SHRMStrategic human resource management has been defined as ‘

the linking of human resources with strategic goals and objectives in

order to improve business performance and develop organizational
culture that foster innovation and flexibility ‘. Strategic HR means
accepting the HR function as a strategic partner in the formulation of
the company’s strategies as well as in the implementation of those
strategies through HR activities such as recruiting, selecting, training
and rewarding personnel. Whereas strategic HR recognizes HR’s
partnership role in the strategizing process, the term HR Strategies
refers to specific HR courses of action the company plans to pursue to
achieve it’s aims

HR management can play a role in environmental scanning i.e.

identifying and analyzing external opportunities and threats that may
be crucial to the company’s success. Similarly HR management is in a
unique position to supply competitive intelligence that may be useful
in the strategic planning process. HR also participates in the strategy
formulation process by supplying information regarding the company’s
internal strengths and weaknesses. The strengths and weaknesses of a
company’s human resources can have a determining effect on the
viability of the firm’s strategic options.

By design the perspective demands that HR managers become

strategic partners in business operations playing prospective roles
rather than being passive administrators reacting to the requirements
of other business functions. Strategic HR managers need a change in
their mindset from seeing themselves as relationship managers to
resource managers knowing how to utilize the full potential of their
human resources.

The primary actions of the strategic human resource manager

translate business strategies into HR priorities. In any business setting,
whether corporate, functional, business unit or product line a strategy
exists either explicitly in the formal process or document or implicitly
through a shared agenda on priorities. As strategic partners, HR
professionals should be to identify the HR practices that make the
strategy happen. The process of identifying these HR priorities is called
organizational diagnosis, a process through which an organization is
audited to determine its strengths and weaknesses
The three stages cover strategy formulation, implementation and evaluationThe three
stages cover strategy formulation, implementation and evaluation…
The strategy formulation process is influenced by a numbr of external and internal
factors..Formbrun(1984) identifies technological,economical, socio-cultural and political
environmentas interrelated external factors that hav impact on the strategy formulation of
organizations.
The formulation stage provides the ground for the happening of effective shrm.the
organizations recognizes hr dept as a business partner and provides it wid avenues for
beinga proactive partner..

Implementation of shrm may involve drastic changes in the work practices and other hr
processes and hence may affect a lot of employees..bringing about change is a difficult
process and people who hav faced negative consequences of an unsuccessful effort to
change may obstruct the change processes of future
Various hrm systems like recruitment and selection,,performance mgt,compensation,trng
n developm,career mgtneed to b aligned wid hr strateg
The third stage deals wid the evaluation of effectiveness of hrmsystems and their strategic
integration..
The evaluation stage in dis model includes various surveys and evaluation processes..d
evalution metrics need 2 b carefully constructed ..evalation of hrm systems is difficult
bcos most of d orgabnisations are nt vry clear as 2 what they want 2 evaluet

EMPLOYEE RETN STR Employee Retention Strategies is uniquely designed to

provide small- to medium-sized organizations (and business units of large organizations)
with affordable, effective, fast and lasting solutions to improve employee retention,
satisfaction and commitment
Main retention strategies

1 Communications - Getting Your People to Care

Communication is the first step toward creating the kind of environment that people care about,
and if they care, they just may stay. I'm not talking about a lot of New Age stroking designed to
bring out the inner person or false praise that creates a misplaced sense of security. Instead,
keep your people in the loop about what's happening with the company. At any time, all of your
employees should have a pretty good idea of how business has been, and they should be aware
of what issues the company is attempting to address.

That means that you regularly keep your people up to date with important events affecting the
company. If November was good, let them know, and while you're at it, tell them what you expect
to happen in December. Share good news, as well as points of concern. If you've got "issues,"
talk about them before they start making you crazy. And if they don't get resolved, figure out
whether the problem stems from a couple of individuals or from your system.

The point here is that you want to treat these people as your partners, which they are. They may
not have to worry about covering the payroll this week, but they do have worries of their own.
Treat them with at least as much respect as they give you. As the store's owner or manager, you
set the tone for the entire organization. If your salespeople, for instance, enjoy their encounters
with you, they are much more likely to greet customers with a positive attitude. They are also
much more likely to enjoy their work when they don't have a fire-breathing dragon looking to singe
their butts.

2 set clear expectations

a. How often do you appraise your employees/team-members?
b. What are your expectations from your employees/team-members? What are the
parameters to measure their performance? Have you communicated to them?
c. What will be the consequences, if they fail?
d. What will be the rewards, if they exceed the expected level
 3 33 Proper Rewarding

A research reports says that in today's scenario,

a. 70% of your employees are less motivated today than they used to be.
b. 80% of your employees could perform significantly better if they wanted to.
c. 50% of your employees only put enough effort into their work to keep their job.

As you might be aware of Employee Reward covers how people are rewarded in accordance with
their value to an organization. It is about both financial and non-financial rewards and embraces
the strategies, policies, structures and processes used to develop and maintain reward systems.
The ways in which people are valued can make a considerable impact on the effectiveness of the
organization, and is at the heart of the employment relationship.

The aim of employee reward policies and practices, if any in your organization is to help attract,
retain and motivate high-quality people. Getting it wrong can have a significant negative effect on
the motivation, commitment and morale of employees. Personnel and development professionals
will be involved frequently in reward issues, whether they are generalists or specialize in people
resourcing, learning and development or employee relations. Keep following parameters in mind,
while designing a reward policy:

Build a high degree of recognition value into every reward you offer.

Recognition is the most cost-effective motivator there is. While the high cost of other rewards
forces us to give them sparingly, recognition can be given any time, at very little cost.

Reduce entitlements and link as many rewards as possible to performance.

Clearly the traditional "pay for loyalty" systems in most organizations need to be changed. Don't
let attendance be your major criterion for rewards. Most employees resent those who only put in
their time and yet receive the same reward as those who go the extra mile. Today's employees
have higher expectations for what work can and should be, and they want to receive rewards that
reflect their personal efforts and contributions.

This is why so many companies are moving toward performance-based rewards, including
performance bonuses, gain-sharing and non-monetary recognition. Although not a panacea,
companies are finding that these new reward systems do allow them to give substantial rewards
to those who really deserve them. Smart organizations are looking for opportunities to reduce
across-the-board entitlements, and thereby find more resources for discretionary performance-
based rewards, without increasing the total cost of rewards.
Reward promptly. Rewards should be given as soon as possible after the performance has
taken place. This is why the most successful gain-sharing programs pay employees monthly,
rather than quarterly or annually as in the past.

There is a well-accepted law of behavioral psychology, that if you want someone to repeat a
behavior, you should positively recognize it immediately. From this law, smart supervisors and
managers can learn a vital lesson: Look for any employee doing something right, right now, and
recognizes it.

A support to this, here is my favorite reward story:

"When a senior manager in one organization was trying to figure out a way to recognize an
employee who had just done a great job, he spontaneously picked up a banana (which his wife
had packed in his lunch), and handed it to the astonished employee with hearty congratulations.
Now, one of the highest honors in that company has been dubbed the "Golden Banana Award"."

Give employees a choice of rewards. Rewards are as different as the people who receive them
and it doesn't make sense to give rewards that recipients don't find rewarding. For example,
some people prefer more pay, while others prefer more time off. A promotion might be more
rewarding to one person, while a job-sharing arrangement might be more rewarding for another.
Some people are excited about sports events, others about movies. Some employees would love
a dinner in a romantic restaurant, others a book by their favorite author. Food, fun, education,
improved work environment, gifts, travel, family-oriented activities - the options are endless.

How do you know what will be rewarding to employees? Ask them. Smart organizations are also
letting employees choose their own rewards from reward menus and catalogs. Personalizing
rewards shows that a company cares enough to discover what "interests" each employee, rather
than just distributing generic items. It also reduces the following danger: In one organization I was
visiting, an employee opened a big drawer in his desk and disdainfully showed me all the
"worthless trinkets" he had collected over the years.

