Chapter Human Resource Management and Competitive Advantage © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Chapter Outline • 1-1 Human Resource Management • 1-2 Who Is Responsible for Developing and Implementing HRM Practices? • 1-3 Gaining a Competitive Advantage • 1-4 Competitive Advantage and HRM © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1 Human Resource Management • Human resource management: Consists of practices that help the organization deal effectively with its people during the various phases of the employment cycle • Three phases of the employment cycle: Pre-selection – Planning practices Selection – Recruiting applicants and selecting the most qualified Post-selection – Practices designed to maximize the performance and satisfaction levels of employees © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1a HRM Preselection Practices • Human resource planning: Anticipate and meet changing needs relating to the acquisition, deployment, and utilization of employees; accomplished through strategic planning and demand and supply forecasting • Job analysis: A systematic procedure for gathering, analyzing, and documenting information about particular jobs © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Figure 4-1 Job Analysis © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1b HRM Selection Practices • Recruitment: Locate and attract job applicants for particular positions quickly, cost efficiently, and legally • Selection: Assessing and choosing job candidates through a technically sound and legal procedure © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1c HRM Postselection Practices • Training and development: Planned learning experiences that teach workers how to perform their current or future jobs effectively • Performance appraisal: Measures the adequacy of employees’ job performances and communicates these evaluations to them © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1c HRM Postselection Practices (cont.) • Compensation: Entails pay and benefits, and aims to establish and maintain a competent and loyal workforce at an affordable cost • Productivity improvement programs: Tie job behavior to rewards, and aim to motivate employees to engage in appropriate job behaviors © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1d HRM Practices Influenced by External Factors • Legal and environmental issues: Federal, state, and local laws are designed to guarantee employees’ rights to fair and safe treatment Social, economic, and technological events also strongly influence HRM practices • Workplace justice laws: Addresses the issue of employee rights • Union influences: Regulate many HRM practices such as discipline, promotion, grievance procedures, and overtime allocations © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1d HRM Practices Influenced by External Factors (cont.) • Safety and health concerns: Institution of accident prevention programs, wellness programs, and employee assistance programs to ensure the health and mental well-being of employees • International influences: Development of globally oriented managers who understand foreign languages and cultures, as well as the dynamics of foreign marketplaces © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-3 Gaining a Competitive Advantage & 1-3a Competitive Advantage Defined • Firms gain competitive advantage by effectively managing their human resources • Competitive advantage is a status achieved by a company when gaining a superior marketplace position relative to its competition • This is accomplished through cost leadership and product differentiation © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-3b Cost Leadership • Cost leadership strategy: A firm provides the same services or products as its competitors, but produces them at a lower cost • A firm can reduce its per unit cost by increasing the value of Number of units produced/total cost of production • Per unit cost can be reduced by: Using new technology Devising more efficient work methods Cutting overhead costs © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-3c Product Differentiation • Occurs when a firm produces a product or service that is preferred by buyers • A firm can accomplish this aim by: • Creating a better quality product or service Providing innovative products or services Choosing a superior location Promoting and packaging its product to create a perception of higher quality Creates a competitive advantage if the firm’s customers are willing to pay enough to cover extra production costs © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4 Competitive Advantage and HRM • Studies have indicated: A strong link between HRM effectiveness and productivity The impact of a broad range of HRM practices on shareholder return; 15–30 percent of the total value of a company could be attributed to the quality of its HRM practices © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4a Evidence Linking HRM Practices to Competitive Advantage • Jeffrey Pfeffer identified 16 HRM practices: Employment security Selectivity in recruiting High wages Incentive pay Employee ownership Information sharing Participation and empowerment Teams and job redesign © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4a Evidence Linking HRM Practices to Competitive Advantage (cont.) • Jeffrey Pfeffer identified 16 HRM practices (cont.): Training and skill development Cross-utilization and cross-training Symbolic egalitarianism Wage compression Promotion from within Long-term perspective Measurement of practices Overarching philosophy © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Figure 1-4 A Model Linking HRM Practices to Competitive Advantage © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4b A Model Linking HRM Practices to Competitive Advantage • Direct path: The way an HRM practice is carried out can, by itself, have an immediate impact on competitive advantage Cost leadership can be achieved through the use of effective HRM practices Firms doing the best job of containing HRM-related costs stand to gain a financial advantage over their competitors © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) • Indirect path: An HRM practice can impact competitive advantage by causing certain outcomes, which, in turn, create competitive advantage HRM practices Employee-centered outcomes Employee-centered outcomes Organizationcentered outcomes Organization-centered outcomes Competitive advantage © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) • HRM Practices Employee-centered outcomes Competence – Extent of knowledge, skills, and abilities possessed for the job Motivation – Willingness to exert necessary effort to perform the job well © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) • HRM Practices Employee-centered outcomes Work-related attitudes – Extent of - - Job satisfaction – Favorableness of employee attitudes toward their jobs Organizational commitment – Psychological attachment to, identification with, and involvement in the organization Organizational citizenship – Willingness to engage in behaviors that help the organization achieve its goals © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) • Employee-centered outcomes Organizationalcentered outcomes Output – Quantity, quality, and innovativeness of the product or service offered by a firm Employee retention – Amount of employee turnover Legal compliance – Conformance to various employment laws Company reputation/Image – Favorable view of the organization by potential applicants and customers © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) • Achievement of employee-centered outcomes leads to favorable organization-centered outcomes Positive job attitude, motivation, and high productivity Reduction of HRM-related lawsuits Enhances the reputation of the company Helps the customers view the company positively © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4b A Model Linking HRM Practices to Competitive Advantage (cont.) • Organization-centered outcomes Competitive advantage Cost leadership – Achieved through using technology, minimizing turnover rates, and avoiding lawsuits resulting from noncompliance Product differentiation – Achieved through: - Individuals performing their jobs well Treating employees in a manner that helps retain longterm employees © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-4c HRM Practices and Sustained Competitive Advantage • Management of human resources is less susceptible to imitation • The competitive advantage achieved through HRM practices is likely to be more sustainable Competitors rarely have access to a firm’s HRM practices; the practices are not very visible to outsiders Even when these practices are visible, their impact may not be as favorable when used by competitors © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved ... Cost Leadership • Cost leadership strategy: A firm provides the same services or products as its competitors, but produces them at a lower cost • A firm can reduce its per unit cost by increasing... Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-2 Who Is Responsible for Developing and Implementing HRM Practices? • Human resource professionals • Establish HRM... 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 1-1 Human Resource Management • Human resource management: Consists of practices that help the organization