Human Resource Management

Gaining a Competitive Advantage

Chapter 1
Human Resource Management:
Gaining a Competitive Advantage

McGraw-Hill/Irwin Copyright 2008 by The McGraw-Hill Companies, All Rights Reserved.

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Learning Objectives
After reading this chapter, you should be able to:
Discuss the roles and activities of a companys human
resource management function
Discuss the implications of the economy, the makeup of
the labor force, and ethics for company sustainability
Discuss how human resource management affects a
companys balanced scorecard
Discuss what companies should do to compete in the
global marketplace
Identify the characteristics of the workforce and how they
influence human resource management
Discuss human resource management practices that
support high-performance work systems
Provide a brief description of human resource
management practices

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Introduction
Competitiveness a companys
ability to maintain and gain market
share
Human resource management
the policies, practices, and systems
that influence employees behavior,
attitudes, and performance

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 Competitiveness refers to a
companys ability to maintain and
gain market share in its industry
--It is related to company effectiveness

Human resource management

refers to the policies, practices, and
systems that influence employees
behavior, attitudes, and
performance
--Many companies refer to HRM as involving people practices"

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Responsibilities of HR
Departments

Employment and recruiting

Training and development
Compensation
Benefits
Employee services
Employee and community
relations
Personnel records
Health and safety
Strategic planning
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What Roles Do
HR Departments Perform?

Business
Partner Services

Administrative
Services and Transactions

Human
Resources

Strategic Partner

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One way to think the roles and responsibilities of

HR department is to consider HR as a business
within the company with three product lines.
1. Administrative services and transactions which
includes compensation, hiring, staffing.
2. Business partner services includes developing
effective HR systems and helping implement
business plans, talent management, and
3.
Strategic partner includes contributing to
business strategy based on considerations of
human capital, business capabilities, readiness, and
developing HR practices as strategic differentiation
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What Competencies Do HR
Professionals Need?

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Figure 1.3 shows the six competencies that are needed for
the HR profession.
1. Credible activist: delivers results with integrity, shares
information, builds trusting relationships, and influences
others, providing candid observation, taking appropriate
risks.
2. Cultural steward: facilitates change, develops and values
the culture, and helps employees navigate the culture.
3. Talent manager/organizational designer: develop talent,
design reward systems, and shapes the organization.
4. Strategic architect: recognizes business trends and their
impact on the business, evidence-based HR, and develops
people strategies that contribute to the business strategy.
5. Business Ally: understands how the business makes
money and the language of the business.
6. Operational executor: implements workplace policies,
advances HR technology, and administers day-to-day work
of maintaining people.
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How is the HRM Function

Changing?
Time spent on administrative tasks is decreasing
and its roles as a strategic business partner,
change agent, and employee advocate are
increasing
This shift presents two important challenges:
Self-service giving employees online access to
information about HR issues
Outsourcing the practice of having another
company provide services

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How is the HRM Function

Changing?
As part of its strategic role, one of the key
contributions that HR can make is to
engage in evidence-based HR.
Evidence-based HR demonstrating
that human resource practices have a
positive influence on the companys
bottom line or key stakeholders.

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 The amount of time that the HRM function

devotes to administrative tasks is decreasing
and its roles as a strategic business partner,
change agent, and employee advocate are
increasing
In shifting the focus from current operations to
strategies for the future and preparing non-HR
managers to develop and implement HR
practices, HR managers face two important
challenges:
Self-service refers to giving employees online access to
information about HR issues
Outsourcing refers to the practice of having another
company provide services

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The HRM Profession

HR salaries vary depending on education
and experience as well as the type of
industry
The primary professional organization for
HRM is the Society for Human Resource
Management (SHRM)

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 HR salaries vary depending on

education and experience as well as the
type of industry
College degrees are held by the vast
majority of HRM professionals
Professional certification is less common
than
membership
in
professional
associations

The primary professional organization for

HRM is the Society for Human Resource
Management (SHRM)

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Competitive Challenges
Influencing HRM
Three competitive challenges that
companies now face will increase the
importance of HRM practices:
The Challenge of
Sustainability
The Global
Challenge
The Technology
Challenge
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Three competitive challenges that companies now face

will increase the importance of HRM practices:
1. The Challenge of sustainability includes providing a
return to shareholders, providing high quality products and
services and experiences for employees, social
responsibility, and effectively using new work
arrangements.