Increase the longevity of your rewards. This can be done in a number of ways: One of the
keys to reward longevity is symbolism. The more symbolic an item is of the accomplishment, the
more likely it is to continue reminding the employee of why it was given. For instance, a T-shirt of
coffee mug with a meaningful inscription will continue rewarding those who wear it, or use it, long
after its initial receipt. There are many tokens of appreciation I still keep on or near my desk that
remind me of the joy of past accomplishments, while the monetary rewards I have received are
long spent and long forgotten.

Another way to increase the longevity of rewards in your organization is by using some kind of
point system. Rather than rewarding each individual behavior or accomplishment, points can be
awarded, which employees can accumulate and eventually trade for items from a reward menu or
gift catalog. This keeps the anticipation of rewards fresh for longer periods of time. It also
addresses the need for reward individualization.

One company that designs motivational systems offers an electronic debit-card system to help
larger clients cope with the complexity of distributing, tracking and redeeming employees' points.
Employees can use their points to purchase virtually anything they want, from sports equipment
and clothing to automobiles and overseas vacations. They only caveat for such programs is to
make sure that the recognition value of the rewards isn't lost because of the impersonal nature of
the technology.

One company uses a game it Call Safety Bingo. All employees receive a weekly bingo card.
When an employee is observed working safely, a number is presented (immediate recognition).
When they get "bingo", they receive a safety jacket (along with appropriate verbal reinforcement).
The rewards escalate for subsequent wins. This type of program keeps employees interested for
long periods of time, even though there might be weeks or months between rewards, and makes
routine work more fun overall.

Interestingly, when researchers have investigated the motivational dynamics of these workplace
games, they have found that the major motivator is the playing, not the prize.

Be continually vigilant of demotivators that may undermine your organization's best

efforts to provide power rewards, and reduce them promptly.

Most demotivators can be dramatically reduced by soliciting employee involvement in identifying

highest-priority demotivators and by enlisting top-management commitment to support their
reduction.
HR Outsourcing

The Human Resource (HR) department is critical for employee satisfaction in any
firm. Some businesses don’t have the staff, the budgets or the inclination, to deal
with the nitty-gritty of HR management, so they opt for outsourcing. Deciding which
functions to offload and which firm to outsource is also a major decision.

HR functions include Payroll administration (producing checks, handling taxes,

dealing with sick time and vacations), employee benefits (Health, Medical, Life
insurance, cafeteria, etc), human resource management (hiring and firing,
background interviews, exit interviews and wage reviews), risk management
(workers’ compensation, dispute resolution, safety inspection, office policies and
handbooks) and others.
HR outsourcing Services could fall into one of four categories: PEOs, BPOs, ASPs, or
e-services

Not every HR outsourcing relationship results in a sizable return on investment (ROI). In some
situations, the net result can be a substantial write-off. In this article, we study some high profile
HR outsourcing failures.

Many companies have been burned - badly, in some cases - as a result of misaligned expectations,
selection of the wrong vendor or too narrow a focus on why they were outsourcing in the first place.

Companies are slowly come to appreciate that HR outsourcing is far more complex than meets the
eye both in terms of technology and business process change.

Steps
PHASE I - Define
In this phase, the objective is to understand clearly the voice of the prospective customer.
When doing business on the Internet, we realize the importance of being clearly
understood, to provide the best solutions to our customers.

PHASE II - Design and Develop

Methodology - The evolving iterative approach. We often use the evolving iterative approach to
web development. In this methodology, once the preliminary requirements are clarified, the next
step is to quickly build the prototype of the website/web application. From then on, it is the
continuing evolution of this prototype until it becomes the final product, exact to specifications.

Visibility - The key Advantage. This is a revolutionary, new approach to software development
and extremely suited to offshore development and outsource services. When you outsource your
requirement of web solutions to us, we are sensitive to the fact that you require high visibility of the
WIP (work in progress). This is the reason why we have adapted this methodology to our web
development process. At each stage along the development, the website/web application evolves
before your own eyes. Here are the broad milestones in this process:

1. Prototype: The first and crucial phase. The prototype shows you the shape of things to come.
This is much more than just a visual representation. It represents all the screen elements in the
final solution. This is the mould into which we start to breathe the breath of life! Feedback from the
client is taken and required modifications are incorporated.
2. Functional Specifications Document: Before starting to actually develop the functionalities,
we document all the functional specifications. The client reviews it and gives feedback again and
with this, the requirements specifications are fully captured.

3. The Proof of concept. The prototype evolves to its more complex level of existence. Many parts
of the prototype spring to life. We have this intermediate delivery before the final delivery to
establish the proof of concept. The client can now almost feel the solution that he/she had entrusted
us to develop. What remains now is just formality. Our production engine hauls the project to
completion.

4. Final Delivery: The final product is delivered after testing. There are no surprises, and no tense
expectations on the date of delivery. For, you had seen it evolve!

PHASE III - Deploy

Performance of the site is monitored for a period of one month if there is no site
maintenance agreement.

Any problems found during this period will be solved, without any additional cost
to the customer.

HR outsourcing: Key drivers

No matter in which part of the world companies are located, they share some common reasons
for outsourcing their HR activities. Typically companies outsource their HR to contain and
manage costs, hire and retain talent, develop infrastructure, create and administer benefits and
compensation programs, and get a company-wide view of HR resources.

The issue of build versus buy is also stated to be a strong driver for outsourcing. In this case,
companies choose to "leapfrog" their efforts by hiring an outsourced service provider to get things
up and running quickly.

Some HR departments within companies are going for one-stop solutions HR outsourcing shops
where activities such as payroll, compensation, benefits, and BPO are handled by the service
provider.

It has been found that HR organizations, particularly in US-based firms, are starting to outsource
even some of their core tasks, like parts of training or recruitment. These firms are learning how
to take core functions apart and outsource some of their elements, further reducing the burden on
the HR department of the organization.

In yet other cases, HR organizations are not thinking in terms of core or non-core activities. They
are simply categorizing transactional activities and looking for a different way to perform them.

Reasons for outsourcing

• Cost effectiveness
• Reduced administrative costs
• Capitalizing on technological advances/expertise
• Improved customer service
 • Redirecting HR focus toward strategy/planning
• Focus on core business
• Reduced corporate overhead
• Provision of "seamless" delivery of services
• Insufficient staff

Size: No longer a barrier to outsourcing

In fact, it is not just the HR departments of larger companies that are undergoing this
makeover and catalyzing the outsourcing trend. Smaller and mid-sized companies,
traditionally out of this magic circle, are now also being driven by factors such as bottom
line consciousness to take the outsourcing route. Until recently, these companies were
maintaining large headcounts and spending excessively on areas such as HR expenses

What are the factors to be considered before selecting an ERP vendor?

• Analyze the capabilities of your outsourcing vendor

• Check if your outsourcing vendor has proper information security systems
• Review his infrastructure
• Study the organization and reassure yourself if a long term relationship is possible with that
company. Long term relationships are important as ERP is a process which will take time to
get implemented
• Review if there are appropriate programs to protect trade secrets of its clients, partners and
customers
• If possible, involve CEO level interactions to ensure minimum risks

DOWNSIZING N LAYOFFS

Downsizing and layoffs, once phenomena associated mainly with individual company distress or
larger economic downturns, have become permanent features of the global business landscape.
This entrenchment of job-shedding activity has been driven by a number of factors. These factors
include: more rapidly evolving technologies and business cycles, intensified pressure to improve
stock performance, and mergers and acquisitions. At the same time, a growing body of evidence
has shown that companies often fail to realize anticipated gains from downsizing, and nearly
always suffer from substantial hidden costs. Employers therefore have begun to understand that
simply reducing headcount may not be a strategy for long-term advantage. (For purposes of this
overview, "downsizing" - defined as a net reduction in a company's workforce - also includes
"layoffs," which can take place in one part of a company concurrent with hiring in another part of
the same company.)

