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