2. The Global Challenge - In order to survive, U.S.

companies must, improve HRM practices, develop global
markets and better prepare employees for global
assignments.
3. The technology challenge with advances in
technology, companies must change employees and
managers work roles, create high performance work
systems, and develop-commerce and e-HRM.
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The Sustainability Challenge

Sustainability refers to the ability of a
company to survive and succeed in a
dynamic competitive environment
Stakeholders refers to shareholders, the
community, customers, and all other
parties that have an interest in seeing that
the company succeeds

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The Sustainability Challenge

Sustainability includes the ability to:
provide a return to shareholders
provide high-quality products, services,
and work experiences for employees
increase value placed on intangible
assets and human capital
social responsibility
Adapting to changing characteristics
and expectations of the labor force
Legal and ethical issues
Effectively use new work arrangements
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The Sustainability Challenge

The changing structure of the economy
Skill demands for jobs are changing
Knowledge is becoming more valuable
Intangible assets -- human capital, customer
capital, social capital, and intellectual capital
Knowledge workers employees who
contribute to the company through a
specialized body of knowledge
Empowerment giving employees
responsibility and authority to make decisions
regarding all aspects of product development
or customer service

Learning organization

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There are several changes in the economy that has implications

for HR:
Impact of September 11, 2001 companies are spending
more on security
The competition for labor affected by the growth and
decline of industries and availability of number and skills of
persons.
Also, skill demands for jobs are changing.
Knowledge is becoming more valuable
Intangible assets refer to a type of company asset
including human capital, customer capital, social capital,
and intellectual capital
Knowledge workers are employees who contribute to the
company not through manual labor but through a
specialized body of knowledge
Empowerment means giving employees responsibility and
authority to make decisions regarding all aspects of product
development or customer service
A learning organization embraces a culture of lifelong
learning, enabling all employees to continually acquire and
share knowledge
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The Sustainability Challenge

Changes in Employment Expectations:
Psychological contract
Alternative work arrangements

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 Changes in Employment Expectations:

The need for companies to make rapid
changes are reshaping the employment
contracts.
The psychological contract describes
what an employee expects to contribute
and what the company will provide to the
employee for these contributions
Alternative work arrangements include
independent contractors, on-call
workers, temporary workers, and
contract company workers
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The Balanced Scorecard

The balanced scorecard gives managers the
opportunity to look at the company from the
perspective of internal and external customers,
employees and shareholders.
The balanced scorecard should be used to:
Link human resource management activities to the
companys business strategy.
Evaluate the extent to which the human resource
function is helping the companys meet its
strategic objectives.
Measures of human resource practices primarily
relate to productivity, people, and processes.
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The Balanced Scorecard

How do customers see us?
What must we excel at?
Can we continue to improve and create
value?
How do we look to shareholders?

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Customer Service and

Quality Emphasis
Total Quality Management (TQM)
Core values of TQM include:
designing methods and processes to meet the
needs of internal and external customers
all employees receive training in quality
promotion of cooperation with vendors,
suppliers, and customers
management gives feedback on progress

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 Customer excellence requires attention to

product and service features as well as to
interactions with customers.
Total Quality Management (TQM) is a
company-wide effort to continuously improve
the ways peoples, machines, and systems
accomplish work
Core values of TQM include:
designing methods and processes to meet the needs
of internal and external customers
all employees receive training in quality
promotion of cooperation with vendors, suppliers, and
customers
management gives feedback on progress

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Customer Service and

Quality Emphasis
Malcolm Baldrige National
Quality Award
ISO 9000:2000
Six Sigma process

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 The emphasis on quality is seen in the

following:
Malcolm Baldrige National Quality
Award
established in 1987 to promote quality awareness, to
recognize quality achievements, and to publicize successful
quality strategies.

