchanges with their employer to exchanges with others-insiders and outsiders called referents If an employee believes his treatment is inequitable, compared to others, he or she will be motivated to do something about it -that is, seek justice.
Is/Os
versus
Ir/Or
O = Outcomes: the type and amount of rewards received I = Inputs: R = Referent: S = Subject: employees contribution to employer comparison person the employee who is judging the fairness of the exchange
Case 1: Equity -- pay allocation is perceived to be to be fair - motivation is sustained Case 2: Inequity (Underpayment) -Employee is motivated to seek justice. Work motivation is disrupted. Case 3: Inequity (Overpayment) -- Could be problem. Inefficient. In other cultures employees lose face.
Consequences of Inequity
The employee is motivated to have an equitable exchange with the employer. To reduce inequity, employee may
Reduce inputs (reduce effort) Try to influence manager to increase outcomes (complain, file grievance, etc.) Try to influence co-workers inputs (criticize others outcomes or inputs) Withdraw emotionally - or physically (engage in absenteeism, tardiness, or quit)
There is tension between internal and external pay equity: Decide where to place the emphasis. Example: In and out versus lifelong employment system Let employees know who their pay referents are in the pay system: identify pay competitors and internal pay comparators. Strive for consistent pay allocations Monitor internal pay structure and position in the labor market for consistency.
Agency Theory
Agency theory is a theory of governance in the workplace. It tries to solve the problem of separation of ownership (atomistic shareholders) and control (professional executives and nonowners) It also tries to solve conflicts of interest between managers and employees with delegated responsibilities.
Agency Theory
1. Principals = owners or managers who delegate responsibilities 2. Agents = managers or employees who manage firm assets for owners or other principals. 3. Information asymmetry = managers or other agents have greater access to strategic information than principals, who are not willing to bear the cost of directly monitoring the agents due to steep agency costs.
Agency Theory
4. Risk Preferences principals are risk neutral and willing to bear greater risks than agents because their asset wealth is more likely to be diversified between corporate assets and other equities/investments. Agents are more risk averse than principals, because most of their wealth is concentrated in the firm and received in the form of pay and opportunities for promotion.
Agency Theory
5. Moral Hazard agent is tempted (and some cases succeeds) in taking advantage of information asymmetry with principal and act opportunistically (defined as making decisions not aligned with principals interests) and use the firm resources to maximize wealth of the agent (often at the expense of the principal).
Agency Theory
6. Agency Contract provides solution to moral hazard/agency problem, by establishing rules of the game to control agent opportunism agents performance will be judged by outcomes (often financial benchmarks) not behaviors (which require direct supervision of agents actions). These outcomes will reflect principals goals and risk preferences.
Agency Theory
7. Incentive alignment the agency contract will specify a compensation plan that aligns the interests of the principal and agent. This agency contract will be a type of pay for performance plan. Meeting or exceeding pre-agreed upon financial or non-financial outcomes triggers various forms of compensation (individual or group-based) for the agent. Some agency costs are borne by the principal in the form of financial incentives for the agent.
Tournament Theory
1. Tournaments are competitions between peers to achieve a promotion to a higher rank along with the pay and perks that go with it. 2. Tournaments are likely to result in a winner take all outcome. 3. Managers who enter the tournament must forego other alternatives (such as jobs with other firms, start own business, receive more pay with an alternative opportunity) to compete in the tournament.
Tournament Theory
4. A high pay differential (such as the CEO receiving much greater pay than any subordinates) attracts more players to the tournament. 5. Players must invest (work long hours, accept less pay, show loyalty to their boss) to enter the tournament firm captures value from these players, more than what it gives up to the winner for the prize.
Some Suggestions for More Effective Pay For Performance Plans Pay and Performance should be Loosely Coupled this gives managers more flexibility to make changes when new situations arise. Example: a formula with a bonus based on a moving average of a 3-year historical performance period. A 3-year period smoothes out performance over a longer cycle.
The job is priced in the open market as a commodity Performance differences between competent employees are assumed to be small A star would reflect value inherent in the job role
Assumes the individual is the source of value, rather than the job Specific skill blocks and competences that an employee brings or develops is recognized with higher pay A star would reflect a highly competent individual such as a top engineer or computer programmer
Basis of pay is employees experience on the job or firm Assumes more experienced employees are more competent Seniority is valued in certain societies (Asian), occupational groups (unionized trades), and corporate cultures
Seniority is easier to measure (objectivity) and administer fairly, than most alternatives as a rule for pay allocation. Seniority influences many benefits: retirement plan vesting, allocations for vacation, sick leave, offices, parking spaces, and other privileges.
International HRM
To capture enhanced market opportunities that foreign countries may present. To achieve economies of scale in production and administration by expanding the scope and volume of operations to international markets. Keeping up with industry leaders may require that an organization enter foreign markets. Acquiring ownership of a foreign-based organization or subsidiary.
Managing a broader range of functional areas. Becoming more involved in employees personal lives. Setting up several different HRM systems for different geographic locations. Dealing with more complex external constituencies Participating in international assignments that have heightened exposure to personal risk.
International Expansion
Exporting locally produced goods to the host country. Subcontracting or licensing the production of certain goods or services to a foreign partner. Entering into a joint venture with a foreign partner. Setting up operations (making a direct investment) in the form of a foreign branch or subsidiary.
the employee destined for an international assignment with paperwork and minor logistics Tactical approach involves managing the risk or failure factor of overseas assignment by providing paperwork assistance and a modest amount of training. Strategic approach involves extensive support and coordination of the international assignment and a strategized repatriation program at the end of the assignment.
Expatriate salary is based on home country pay and additional expenses associated with relocation and the assignment are accounted for, plus hardship and incentives to determine the overall reimbursement and compensation level.
Higher-of-home-or-host method
Employees salary at home is adjusted upward to account for a higher cost of living in the host country.
Employees salary is converted to the host countrys equivalent when the employee is on permanent assignment.
Localization approach
Repatriation