• Traditional downsizing doesn't achieve its goals. A wealth of evidence indicates that the
benefits companies frequently hope to realize from downsizing fail to materialize or, if
they do, are limited and short-lived. For example:
o Cost Savings: While downsizing is intended to reduce a company's overhead, the
savings frequently are less than expected or, in some cases, nonexistent.
Research at the University of Wisconsin at Milwaukee showed that while nearly
 all Fortune 1000 companies downsized between 1985 and 1990, fewer than half
met their cost-cutting goals. A 1995 study by Watson Wyatt Worldwide found that
only 46 percent of companies surveyed met their expense-reduction goals after
downsizing, and fewer than 33 percent met their profit objectives; only one in five
enhanced shareholder return on investment.
o Profits and Performance: These, too, are expected to rise following a downsizing,
although this often isn't the case. The American Management Association, in its
1998 Staffing and Structure Survey, concluded that firms that showed a
workforce decrease in the 1990s are far more likely to report long-term decline in
worker quality, product quality, operating profits, and shareholder value than they
are to report a long-term improvement. Meanwhile, a 1997 study by business
school professors at the University of Colorado at Denver, which analyzed
downsizing trends at Standard & Poor's 500 firms over a 12-year period, found
that companies that downsize are generally no more profitable than those that do
not.
o Share Price: Downsizing often doesn't pay off in shareholder value, according to
several studies. For example, a 1997 Wharton School of Business analysis of 52
studies involving several thousand companies found that corporate restructuring
had little if any positive impact on earnings or stock performance. The year
Watson Wyatt study mentioned above found that only one in five downsizing
companies enhanced shareholder return on investment.
• The "downstream" costs can be large. Several studies indicate that downsizing can have
hidden and very significant costs that emerge over time. Among them:
o Reduced Productivity: The morale and reduced productivity of employees that
survive downsizing - those that represent the future of the company - are
frequently a problem. They may be required to take on additional workloads and
adapt quickly to new work situations, often in an environment undermined by
reduced trust and increased uncertainty.
o Loss of Key Talent: In a downsizing environment, companies often find that their
key employees and top performers depart the company, stripping it of valuable
human capital, critical skills, and institutional memory. In some cases, downsizing
disrupts or destroys the informal networks of employees that often contribute
significantly to company productivity. For example, the Economist magazine in
April 1996 reported on an insurance company whose claim settlements rose
sharply following staff cuts in its claims department. Further investigation found
that a few long-time employees who had lost their jobs had created an informal
but effective way to screen claims, which disappeared after the downsizing.
o Decreased Risk-Taking and Entrepreneurism: A 1995 study by McGill University
and the Wharton School of Economics found that "Downsizing seems to interfere
with the web of informal relationships that innovators use to win support and
resources for new products, and which helps mesh innovative activities with
those of the firm as a whole."
o Potential legal and administrative costs: Many companies find that the price of
downsizing can be high in the costs of legal challenges, disability claims, and
other unanticipated costs. For example, a 1997 survey of 300 midsized and large
companies by the American Management Association and CIGNA Corp. found
that eliminating jobs can lead to an increase in disability claims, both
occupational and non-occupational, particularly stress-related claims. The study
also found that claims last an average of 25 percent longer than in companies
that haven't downsized. A top executive at a large facilities-services firm quoted
in Personnel Journal said that 90 percent of the 600 claims, charges, and cases
the company had open were filed following a termination.

Implementation Steps
Company approaches to downsizing are many and varied and there are few templates to follow.
Following are some key issues to consider:

• Consider downsizing's full costs. Before implementing any layoffs or downsizing, it is

important to carefully consider all of the costs involved - the direct costs as well as the
indirect costs. Any decision to layoff employees should make a compelling case for how
the job cuts will help achieve long-term company goals. Consider such costs as the
potentially reduced productivity of "surviving" employees, the loss of institutional memory,
the potential legal challenges, and the potential negative public relations that may result.
Consider also the costs associated with several short- and mid-term business scenarios,
including the potential need to hire and train staff several months or a year later when
conditions improve.
• Examine alternative strategies. A variety of alternatives to downsizing may provide the
same or additional benefits at a lower cost. These include:
o deploying surplus workers to growth areas of the company, utilizing retraining
and internal placement assistance when necessary;
o making managers responsible for finding new positions within the company for
downsized employees;
o identifying temporary internal work arrangements at employees' standard
salaries, even if the arrangements are for jobs that traditionally pay less;
o establishing job-sharing or work-sharing arrangements among employees;
o restricting overtime, enabling more employees to share the available workload;
o establishing "employee exchanges," through which employees are "loaned" to
customers, suppliers, or other local companies for temporary periods;
o assigning employees to voluntary community activities that fit with the company's
philanthropic goals;
o encouraging voluntary time off and leaves of absence, during which employees
continue to receive benefits and retain seniority;
o implementing wage freezes or pay cuts that apply to all employees, including
managers; and
o implementing voluntary separation and early-retirement programs.
• Communicate fully and continually with employees. Research shows that employees with
a full understanding of their industry and their company's situation feel less stress and
more control, even if that knowledge suggests that layoffs may be inevitable. Make sure
communication is clear, candid, and that employees are given the chance to ask
questions and express their views. For example, ask employees about their ideas and
suggestions for avoiding layoffs. Encourage them to participate in cost-cutting and
efficiency measures, and to offer strategies for growth and the development of new
markets that may alleviate the need for downsizing. In addition, make sure employees
are the first to know about the downsizing by maintaining confidentiality about any layoff
plans. Rumors and paranoia flourish - and productivity and risk-taking plummet - in an
atmosphere of leaks and partial information. Avoid having employees learn about their
own layoffs from news reports.
• Provide long-term notice: If layoffs are deemed necessary, give employees as much
notice as possible. Many employers now give notice a full year in advance, or even
longer. When the rationale for layoffs is clearly communicated, and the package of
severance benefits makes it clear that management values employee input, companies
find that workers will remain productive and quality-conscious up until the end. More than
half of the 531 U.S. companies that responded to a 1993 study on best practices in
corporate restructuring conducted by outplacement firm Wyatt Company reported that
early communications helped companies achieve profitability goals (59 percent) and
expense-reduction goals (54 percent).
• Respect diversity. Keep the company's diversity in mind before, during, and after the
layoff process. Before deciding who to downsize, analyze the make-up of your workforce
 - by gender, race, and age - with statistics broken down by department, job groups and
salary grades. Then, before laying off employees, analyze similar data on potentially
affected employees to be sure no particular group is disproportionately affected. Similarly,
form a diverse, cross-functional team to plan and manage layoffs. At a minimum, such a
team should include representatives from human resources, labor relations, operations,
finance, public relations, community relations, government affairs, and legal affairs.
Diverse, cross-functional teams have proven to be effective at addressing the needs of
employees and external stakeholders, and presenting clear messages about why and
how the company is downsizing.
• Stay on schedule: Announce a specific timeline for implementation of downsizing
activities and transition services, and stick to it. Sticking to schedules and keeping
promises helps preserve credibility and trust, both among affected employees and
survivors.
• Share the pain: Senior managers should demonstrate that they are sharing the burden of
downsizing. They should not announce management bonuses or salary increases during
a period of downsizing. In addition to destroying trust among laid-off employees and
survivors alike, this invites criticism from external stakeholders such as investors and
community groups.
• Craft a fair package: Develop a fair benefits package that fits the needs of affected
employees. In addition to severance, these benefits may include outplacement
assistance; personal, financial, and career counseling; an allowance for job retraining,
education costs, or small business startup; and assistance with medical and dental
insurance coverage. Prepare employees for the tax implications of their severance
packages, and consider compensating them for sizable one-time liabilities. In addition,
help affected employees integrate benefits available in the public sector with those
offered by the company. Private Investment Councils (PICs), State Worker Dislocation
Units, local organizations, and federal programs such as the Job Training and
Partnership Act can provide funds for and assist with job development, training, and
placement. Consider also outside experts, who often prove to be extremely useful in
assisting with transition services. Nonprofit organizations such as the Council for Adult
and Experiential Learning as well as a variety of for-profit companies can provide expert
assistance, particularly in areas such as job placement and counseling.
• Consider external impacts: Anticipate and prepare for consequences outside the
workplace. Layoffs frequently trigger sharp increases in child, spousal, and substance
abuse. Companies often find they can assist most effectively in these areas by providing
confidential access to counseling services, and by working with and providing extra
support to social service organizations that in these areas.
• Redesign jobs: Accompany downsizing with thoughtful restructuring of the organization
and changes in work design. The negative effects of downsizing are most pronounced
when survivors are simply asked to shoulder the load of those who are laid off, without
accompanying changes in job descriptions and duties. Involve employees in this process.
Employees are more likely to feel valued and empowered within the changed
environment when management invests in them through training.
• Avoid "survivor guilt": Anticipate morale problems and "survivor guilt" among employees
who have not been laid off, and take positive steps to help employees to recommit and
reengage. Articulate a clear vision for the company and the place within it that remaining
employees will have, including opportunities that will be available to them. In addition,
prepare managers for what is sometimes described as "terminator guilt," morale
problems they may face after implementing a downsizing.
• Document the process: Document the planning and implementation of all layoff-related
activities. Careful documentation of a well-designed process, particularly when it
demonstrates fairness to workers and good faith efforts to assist them with their
transitions, goes a long way toward protecting companies from litigation.
COMPETIVE ADVANTAGE