ISO 9000:2000
quality standards adopted worldwide.

Six Sigma process

system of measuring, analyzing, improving, and controlling
processes once they meet quality standards.

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Changing Demographics
Diversity of the Workforce
Internal labor force is the labor force of current
employees
External labor market includes persons actively seeking
employment
The U.S. workforce is aging rapidly
The 55-year-old and older group is projected to
increase by 49 percent between 2004 and 2014
Worker performance and learning are not adversely
affected by aging

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Managing a Diverse Workforce

To successfully manage a diverse workforce,
managers must develop a new set of skills,
including:
Communicating effectively with employees from a
wide variety of cultural backgrounds
Coaching and developing employees of different
ages, educational backgrounds, ethnicity, physical
ability, and race
Providing performance feedback that is based on
objective outcomes
Creating a work environment that makes it
comfortable for employees of all backgrounds to
be creative and innovative
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Legal and Ethical Issues

Five main areas of the legal environment have influenced
HRM over the past 25 years
Equal employment opportunity legislation
Employee safety and health
Employee pay and benefits
Employee privacy
Job security
Women and minorities still face the glass ceiling
Sarbanes-Oxley Act of 2002
sets strict rules for corporate behavior and sets heavy
fines for noncompliance, especially in regards to
accounting practices

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Legal and Ethical Issues

Ethical HR practices:
HRM practices must result in the
greatest good for the largest
number of people
Employment practices must
respect basic human rights of
privacy, due process, consent,
and free speech
Managers must treat employees
and customers equitably and
fairly

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The Global Challenge

To survive companies must compete in
international markets
Be prepared to deal with the global
economy.
Offshoring exporting of jobs from
developed countries to less developed
countries
Onshoring exporting jobs to rural parts
of the United States

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The Technology Challenge

The overall impact of the
Internet
The Internet has created a
new business model ecommerce in which
business transactions and
relationships can be
conducted electronically

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The Technology Challenge

Advances in technology have:
changed how and where we work
resulted in high-performance work
systems
increased the use of teams to improve
customer service and product quality
changed skill requirements
increased working partnerships
led to changes in company structure
and reporting relationships
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The Technology Challenge

Advances in technology have:
increased the use and availability of Human
Resource Information Systems (HRIS),
which are used to acquire, store, manipulate,
analyze, retrieve, and distribute HR
information
increased the use and availability of e-HRM,
which is the processing and transmission of
digitalized information used in HRM
increased the competitiveness in high
performance work systems

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Meeting Competitive Challenges

Through HRM Practices
HRM practices that help companies deal with the four
competitive challenges can be grouped into four
dimensions
The human resource environmentHRM practices
should be linked to strategy, legal compliance must be
assured, and work should be designed to maximize
employee effectiveness and motivation
Acquiring and preparing human resourcesHuman
resource planning must occur, employees must be
recruited and placed in appropriate jobs, methods of
employee selection must be determined, and ensuring
employees have skills to perform particular jobs.
Assessment and development of human resources
This area of HRM deals with measuring employee
performance, preparing employees for future work roles,
identifying and responding to employee interests, and
creating a beneficial and effective work environment.
Compensating human resourcesAppropriate pay
systems must be developed, employee contributions must
be rewarded, and employees must be provided with
benefits.

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Meeting Competitive Challenges

Through HRM Practices
Managing internal and external
environmental factors allows employees
to make the greatest possible contribution
to company productivity and
competitiveness
Customer needs for new products or
services influence the number and type of
employees businesses need to be
successful

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Meeting Competitive Challenges

Through HRM Practices
Managers need to ensure that employees
have the necessary skills to perform
current and future jobs.
Besides interesting work, pay and
benefits are the most important incentives
that companies can offer employees in
exchange for contributing to productivity,
quality, and customer service

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