Transcript Chapter 9 Linking Competitive Strategies with Human

Chapter 9
Linking Competitive Strategies
with Human Resource
Management Practices
Randall S. Schuler
and
Susan E. Jackson
Need to match characteristics of top
managers with nature of the business
• Characteristics such as
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Personality
Skills
Abilities
Values
Perspectives
• Growth strategy: need managers likely to abandon the
status quo and adapt their strategies and goals in the
marketplace
• Turnaround Strategy: Recruit from the outside
Need to match characteristics of top
managers with nature of the business
• Mature strategy: Need a stable group of insiders
who know the intricacies of the business
• Managers must exhibit a wide range of behavior
• Match compensation and performance appraisal
practices with the nature of the business
Competitive Strategies
• MacMillan
– Strategic initiative is the ability to capture control of
strategic behavior in the industries in which a firm
competes.
• Porter’s three competitive strategies
– Innovative strategy-develop products or services
different from those of competitors
– Quality enhancement strategy-enhance product and/or
service quality
– Cost reduction strategy-gain competitive advantage by
being the lowest cost producer
Competitive Strategy: Needed Role
Behaviors
• Rather than task-specific KSAs, we need role
behaviors suitable for various social
environments
• Exhibit 9.1 p. 162
• Innovation strategy and needed role behaviors
– Deliberate and official decision of the highest
levels of management
– “Spontaneous” creation of midlevel people for
creative problem solving
Competitive Strategy: Needed Role
Behaviors
• Profile of employee role behaviors for innovation
strategy:
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high degree of creative behavior
longer-term focus
relatively high level of cooperative, interdependent behavior
moderate degree of concern for quality
moderate concern for quantity
equal degree of concern for process and results
greater degree of risk taking
high tolerance of ambiguity and unpredictability
Competitive Strategy: Needed Role
Behaviors
• Implications
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selecting highly skilled individuals
giving employees more discretion
using minimal controls
making a greater investment in human resources
providing more resources for experimentation
allowing and even rewarding occasional failure
appraising performance for its long-run implications
• Result in feelings of enhanced personal control and
morale, greater commitment to self and profession
Quality-enhanced strategy and
needed role behaviors
• “Being right the first time every time”
• Getting employees committed to quality and
continual improvement
• Policies followed up with specific human resources
practices:
– Feedback systems are in place
– Team work is permitted and facilitated
– Decision making and responsibilities are a part of each
employee’s job description
– Job classifications are flexible
Quality-enhanced strategy and
needed role behaviors
• Profile of employee role behavior for strategy of quality
enhancement
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Relatively repetitive and predictable behaviors
More long-term or intermediate focus
Modest amount of cooperative, interdependent behavior
High concern for quality
Modest concern for quantity of output
High concern for process
Low risk-taking activity
Commitment to the goals of the organization
• Fewer employees needed to produce and/or to repair rejects
Cost-reduction strategy and needed
role behaviors
• Characteristics:
– Tight controls
– Overhead minimization
– Pursuit of economies of scale
• Primary focus is to increase productivity (reduce output
cost per person)
• Reducing wage levels
Cost-reduction strategy and needed
role behaviors
• Cost reduction pursued through:
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Increased use of part-time employees
Subcontractors
Work simplification
Measurement procedures
Automation
Work rule changes
Job assignment flexibility
Cost-reduction strategy and needed
role behaviors
• Employee role behaviors for cost-reduction strategy:
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Relatively repetitive and predictable behaviors
A rather short-term focus
Primarily autonomous or individual activity
Modest concern for quality
High concern for quantity of output
Primary concern for results
Low risk-taking activity
Relatively high degree of comfort with stability
Typology of HRM Practices
• Six human resource practice “menus” (Exhibit 9.2
p. 166)
– Recruitment
• Can rely on internal labor market or on the external
labor market (make or buy decision)
– Career paths
• Broader the paths, greater the opportunity
• Much longer for broad skill acquisition
• Employee’s career opportunities more limited over
the long run
Typology of HRM Practices
• Promotions
– Several promotion ladders enlarges the opportunities for
employees to be promoted and yet stay within a given
technical specialty
– One promotion ladder enhances the relative value of a
promotion and increases the competition for it
– More explicit the promotion criteria, the less adaptable
the promotion system is to exceptions and changing
circumstances
– More implicit the criteria, the greater the flexibility to
move employees around to develop them more broadly
Typology of HRM Practices
• Socialization
– Minimal socialization, firms convey few informal
rules and establish new procedures to immerse
employees in the culture and practices of the
organization
– Result is a more restricted psychological
attachment and commitment by the employee to
the firm
Typology of HRM Practices
• Openness
– More open the procedures, the more likely there
is to be job posting for internal recruitment and
self-nomination
– Allows employees to select themselves into
jobs
– More secret the procedure, the faster the
decision can be made
Hypotheses of Competitive
Strategy-HRM Archetypes
• Innovative Strategy characteristics:
– Jobs that require close interaction and coordination
among groups of individuals
– Performance appraisals reflect longer-term and groupbased achievements
– Jobs that allow employees to develop skills that can be
used in other positions in the firm
– Compensation systems that emphasize internal equity
rather than external or market-based equity
– Pay rates that tend to be low
– Broad career paths
Quality-enhancement Strategy
• Key HRM practices:
– Relatively fixed and explicit job description
– High levels of employee participation
– Mix of individual and group criteria for
performance appraisal
– Relatively egalitarian treatment of employees
– Extensive and continuous training and
development of employees
Cost-reduction Strategy
• Key human resource practices:
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Relatively fixed and explicit job descriptions
Narrowly designed jobs
Narrowly defined career paths
Short-term, results-oriented performance
appraisals
– Close monitoring of market pay levels
– Minimal levels of employee training and
development
Implementation Issues
• Which competitive strategy is best?
– Customer wants and the nature of the competition
– A cost-reduction strategy
– Quality improvement strategy
• One competitive strategy or several?
– May need to have multiple and concurrent
competitive strategies
– Multiple strategies results in the challenge of
stimulating and rewarding different role behaviors
– Art of management is sorting things into the loose
pile or the tight pile
Implementation Issues
• Change of competitive strategies
– Accompanied by changes in human resources
practices
– Employees will face an ever-changing
employment relationship
– May offer outplacement assistance to another
firm or division in the company
– May offer training programs
Conclusion
• Cost and market conditions tend to
constrain choice of strategy
• Effectiveness can be increased by melding
HR practices with competitive strategy