Sustained Competitive Advantage Through Inimitable Human Resource Practices

1. Chapter 9 Sustained Competitive Advantage Through Inimitable Human Resource Practices Matt 1-8Matt 1-8

2. Agenda Define Terms 3 Perspectives of HR System Strategies Behavior Orientation Types Principles of Congruence Group Activity (Design a Congruent HR System) Tradeoffs In System Design Examples Of Competitive Strategies Chapter 1 Tie-in Figure 1.1 Conclusions

3. Terms Competitive Advantage � Advantage over other firms in the same industry The basic idea: establishing and maintaining competitive advantage through people. Competitive advantage: Valuable, rare, inimitable, non-substitutable Traditional sources of competitive advantage no longer as effective Instead, the organization�s people are its competitive advantage

4. Terms (cont�d) Congruent Systems � Focused on the same goal / integrated and mutually supportive The internal consistency and synergy among HR practices for promoting key employee behaviors Inimitable Systems � Difficult to copy Provides a competitive advantage through skilled human capital

5. Traditional Sources of Competitive Advantage�and Where They�ve Gone Product and process technology Technological innovations make innovation easier and faster Development and manufacturing technology freely available Protected and regulated markets Move to global economy Deregulation Access to financial resources Venture capital Economies of scale Fragmented markets Less important with advances in technology

6. Competitive Advantage Through People Viewing the work force as an asset, not an expense The result: Harder work, from increased involvement and commitment Smarter work, through enhanced skills and competence Lower overhead, by pushing responsibility downward

7. Three Perspectives of HR Systems Universalistic perspective Some HR Practices are better than others Contingency perspective HR Practices should be consistent with other aspects of the organization, particularly strategy Configurational perspective �Holistic� Approach HR systems must achieve a horizontal and a vertical fit

8. Behavior Orientation Types Individual oriented Group-oriented Organizational oriented

9. Mike 9-17Mike 9-17

10. Individual Oriented Tying extrinsic rewards to performance Setting realistic and challenging goals Evaluating employee performance accurately and providing feedback Promoting employees on the basis of skill and performance Building the skill level of employees through development activities Enriching jobs through increases in responsibility and skill variety

11. Group-Oriented Organizing work around intact groups Groups charged with selection, training, and rewarding of group members Using groups to enforce strong norms of behavior Group involvement in off-the-job and on-the-job behavior Distributing resources on a group basis Allowing and/or promoting inter-group rivalry Build within-group solidarity

12. Organizational Oriented Socialization into the organization as a whole Foster identification with the entire business Job rotation around the company Loyalty is not limited to one subunit Long training periods with the development of non-transferable skills specific to the company Commits people to the employing organization Long-term or protected employment to gain loyalty

13. Organizational Oriented (cont�d) Decentralized operations Decreases competition among departments Few status distinctions between employees Dissention and separatism are not fostered Economic education and sharing of organization information Increases knowledge of products, financial condition, and strategies of the firm Use of various forms of profit sharing, stock options, and bonuses Ties individual rewards to organizational performance

14. Principles of Congruence Managers must focus powerful forces on the target behaviors Managers must make sure that staffing, reward, and development practices do not conflict Managers must ensure that interrelated HRM practices are sufficiently supportive of each other

15. Congruent System Decide on a target behavior aligned with the business strategy Provide training to achieve behavior Create rewards to encourage behavior Measurement system Feedback system

16. Example: Incongruent System Target behavior: Teamwork Training: Team training in group interaction skills Contribution Analysis: How has the individual (in isolation) performed? Reward: Individual employee bonuses Measurement: Individual employee performance Feedback: Individual feedback

17. Example: Congruent System Target behavior: Teamwork Training: Team interaction skills Use interaction skills in an exercise Contribution Analysis: How has individual performed in teams? Reward: Financial reward for achieving team goals Measurement: Measure team performance Feedback: Provide feedback regarding teamwork

18. Group Activity Design a congruent HR system focused on one of the following topics: 1. Decreasing absenteeism 2. Improving job performance Dave 18-27Dave 18-27

19. Characteristics of System Design Target behavior Training Contribution Analysis Reward Measurement Feedback

20. Tradeoffs with a Congruent System For any given goal, there will be tradeoffs necessary Example: Goal of hiring creative personnel Training vs. Selection Factors to consider: Availability in labor market Availability, costs, and benefits of training vs. selection History, culture, and strategy of the firm

21. Competitive Strategies Innovation Highly creative, cooperative employees Moderate concern for quality and quantity Risk takers Quality-Enhancement Low concern for margins. Highly conscientious and meticulous Risk averse Cost-Reduction Focused on economies of scale, little concern for quality Highly creative Risk takers

22. Aligning Strategy and HR Determine the firm�s strategy Determine the competencies needed to carry out the strategy Examine current management practices Determine congruence Do the current practices work to enhance needed competencies? Are the current practices internally consistent?

23. Frost Inc. Medium size manufacturer of overhead conveyor trolleys for the auto industry Focus on Innovation Major changes in production to enhance flexibility HRM practices to support innovation: �Celebration Fund� Quarterly bonuses based on cooperative behavior Incentives with a long-term focus Elimination of special �perks� Extensive training programs

24. Types of Human Resource Systems Control Cost reduction oriented Reduce direct labor cost Improved efficiency Achieve by compliance with rules and procedures Measurable output linked to rewards Centralized decision making Increased use of bonuses and incentives

25. Human Resource Systems (cont�d) Commitment Link employee goals with organization goals Decentralized decision making Encourage group problem solving Decreased attention to compliance with rules Emphasis on training

26. How Does This Fit In to the HRS Design?

27. Conclusion Should not consider HR practices in isolation HR system that is well integrated and complete is very difficult to duplicate which gives the system a sustainable competitive advantage. Interrelated HR practices should be supportive and make use of available synergies.