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Competitive Advantage

When a firm sustains profits that exceed the average for its industry, the firm is
said to possess a competitive advantage over its rivals. The goal of much of
business strategy is to achieve a sustainable competitive advantage.

Michael Porter identified two basic types of competitive advantage:

• cost advantage
• differentiation advantage

A competitive advantage exists when the firm is able to deliver the same benefits
as competitors but at a lower cost (cost advantage), or deliver benefits that
exceed those of competing products (differentiation advantage). Thus, a
competitive advantage enables the firm to create superior value for its customers
and superior profits for itself.

Cost and differentiation advantages are known as positional advantages since

they describe the firm's position in the industry as a leader in either cost or
differentiation.

A resource-based view emphasizes that a firm utilizes its resources and

capabilities to create a competitive advantage that ultimately results in superior
value creation. The following diagram combines the resource-based and
positioning views to illustrate the concept of competitive advantage:

A Model of Competitive Advantage

Resources

Cost Advantage
Distinctive Value
or
Competencies Creation
Differentiation Advantage

Capabilities
Resources and Capabilities

According to the resource-based view, in order to develop a competitive

advantage the firm must have resources and capabilities that are superior to
those of its competitors. Without this superiority, the competitors simply could
replicate what the firm was doing and any advantage quickly would disappear.

Resources are the firm-specific assets useful for creating a cost or differentiation
advantage and that few competitors can acquire easily. The following are some
examples of such resources:

• Patents and trademarks

• Proprietary know-how
• Installed customer base
• Reputation of the firm
• Brand equity

Capabilities refer to the firm's ability to utilize its resources effectively. An

example of a capability is the ability to bring a product to market faster than
competitors. Such capabilities are embedded in the routines of the organization
and are not easily documented as procedures and thus are difficult for
competitors to replicate.

The firm's resources and capabilities together form its distinctive

competencies. These competencies enable innovation, efficiency, quality, and
customer responsiveness, all of which can be leveraged to create a cost
advantage or a differentiation advantage.

Cost Advantage and Differentiation Advantage

Competitive advantage is created by using resources and capabilities to achieve

either a lower cost structure or a differentiated product. A firm positions itself in its
industry through its choice of low cost or differentiation. This decision is a central
component of the firm's competitive strategy.

Another important decision is how broad or narrow a market segment to target.

Porter formed a matrix using cost advantage, differentiation advantage, and a
broad or narrow focus to identify a set of generic strategies that the firm can
pursue to create and sustain a competitive advantage.
Value Creation

The firm creates value by performing a series of activities that Porter identified as
the value chain. In addition to the firm's own value-creating activities, the firm
operates in a value system of vertical activities including those of upstream
suppliers and downstream channel members.

To achieve a competitive advantage, the firm must perform one or more value
creating activities in a way that creates more overall value than do competitors.
Superior value is created through lower costs or superior benefits to the
consumer (differentiation).

FEATURES OF ORGNSTION STRUCTURE

Organizational Structure

The organizational structure is an instrument of coordination of activities and control of the

actions of its members. The organizational flow chart shows how its resources are distributed and
how they are managed, giving "officially" shape to the communication and decision -making
channels.
When we define the structure to be adopted by the company, it would be wise to have always
present its different purposes and functions. This one should:

• To support the organizational structure. The structure should be designed in order to

ensure meeting of the company's targets and objectives;
• To organize the different resources in an efficient and effective way;
• To allow the real share of tasks and responsibilities between the various employees and
groups (if any), allowing for a progressive specialization;
• To ensure the effective coordination of the company's activities and to clarify the decision-
making processes;
• To enhance and clarify the vertical and horizontal communication channels;
• To allow effective monitoring and analysis of the company's activities;
• To supply mechanisms that will allow you to overcome changes that may occur on the
market, to the products /services and to the external and internal environmental
component;
• To make the resolution of crises and problems easier;
• To help the employees of the company to become motivated, to manage and to provide
them with professional satisfaction;
• To prepare the succession of the managing staff, and at the same time, to allow
management of careers.

Key elements for "building" the organizational structure

As referred to above, the organizational structure is usually represented as a flow chart also
referred to as organizational design.
There are several elements that influence the organizational design. However, the ones that
prevail over the remaining ones, in a direct influence relationship, which must be taken into
account for its election are as follows: the company's objectives; its strategy; the technology used
by the company; its size; and, its action environment.
Thus, and in accordance with the above-mentioned elements, you are now going to reflect and
define, within the scope of what is your company, the main features of the organizational design
that you want to adopt:

• Specialization / differentiation: How and at what extent are you going to divide the work
and what is the system that best fits your company? The aim is to divide the company
into units/departments/areas and to define criteria associated with it;
• Formalization: How should the competences be defined in terms of detail and
accurateness regarding each area / department as well as its functions and links between
them? Are the different roles clear for everyone, or is there any possibility of individual
interpretations? Do rules and regulations have to exist?
• Coordination: What type of coordination and links should exist between departments /
areas? Shall you centralize or decentralize?

To "build" a good organizational design, you should also have to take into account certain
principles, such as. As we usually say, here you have some "clues":

• The structure must comply with the strategy. Objectives and targets must be known and
supported by all employees of the company;
• The whole structure should be divided into speciality areas;
• The number of structure levels should be as low as possible. The more levels exist the
bigger will be the problems in communication from top to bottom, decision-making,
coordination and control;
• The number of directly managed "employees" should vary in accordance with the nature
of the functions and with the organization, but should not be so narrow that would lead to
a structure with several levels, or so wide that would not allow an effective management;
• A "leading team" should exist. There should not exist any doubts as to whom any
employee should report to and who has the authority to make decisions;
• Each position should be provided with a well-defined role, which will bring added value to
the operation of the company;
• The structure should be designed so as to be able to face any change in the environment
that includes economy, legislation, markets, technological developments, geography,
among others.

Types of organizational structures

You have several different types of organizational structures to choose from. Just to give you an
example, we are going to use a simple and functional structure so as to better understand what is
on the basis of its design.
Although many of us are not aware that there is or that we are using a business plan, the "simple
structure" is often used in the small-sized family companies, which is basically build up by two
hierarchic levels: the managing owner and the employees. In this case, the manager holds most
of the managing responsibilities, and there is not a clear definition of the tasks of the remaining
employees. The company operates under the personal control and the individual contact of the
manager with his employees.
Obviously, this type of structure is feasible only when the company to has a certain size. When
the company grows it is more and more difficult for just one person to have the control of the
whole company.
Another type of structure often used in small-sized companies or in companies with a reduced
range of products and/or services and, mainly, in stable environments, is the so-called "functional
structure". It consists in dividing the work and in allocating authority and responsibility according
to the classical management areas:

• Financial;
• Production;
• Marketing / Sales;
• Personnel / Human Resources Management;
• Organizational.

