Ch.8 Human Resource Systems

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Ch.8Human Resource Systems

• Tae-Hwan Kim
• Ariani Parjanto
• Porntip Riansuwan

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Agenda

• Group/Class Discussion
• Chapter Review
• Video of SCA SHRM
• Example SHRM at Sears
• Relation to Figure 1-1
• Key Thoughts

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Class Discussion

• Make a group of 5-6 people.
• Discuss the competitive advantage strategies and
  compare the HR systems and the need of HR at each
  of the following companies
  
• WalMart
• Amazon.com
• Disney

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Strategic Human Resource Management- SHRM

• Different business strategies emphasize different
  role requirements and employee behaviors.
  
• A human resource system that is tailored to the
  demands of the business strategy. (Miles and
  Snow 1984)
  
• The pattern of planned human resource activities
  intended to enable an organization to achieve its
  goals. (Wright and McMahan 1992)
  
• An Integrated HRM practice can add value to the
  firm and serve as a source of sustained
  competitive advantage (SCA).

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Figure 1-1. HRM system design
Labor and Legal environment
Business strategy
Organizational design/work process
Behavioral/role requirements
HRM systems
Technology
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Figure 8-2. HRM-business outcomes linkages
Labor and Legal environment
Business strategy
Organizational design/work process
Behavioral/role requirements
HRM systems
Technology
Workforce composition
Workforce behaviors
Business Outcomes
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Sustained Competitive Advantage

• HRM adds value to the Firm
• Trend to more highly educated labor forces
• Sears employee-customer-profit model
• HR as rare resources
• Advanced technology
• More flexible
• More demanding jobs
• Require a new approach to management

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Sustained Competitive Advantage (contd)

• HR systems as inimitable
• Why?
• The success come from managing people is often
  not as visible or transparent as to its sources
  
• It is easier to copy one element from HR system
  and culture
  
• The relationship between workforce and employment
  relationship
  
• Not focusing on cost to be minimized

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Sustained Competitive Advantage (contd)

• HR as non-substitutable
• Encourage people to possess skill needed to
  implement a firms business strategy
  
• Reinforce needed role behaviors
• Example of SHRM SCA

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Linking HRM Practices to Organizational Outcomes

• Accessing and reducing costs
• Costs are reduced while quality is maintained
• 2 methods
• The use of consulting firms
• Hewitt Total Benefit Administration System
• Estimate financial cost associate with employee
  behaviors
  
• E.g. employee absenteeism, employee turnover, etc.

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Linking HRM Practices to Organizational Outcomes

• Behavioral impact of HRM practices
• Training program account for the change in
  performance
  
• Effect size statistical index e.g. Z score, and
  coefficient correlation
  
• Marginal Utility Models

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Marginal Utility Models

• The Costs the financial return
• Investment in HR system should be value added
• Rate of return on investment the cost of
  capital
  
• The consideration of time value
• Present future HRM costs
• Future revenue stream

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Marginal Utility Models (Contd)

• Basic concept
• The money invested in HR system improvement.
  (costs)
  
• The positive return (in ) associated with the
  hiring and retention of more productive
  employees. (return)
  
• Variable cost Fixed cost
• Costs and return put in present-value term

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Marginal Utility Models (Contd)

• The decision-making model must take into account
  the time value of money
  
• The positive figure in MUM is favorable.

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Marginal Utility Models (Contd)

• ?U (N) x ?1/(1i)t (r1-r2)(SDy)(?/P)(1V)(1-TA
  X)
  
• - (N)(C1-C2)/P(1-TAX)
• N the number of employee selected
• t the time period in which the benefit
  occurs
  
• i the current discount rate
• r1 the validity of the new selection
  procedure
  
• r2 the validity of the existing selection
  procedure
  
• SDy the standard deviation of dollar-value
  payoff
  
• ?/P the estimated average score on the
  predictor among the group hired
  
• T average tenure of new employees
• C1,C2 the cost per applicant of using the
  new(C1) and old(C2) procedure
  
• V the proportion of service value (variable
  costs)
  
• P the selection ratio

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Marginal Utility Models (Contd)

• Example
• You train 1500 employees annually (N 1500)
• The current discount rate is 6.5 (i 6.5)
• r1 is 0.55
• r2 is 0.40
• SDy is worth 100,000 annually to firm
• ?/P is 1.16
• T is two years
• C1 is 250
• C2 is 750
• V is -.60
• The marginal Tax rate is 0.35
• P is 0.30
• ?U 1500(1.83)(.15)(100,000)(1.16)(1-.60)(1-.35)
  (1500)(750-250)/(.30)(1-.35) 10.793,380

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Linking Strategy to HRM Practices

• Corporate HR philosophy/ HR standards
• Provide strategic direction to a firms HR
  practices.
  
• A written list of HR standards
• Normally, Business Strategy and HR Standards
  are too general
  
• Strategy should vary across organizational level.

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Linking Strategy to HRM Practices

• Direct business strategy-HRM connection
• Different business strategy requires different
  HRM.
  
• Reasonable specification about companys
  strategy
  
• Lack of information about HR system design.
• Careful review of role requirements.
• Strategy formulation
• Provide feedback information about contextual
  factors and the organizational capability

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Sears

• A retailing giant with a market capitalization
  over US1 billion.
  
• 5 distinct business units
• Full-line stores (250,000 employees)
• Off the mall stores (10,000 employees)
• Automotive services (35,000 employees)
• Home services (30,000 employees)
• Sears credit (12,000 employees)

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HR at Sears

• HR community is defined as the single most
  important business group in leading the change
  efforts within the firm.
  
• for every 5 improvement in associates
  behaviors, customer retention was increased by
  1.3, revenues by 1.04 and profit by 0.4.
  
• (Young and Berman 1997)
• Sears ? improving associates behaviors by 0.5
  will increase revenue by 300 M.

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Sears strategy

• Ownership culture involving employee
• Developing a clear competitive strategy
• Associated operational goals
• Communicating both strategy and goals to
  employee.
  
• Develop a conceptual model rather than
  conventional vision mission statements.
  
• 3 Cs model
• compelling place to work
• compelling place to shop
• compelling place to invest

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Strategic HRM at Sears

• Educating the employee
• Learning Maps
• Ownership
• Sears Total Performance Indicators
• A New Day in Retail Street
• Voice of Our Customers
• The Sears Money Flow
• Sears University
• Case studies, working with teams or work groups
• Teachers Sears managers outside faculty

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Strategic HRM at Sears (contd)

• Performance Management
• Coaching and training
• Feedback
• Incentives ? pay for performance
• Employee selection system
• ? Develop a selection tool to assess an
  applicants customer service aptitude and
  dependability.

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Relation to Figure 1-1
Labor and legal environment
Business strategy
Organizational design/work process
Behavioral/role requirements
HRM systems
Technology
Feedback
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Key Thoughts

• HRM is strategic where personal policy represent
  a good fit of the organization.
  
• What distinguishes Strategic HRM from personnel
  management is the ability to take a strategic
  view of the whole range of personnel practices in
  relation to business activity as a whole.

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Questions?

• Thank You