Features of an organization
Composed of individuals and groups of individuals
Oriented towards achievement of common goals
Differential functions
Intended rational coordination
Continuity through time

Considerations in designing organizational structure

CLARITY
UNDERSTANDING
DE-CENTRALIZATION
STABILITY AND ADAPTABILITY

Principles of organizational structure

Specialization

Horizontal
Vertical

Coordination

Unity of command
Scalar principle
Responsibility and authority principle
Span of control
Departmentalization
- functional
- product
- users
- territory
- process or equipment

De-centralization and centralization

Line and staff relationships

Structure in an organization has three components (Robbins, 1989):

• Complexity, referring to the degree to which activities within the organization are
differentiated. This differentiation has three dimensions:
- horizontal differentiation refers to the degree of differentiation between units based on
the orientation of members, the nature of tasks they perform and their education and
training,

- vertical differentiation is characterized by the number of hierarchical levels in the

organization, and

- spatial differentiation is the degree to which the location of the organization's offices,
facilities and personnel are geographically distributed;

• Formalization refers to the extent to which jobs within the organization are specialized.
The degree of formalization can vary widely between and within organizations;

• Centralization refers to the degree to which decision making is concentrated at one

point in the organization.

Designing organizational structures

Some important considerations in designing an effective organizational structure are:

• Clarity The structure of the organization should be such that there is no confusion
about people's goals, tasks, style of functioning, reporting relationship and sources of
information.

• Understanding The structure of an organization should provide people with a clear

picture of how their work fits into the organization.

• De-centralization The design of an organization should compel discussions and

decisions at the lowest possible level.

• Stability and adaptability While the organizational structure should be adaptable to

environmental changes, it should remain steady during unfavourable conditions.

Principles of organization structure

Modern organizational structures have evolved from several organizational theories,

which have identified certain principles as basic to any organization.

Specialization

Specialization facilitates division of work into units for efficient performance. According to
the classical approach, work can be performed much better if it is divided into
components and people are encouraged to specialize by components. Work can be
specialized both horizontally and vertically (Anderson, 1988). Vertical specialization in a
research organization refers to different kinds of work at different levels, such as project
leader, scientist, researcher, field staff, etc. Horizontally, work is divided into departments
like genetics, plant pathology, administration, accounts, etc.

Specialization enables application of specialized knowledge which betters the quality of

work and improves organizational efficiency. At the same time, it can also influence
fundamental work attitudes, relationships and communication. This may make
coordination difficult and obstruct the functioning of the organization. There are four main
causal factors which could unfavourably affect attitudes and work styles. These are
differences in:

• goal orientation;
• time orientation;
• inter-personal orientation; and
• the formality of structure (Lawrence and Lorsch, 1967).

Coordination

Coordination refers to integrating the objectives and activities of specialized departments

to realize broad strategic objectives of the organization. It includes two basic decisions
pertaining to:

(i) which units or groups should be placed together; and

(ii) the patterns of relationships, information networks and communication (Anderson,

1988).

In agricultural research institutions, where most of the research is multidisciplinary but

involves specialization, coordination of different activities is important to achieve
strategic objectives. Efficient coordination can also help in resolving conflicts and
disputes between scientists in a research organization.

Hierarchy facilitates vertical coordination of various departments and their activities.

Organizational theorists have over the years developed several principles relating to the
hierarchy of authority for coordinating various activities. Some of the important principles
are discussed below.

Unity of Command Every person in an organization should be responsible to one

superior and receive orders from that person only. Fayol (1949) considered this to be the
most important principle for efficient working and increased productivity in an
organization.

The Scalar Principle Decision making authority and the chain of command in an
organization should flow in a straight line from the highest level to the lowest. The
principle evolves from the principle of unity of command. However, this may not always
be possible, particularly in large organizations or in research institutions. Therefore Fayol
(1949) felt that members in such organizations could also communicate directly at the
same level of hierarchy, with prior intimation to their superiors.
The Responsibility and Authority Principle For successfully performing certain tasks,
responsibility must be accompanied by proper authority. Those responsible for
performance of tasks should also have the appropriate level of influence on decision
making.

Span of Control This refers to the number of specialized activities or individuals

supervised by one person. Deciding the span of control is important for coordinating
different types of activities effectively. According to Barkdull (1963), some of the
important situational factors which affect the span of control of a manager are:

• similarity of functions;
• proximity of the functions to each other and to the supervisor;
• complexity of functions;
• direction and control needed by subordinates;
• coordination required within a unit and between units;
• extent of planning required; and
• organizational help available for making decisions.

Departmentalization

Departmentalization is a process of horizontal clustering of different types of functions

and activities on any one level of the hierarchy. It is closely related to the classical
bureaucratic principle of specialization (Luthans, 1986). Departmentalization is
conventionally based on purpose, product, process, function, personal things and place
(Gullick and Urwick, 1937).

Functional Departmentalization is the basic form of departmentalization. It refers to the

grouping of activities or jobs involving common functions. In a research organization the
groupings could be research, production, agricultural engineering, extension, rural
marketing and administration.

Product Departmentalization refers to the grouping of jobs and activities that are
associated with a specific product. As organizations increase in size and diversify,
functional departmentalization may not be very effective. The organization has to be
further divided into separate units to limit the span of control of a manager to a
manageable level (Luthans, 1986). In an agricultural research institution, functional
departments can be further differentiated by products and purpose or type of research.

In contrast to functional departmentalization, product-based departmentalization has the

advantage of:

• less conflict between major sub-units;

• easier communication between sub-units;
• less complex coordination mechanisms;
• providing a training ground for top management;
• more customer orientation; and
• greater concern for long-term issues.
In contrast, functional departmentalization has the strength of:

• easier communication with sub-units;

• application of higher technical knowledge for solving problems;
• greater group and professional identification;
• less duplication of staff activities;
• higher product quality; and
• increased organizational efficiency (Filley, 1978).

Departmentalization by Users is grouping of both activities and positions to make them

compatible with the special needs of some specific groups of users.

Departmentalization by Territory or Geography involves grouping of activities and

positions at a given location to take advantage of local participation in decision making.
The territorial units are under the control of a manager who is responsible for operations
of the organization at that location. In agricultural research institutions, regional research
stations are set up to take advantage of specific agro-ecological environments. Such
departmentalization usually offers economic advantage.

Departmentalization by Process or Equipment refers to jobs and activities which require

a specific type of technology, machine or production process.

Other common bases for departmentalization can be time of duty, number of employees,
market, distribution channel or services.

De-centralization and Centralization

De-centralization refers to decision making at lower levels in the hierarchy of authority. In

contrast, decision making in a centralized type of organizational structure is at higher
levels. The degree of centralization and de-centralization depends on the number of
levels of hierarchy, degree of coordination, specialization and span of control. According
to Luthens (1986), centralization and de-centralization could be according to:

• geographical or territorial concentration or dispersion of operations;

• functions; or
• extent of concentration or delegation of decision making powers.

Every organizational structure contains both centralization and de-centralization, but to

varying degrees. The extent of this can be determined by identifying how much of the
decision making is concentrated at the top and how much is delegated to lower levels.
Modern organizational structures show a strong tendency towards de-centralization.

Line and Staff Relationships

Line authority refers to the scalar chain, or to the superior-subordinate linkages, that
extend throughout the hierarchy (Koontz, O'Donnell and Weihrich, 1980). Line
employees are responsible for achieving the basic or strategic objectives of the
organization, while staff plays a supporting role to line employees and provides services.
The relationship between line and staff is crucial in organizational structure, design and
efficiency. It is also an important aid to information processing and coordination.

In an agricultural research organization, scientists and researchers form the line.

Administrative employees are considered staff, and their main function is to support and
provide help to scientists to achieve organizational goals

It is the responsibility of the manager to make proper and effective use of staff through
their supportive functions. The staff may be specialized, general or organizational
(Anderson, 1988). Specialized staff conduct technical work that is beyond the time or
knowledge capacity of top management, such as conducting market research and
forecasting. General staff consists of staff assistants to whom managers assign work.
Organization staff (such as centralized personnel, accounting and public relations staff)
provide services to the organization as a whole. Their role is to integrate different
operations across departments.

Line and staff personnel have different functions, goals, cultures and backgrounds.
Consequently, they could frequently face conflict situations. A manager has to use his
skills in resolving such conflicts.

Type of organizational structure

Classical organizational structure

In a simple centralized organizational structure, power, decision making authority and

responsibility for goal setting are vested in one person at the top. This structure is
usually found in small and single-person-owned organizations. The basic requirement of
a simple centralized structure is that it has only one or two functions, and a few people
who are specialists in critical functions. The manager is generally an expert in all related
areas of functions and is responsible for coordination. Thus, the organization has only
two hierarchical levels. However, this structure has to become more complex for growth,
diversification or other reasons.

The Bureaucratic Organization

In large organizations and under well defined conditions, organization structure may be
bureaucratic. The essential elements of a bureaucratic organization are:

• the use of standard methods and procedures for performing work; and
• a high degree of control to ensure standard performance

Modern organization designs

Modern approaches to organizational design include project, matrix and adhocracy

types.

Project design
Project design is also called the team or task force type. It is used to coordinate across
departments for temporary, specific and complex problems which cannot be handled by
a single department. This design facilitates inputs from different areas. Members from
different departments and functional areas constitute a team, in which every member
provides expertise in their area of specialization. Such a structure generally coexists with
the more traditional functional designs. An illustration of project type of the organizational
structure is given in Figure 2.

Matrix Organization

The matrix design blends two different types of designs, namely project and functional
organizational designs (Kolodny, 1979). Since the project type of organizational design is
not considered stable, the matrix design attempts to provide permanent management
structures by combining project and functional structures. The main advantage of this
combination is that the matrix design balances both technical and project goals and
allocates specific responsibilities to both. Technical goals refer to how well work is done,
while project goals relate to issues such as type of work to be done and its costs. Figure
3 shows a very simplified matrix organization design in which department heads have
line authority over specialists in their departments (vertical structure). Functional
specialists are assigned to given projects (horizontal structure). These assignments are
made at the beginning of each project through collaboration between appropriate
functional and project managers.

Porter's Generic Competitive Strategies (ways of

competing)
A firm's relative position within its industry determines whether a firm's profitability is
above or below the industry average. The fundamental basis of above average
profitability in the long run is sustainable competitive advantage. There are two basic
types of competitive advantage a firm can possess: low cost or differentiation. The two
basic types of competitive advantage combined with the scope of activities for which a
firm seeks to achieve them, lead to three generic strategies for achieving above average
performance in an industry: cost leadership, differentiation, and focus. The focus strategy
has two variants, cost focus and differentiation focus.

1. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The
sources of cost advantage are varied and depend on the structure of the industry. They
may include the pursuit of economies of scale, proprietary technology, preferential access
to raw materials and other factors. A low cost producer must find and exploit all sources
of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be
an above average performer in its industry, provided it can command prices at or near the
industry average.
2. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some

dimensions that are widely valued by buyers. It selects one or more attributes that many
buyers in an industry perceive as important, and uniquely positions itself to meet those
needs. It is rewarded for its uniqueness with a premium price.

3. Focus

The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors
its strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b)
differentiation focus a firm seeks differentiation in its target segment. Both variants of the
focus strategy rest on differences between a focuser's target segment and other segments
in the industry. The target segments must either have buyers with unusual needs or else
the production and delivery system that best serves the target segment must differ from
that of other industry segments. Cost focus exploits differences in cost behaviour in some
segments, while differentiation focus exploits the special needs of buyers in certain
segments.

What is the Five Forces model of Porter? Description

The Five Forces model of Porter is an Outside-in business unit strategy tool that is used
to make an analysis of the attractiveness (value) of an industry structure. The Competitive
Forces analysis is made by the identification of 5 fundamental competitive forces:

1. Entry of competitors. How easy or difficult is it for new entrants to start

competing, which barriers do exist.
2. Threat of substitutes. How easy can a product or service be substituted,
especially made cheaper.
3. Bargaining power of buyers. How strong is the position of buyers. Can they
work together in ordering large volumes.
4. Bargaining power of suppliers. How strong is the position of sellers. Do many
potential suppliers exist or only few potential suppliers, monopoly?
5. Rivalry among the existing players. Does a strong competition between the
existing players exist? Is one player very dominant or are all equal in strength and
size.

Sometimes a sixth competitive force is added:

6. Government.
Porter's Competitive Forces model is probably one of the most often used business
strategy tools. It has proven its usefulness on numerous occasions. Porter's model is
particularly strong in thinking Outside-in.

Threat of New Entrants depends on:

• Economies of scale.
• Capital / investment requirements.
• Customer switching costs.
• Access to industry distribution channels.
• Access to technology.
• Brand loyalty. Are customers loyal?
• The likelihood of retaliation from existing industry players.
• Government regulations. Can new entrants get subsidies?

Threat of Substitutes depends on:

• Quality. Is a substitute better?

• Buyers' willingness to substitute.
• The relative price and performance of substitutes.
• The costs of switching to substitutes. Is it easy to change to another product?

Bargaining Power of Suppliers depends on:

• Concentration of suppliers. Are there many buyers and few dominant suppliers?
Compare: Kraljic Model.
• Branding. Is the brand of the supplier strong?

• Profitability of suppliers. Are suppliers forced to raise prices?

• Suppliers threaten to integrate forward into the industry (for example: brand
manufacturers threatening to set up their own retail outlets).
• Buyers do not threaten to integrate backwards into supply.
• Role of quality and service.
• The industry is not a key customer group to the suppliers.
• Switching costs. Is it easy for suppliers to find new customers?

Bargaining Power of Buyers depends on:

• Concentration of buyers. Are there a few dominant buyers and many sellers in the
industry?
• Differentiation. Are products standardized?
• Profitability of buyers. Are buyers forced to be tough?
• Role of quality and service.
Intensity of Rivalry depends on:

• The structure of competition. Rivalry will be more intense if there are lots of
small or equally sized competitors; rivalry will be less if an industry has a clear
market leader.
• The structure of industry costs. Industries with high fixed costs encourage
competitors to manufacture at full capacity by cutting prices if needed.
• Degree of product differentiation. Industries where products are commodities (e.g.
steel, coal) typically have greater rivalry.
• Switching costs. Rivalry is reduced when buyers have high switching costs.
• Strategic objectives. If competitors pursue aggressive growth strategies, rivalry
will be more intense. If competitors are merely "milking" profits in a mature
industry, the degree of rivalry is typically low.
• Exit barriers. When barriers to leaving an industry are high, competitors tend to
exhibit greater rivalry.

Strengths of the Five Competitive Forces Model. Benefits

• The model is a strong tool for competitive analysis at industry level. Compare:
PEST Analysis
• It provides useful input for performing a SWOT Analysis.

Limitation of Porter's Five Forces model

• Care should be taken when using this model for the following:
do not underestimate or underemphasize the importance of the (existing) strengths
of the organization (Inside-out strategy). See: Core Competence
• The model was designed for analyzing individual business strategies. It does not
cope with synergies and interdependencies within the portfolio of large
corporations. See: Parenting Advantage
• From a more theoretical perspective, the model does not address the possibility
that an industry could be attractive because certain companies are in it.
• Some people claim that environments which are characterized by rapid, systemic
and radical change require more flexible, dynamic or emergent approaches to
strategy formulation. See: Disruptive Innovation
• Sometimes it may be possible to create completely new markets instead of
selecting from existing ones. See: Blue Ocean Strategy

Performance management

Performance measurement is the process of assessing progress toward achieving

predetermined goals. Performance management is building on that process, adding the
relevant communication and action on the progress achieved against these predetermined
goals

• In network
performance
management, (a) a
set of functions that
evaluate and report
the behavior of
telecommunications
equipment and the
effectiveness of the
network or network
element and (b) a set
of various
subfunctions, such as
gathering statistical
information,
maintaining and
examining historical
logs, determining
system performance
under natural and
artificial conditions,
and altering system
modes of
operation.[2]
• In organizational
development (OD),
performance can be
thought of as Actual
Results vs Desired
Results. Any
discrepancy, where
Actual is less than
Desired, could
constitute the
performance
improvement zone.
Performance
management and
improvement can be
thought of as a cycle:
 1. Performance
planning where
goals and objectives
are established
2. Performance
coaching where a
manager intervenes
to give feedback and
adjust performance
3. Performance
appraisal where
individual
performance is
formally documented
and feedback
delivered

A performance problem is any gap between Desired Results and Actual Results.
Performance improvement is any effort targeted at closing the gap between Actual
Results and Desired Results.

• Application
Performance
Management (APM)
refers to the
discipline within
systems management
that focuses on
monitoring and
managing the
performance and
availability of
software
applications. APM
can be defined as
workflow and related
IT tools deployed to
detect, diagnose,
remedy and report on
application
performance issues
to ensure that
application
performance meets
or exceeds end-users’
 and businesses’
expectations.

• Business
performance
management (BPM)
is a set of processes
that help businesses
discover efficient use
of their business
units, financial,
human and material
resources.

• Operational
performance
management (OPM)
focus is on creating
methodical and
predictable ways to
improve business
results, or
performance, across
organizations

Simply put, performance management helps organizations achieve their strategic goals.
Rather than discarding the data accessibility previous systems fostered, performance
management harnesses it to help ensure that an organization’s data works in service to
organizational goals to provide information that is actually useful in achieving them. and
focus on the Operational Networking Processes between that performance level.

Business performance management (BPM) is a set of processes that help organizations

optimize their business performance. It is a framework for organizing, automating and
analyzing business methodologies, metrics, processes and systems that drive business
performance.[1]

BPM is seen as the next generation of business intelligence (BI). BPM helps businesses
make efficient use of their financial, human, material and other resources.[

The objectives of the Performance Management Process in CRY are to :

- define parameters of performance

- bring individual clarity to the job role
- give direction to the individual
- and review the performance.

The process starts with the "Key Focus Areas' (KFAs) which outlines the objectives and measure of
performances for each individual's job which is linked to the organisation's objectives. A
performance rating is given against each objective. CRY conducts a review of an individual's
performance twice a year.

COMPENSATION MGT

Compensation Management is an integral part of the management of the organization.

Compensation Management contributes to the overall success of the organization in

several ways. To be effective, the managers must appreciate the value of competitive pay,
their human resources, and have an investment view of payroll costs. We want to
maintain pay levels that attract and retain quality employees while recognizing the need
to manage payroll costs.

SuccessFactors Compensation Management facilitates compensation planning -

and motivates employee performance with:

• Individualized Rewards. Connect merit pay, bonuses, and stock to employee

performance for a true pay-for-performance culture
• Performance Feeds. Keep performance information handy when making compensation
decisions
• The Merit Factor. Apply automated merit increases based on guideline calculations
such as job level, pay grade, performance rating, comp-ratio, and range penetration

• Lump sum adjustments. Move employees to another pay band using a lump sum
adjustment to salary
• Variable Pay. Take overall company or department performance into account on each
individual compensation decision
• Global enablement. Support global offices with local currencies

CAREER PLANNING

Our Career & Succession Planning module facilitates efficient career planning and streamlines
the decision-making process. This is achieved by blending individual aspirations with the
organisation's view of those individuals, thereby minimising the potential of making incorrect
assumptions about career moves. This module leads you through every step of career and
succession planning and tracks information about candidates' levels of potential, performance
over time as well as retention risk.

With our Career & Succession Planning module, you are able to create career development and
succession plans as well as review incumbents and internal/external candidates for key or all
positions. Our solution generates succession scenarios to help you visualise the effects of job
changes and related executive decisions within your organisation.
 What is Career Planning?

Career planning is a lifelong process, which includes choosing an occupation, getting a job, growing in our
job, possibly changing careers, and eventually retiring. The Career Planning Site offers coverage of all these
areas. This article will focus on career choice and the process one goes through in selecting an occupation.
This may happen once in our lifetimes, but it is more likely to happen several times as we first define and
then redefine ourselves and our goals.

Career Planning: A Four Step Process

Self
Gather information about yourself (self assessment)

• Interests
• Values
• Roles
• Skills/Aptitudes
• Preferred Environments
• Developmental Needs
• Your realities

Options

• Explore the occupations in which you are interested

• Research the industries in which you would like to work
• Research the Labor Market

Get more specific information after you narrow down your options by:

• Job Shadowing
• Part time work, internships, or volunteer opportunities
• Written materials
• Informational interviews

Match
During this phase of the process, you will:

• Identify possible occupations

• Evaluate these occupations
• Explore alternatives
• Choose both a short term and a long term option

Action
You will develop the steps you need to take in order to reach your goal, for example:

• Investigating sources of additional training and education, if needed

• Developing a job search strategy
• Writing your resume
• Gathering company information
• Composing cover letters
• Preparing for job interviews

On the other hand, the organic structure is more flexible, more adaptable to a
participative form of management, and less concerned with a clearly defined structure.
The organic organization is open to the environment in order to capitalize upon new
opportunities.

Organic structure may refer to:

• Organic (model),
forms, methods and
patterns found in
living systems, often
used as a metaphor
for non-living things.
• The molecular
structure of an
organic compound,
also known as the
structural formula of
an organic
compound.

multidomestic strategy
- A strategy that enables individual subsidiaries of a multinational firm to compete independently in
different domestic markets. The multinational headquarters coordinates financial controls and some
marketing policy, and may centralize some R&D and component production. Each subsidiary behaves
like a strategic business unit that is expected to contribute earnings and growth proportionate to the
market opportunity.

A core competency is something that a firm can do well and that meets the following
three conditions specified by Hamel and Prahalad (1990):

1. It provides customer
benefits
2. It is hard for
competitors to
imitate
3. It can be leveraged
widely to many
products and
markets.
A core competency can take various forms, including technical/subject matter know how,
a reliable process, and/or close relationships with customers and suppliers (Mascarenhas
et al. 1998). It may also include product development or culture such as employee
dedication. Modern business theories suggest that most activities that are not part of a
company's core competency should be outsourced.

If a core competency yields a long term advantage to the company, it is said to be a

sustainable

There are three tests useful for identifying a core competence. A core
competence should:

1. provide access to a wide variety of markets, and

2. contribute significantly to the end-product benefits, and
3. be difficult for competitors to imitate.

Core competencies tend to be rooted in the ability to integrate and coordinate

various groups in the organization. While a company may be able to hire a team
of brilliant scientists in a particular technology, in doing so it does not
automatically gain a core competence in that technology. It is the effective
coordination among all the groups involved in bringing a product to market that
results in a core competence.

A core competency is fundamental knowledge, ability, or expertise in a specific subject

area or skill set. For example, an individual who becomes certified as a Microsoft
Certified Software Engineer (MCSE) is said to have a core competency in certain
Microsoft systems and networks. Companies with specific strengths in the marketplace,
such as data storage or the development of accounting applications, can be said to have a
core competency in that area. The core part of the term indicates that the individual has a
strong basis from which to gain the additional competence to do a specific job or that a
company has a strong basis from which to develop additional products.

Broadbanding is defined as a strategy for salary structures that consolidate a large number
of pay grades into a few "broad bands." This article covers:

1. The Benefits of Broadbanding

2. Potential Problems with Broadbanding, and
3. Conclusions and Recommendations

Benefits of Broadbanding

Broadbanding has been successfully implemented in large, hierarchical organizations

which attempted to flatten their organizations and remove levels of management. For
example, organizations that had eight levels of management could eliminate four levels,
widen the salary ranges of the remaining four levels, and simply slot each manager into
one of those ranges.

With broadbanding, a manager can more easily encourage his/her employees to broaden
their skills and abilities. This is valuable to organizations because employees with broad
skills and abilities are critical for the success in a total quality/continuous improvement
environment. In contrast, the jobs in traditional organizations are narrow and specialized.
In order for employees to advance in pay and responsibility, they have to further develop
their specialized skill. Thus a bias exists against the broadening of skills.

Broadbanding evolved because organizations want to flatten their hierarchies and move decision-making
closer to the point where necessity and knowledge exist in organizations. In flattened organizations, fewer
promotional opportunities exist so the broadbanding structure allows more latitude for pay increases and
career growth without promotion.

Simply stated, broadbanding is the grouping of jobs with similar duties, responsibilities, and levels
of accountability. Broadbands are created based upon the job analysis process of examining the
body of work being performed at the University. Broadbands widen salary ranges in order to
facilitate organizational flexibility, encourage individual career development, and market
competitiveness. The use of broadbanding also reduces the number of job classifications

The mechanistic structure is the traditional or classical design, common in many

medium- and large-size organizations. Mechanistic organizations are somewhat rigid in
that they consist of very clearly delineated jobs, have a well-defined hierarchical
structure, and rely heavily on the formal chain of command for control. Bureaucratic
organizations, with their emphasis on formalization, are the primary form of mechanistic
structures. According to Max Weber, bureaucracy is a form of organization characterized
by a rational, goal-directed hierarchy, impersonal decision making, formal controls, and
subdivision into managerial positions and specialization of labor. Bureaucratic
organizations are tall consisting of hierarchies with many levels of management. In a tall
structure, people become relatively confined to their own area of specialization.
Bureaucracies are driven by a top-down or command and control approach in which
managers provide considerable direction and have considerable control over others. Other
features of the bureaucratic organization include functional division of labor and work
specialization.

Differentiation Strategy

Differentiation involves creating a product that is perceived as unique. The unique

features or benefits should provide superior value for the customer if this strategy is to be
successful. Because customers see the product as unrivaled and unequaled, the price
elasticity of demand tends to be reduced and customers tend to be more brand loyal. This
can provide considerable insulation from competition. However there are usually
additional costs associated with the differentiating product features and this could require
a premium pricing strategy.

To maintain this strategy the firm should have:

 • strong research and
development skills
• strong product
engineering skills
• strong creativity
skills
• good cooperation
with distribution
channels
• strong marketing
skills
• incentives based on
subjective measures
• be able to
communicate the
importance of the
differentiating
product
characteristics
• stress continuous
improvement and
innovation
• attract highly skilled,
creative people

Differentiation is a source of competitive advantage. Although research in a niche market

may result in changing your product in order to improve differentiation, the changes
themselves are not differentiation. Marketing or product differentiation is the process of
describing the differences between products or services, or the resulting list of
differences. This is done in order to demonstrate the unique aspects of your product and
create a sense of value. Marketing textbooks are firm on the point that any differentiation
must be valued by buyers (e.g. [1]). The term unique selling proposition refers to
advertising to communicate a product's differentiation [

Your differentiation strategy is an integrated set of action designed to produce or deliver goods or services that
customers perceive as being different in ways that are important to them. It call for you to sell nonstandardized
products to customers with unique needs.

What is Skill Based Pay?

The payment of additional salary or hourly pay to employees for learning, and being
able to perform, additional tasks or skills. It is sometimes expanded to compensate
employees for demonstrating relevant competencies.

How does Skill Based Pay work?

Jobs, or groups of jobs, are divided into component parts. Employees are hired into a
base job level that presumes that they either know or will develop proficiency in a
core set of tasks. To encourage them to learn additional skills, the organization
provides additional training on other skill sets and commits to raise their base pay
level once they demonstrate a satisfactory level of competence with each skill set.

An Employee stock option is a call option on a company's own stock issued as a form of
non-cash compensation. Restrictions on the option (such as vesting and limited
transferability) attempt to align the holder's interest with those of the business'
shareholders. If the company's stock rises, holders of options experience a direct financial
benefit. This gives employees an incentive to behave in ways that will boost the
company's stock price.

Employee Stock options are mostly offered to management as part of their executive
compensation package. They are also offered to lower staff, especially by businesses that
are not yet profitable. They can also be offered to non-employees: suppliers, consultants,
lawyers and promoters, and to members of the company's board of directors for services
rendered.

Competency Model for Professional Project Managers

The Project Management Partners Competency Model was developed from the
observable behaviors of successful, professional project managers in a variety of
application areas. It provides a consistent, coherent structure for assessing the
capabilities of current and prospective project managers. The Competency Model can
be used to:

• Guide a training needs assessment to help optimize the use of scarce training
dollars by identifying gaps between job requirements and incumbent skill
levels.
• Perform individual competency assessments to evaluate current project
managers or to screen prospective project managers.

• Conduct an organization-wide competency assessment to ensure that the most

skilled project managers are assigned to the most critical projects.
How are competency models developed?
Competency models are developed through a process of clarifying the business
strategy and determining how the models would be used (e.g., hiring and selection,
assessment, performance management, training and development, and career
development). Then, data is gathered in structured interviews. Next, data is analyzed
and used to develop strawman models of success criteria. Then validation surveys are
administered and models refined based on feedback. Finally, models are finalized
and translated into appropriate, end-user tools and applications.
VCP

The University of Mississippi is committed to compensating its employees on a basis that reflects
the labor market. A market-driven compensation structure, such as the Variable Compensation
Plan (VCP), is a viable approach to facilitate the achievement of this goal.

Specifically, the VCP is a managerial tool developed for the purpose of administrating base pay
among employees. The VCP assumes that pay-rates are a product of the labor market. Like all
commodities, it simply becomes a matter of supply and demand. Therefore, rates based on the
labor market should ultimately represent such factors as ability, education, training, skill, and
experience.

It is important to recognize that while the VCP focuses on base pay-rate administration, other
factors such as shift differential pay, productivity awards, and employee benefits also contribute to
an individual's overall compensation package. For example, an employee may receive benefits in
the form of employer-paid insurance, personal leave, major-medical leave, paid holidays,
compensatory time, retirement, unemployment insurance, workers' compensation insurance, and
employer contributions to social security. Within the public sector, employer costs for these
benefits can be as much as twenty five to thirty percent of an employee's base pay. While the
VCP does not specifically address these additional factors, they ultimately constitute a "hidden
pay check" for the employee, and should be considered as part of the whole compensation
package.

A compensation plan is a set of policies and procedures governing the level, form, and variety of
financial rewards received by members of an organization. A sound, market-driven compensation
plan should provide clear position definitions, assess competitive wages in the labor market,
establish rate minimums for the different position-types, and allow for ease in administration. In
addition, a market-driven compensation plan can be structured to include extra pay for shift work,
additional pay for temporary assignments, and ultimately be administered in a manner that
stimulates productivity.

The VCP represents an ideological shift in the administration of public employee compensation.
Progressive public administrators recognize that in order to attract and retain valuable, highly-
qualified employees, compensation must be competitive with the private sector. Hence, the role of
compensation plan administration has been expanded, with a greater emphasis placed on
understanding the competitive labor market value for positions.

Purpose and Description of the VCP

The VCP is a viable method for assigning a minimum rate for position-types based upon labor
market data. This section presents key characteristics of the VCP for the purpose of developing a
basic understanding of the plan's administration and maintenance. In addition, specific features of
the VCP will serve to demonstrate that the universally accepted requirements of a sound
compensation plan are satisfied.

The VCP is based on the concept of paying a rate that is fair, reasonable, and competitive in the
labor market. Specifically, the plan:
Provides a systematic method of assuring fair and equitable compensation.
Provides rates that can be matched with prevailing wages.
Includes a .5% difference between steps which is applied throughout.
Provides flexibility in determining compensation rates at time of hire or transfer.
Accommodates additional compensation for such reasons as shift work or temporary assignment.
Accommodates for performance pay adjustments.
Provides a usable tool for projecting future budget requirements.
Provides a means for compensation assessment by management.

Components of the VCP include:

Additional Compensation: Examples of additional compensation include Professional

Development, Shift Differential Pay, and Temporary Assignment Adjustments. The plan allows the
University to authorize additional compensation on a case by case review without effecting the
integrity of the plan.

Base Pay-Rate Administration: This describes the set of procedures governing the administration
of employee base pay. The base rate structure and procedures can be modified to stay current
with the expressed goals and objectives of the University.

Productivity: The plan is designed to accommodate rate increases based upon

performance. Productivity and merit awards may be granted by the University
administration without effecting the integrity of the plan.

Professional Development: Current University policy authorizes the awarding of pay

increases to employees who participate in certain educational programs. Degrees and
work related certificates are evaluated on an individual basis, and approved increases are
allowable within the guidelines