MODULE 1

HUMAN RESOURCE MANAGEMENT: GAINING A

COMPETITIVE ADVANTAGE
I. Introduction—HRM's Role in Business Competitiveness
A. Competitiveness refers to the company's ability to maintain and gain market
share in its industry. A competitive advantage is reached when a company successfully
moves ahead of its primary competitors, either local or international.
1. Competitiveness is related to effectiveness-which is dependent on the
satisfaction of corporate stakeholders.
2. Human Resource management (HRM) refers to policies, practices and
systems that influence employee's behaviors, attitudes and performance.
3. Effective HRM practices have been shown to relate to company
performance by contributing to employee and customer satisfaction,
innovation, productivity, and development of a favorable reputation in
the community in which the firm is located.
4. The HRM contribution has only recently been recognized.
B. What activities do HR departments perform?
1. Activities that the HR department is solely responsible for include
outplacement, Labor Law Compliance, recruiting, compensation, and
health and safety.
2. The HR function is in transition from an administrative function to a
strategic business partner. Advances in technology like the intranet has
allowed less face-to-face HR services.
3. Self-service is the process of giving employees control of HR transactions.
This allows employees to take greater responsibility for their own
careers.
4. Outsourcing refers to the practice of having another company provide
services.
C. What skills do HR professionals need?
1. Developing new HR practices and partnering with managers to align
these practices with the business strategy.

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 2. HR managers should be able to manage change within an organization.
3. Representing employees concerns to senior management.
4. Increasing employee contributions to the company through training.
5. Identifying technologies and designing processes to increase efficiencies
and lower costs.
II. Competitive Challenges Influencing Human Resource Management
A. The Global Challenge-In order to survive, companies must improve HRM practices,
expand into new markets and, therefore must prepare employees for international
assignments.
1. Opportunities for U.S. businesses exist in Eastern Europe and Asia, in China
because of the enormous population, and in other areas as well. Many U.S.
companies have well-established international operations.
2. The United States has experienced a relative decline in the world economy,
reflecting the faster economic growth of other countries. European countries are
taking steps to strengthen their competitive position by developing a single
currency, the euro.
3. To compete in the world economy, U.S companies need to put greater effort
into effective HRM practices.
4. U.S. companies must do a better job of preparing employees and their families
for international assignments, especially given the current high failure rate.

Competing through Globalization: Successfully Brewing Global Operations

Starbucks Coffee International has ventured into Beijing China to open new franchises.
Starbucks entered China through a joint venture with Mei Da Coffee Company. Starbucks is
in search of employees that have had managerial experience with other American-style
restaurants such as Hard Rock Café and TGIF. Starbucks is spending a considerable amount
of time and money training managers to be successful by sending new recruits to Tacoma,
Washington to learn the corporate culture of Starbucks.

B. The Challenge of Meeting Stakeholders Needs-Stakeholders include stockholders,

customers, employees, and the community.

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 1. The balanced scorecard gives managers the opportunity to look at the company
from the perspective of internal and external customers, employees and
shareholders. The balanced scorecard should be used to:
a. Link human resource management activities to the company's business strategy.

b. Evaluate the extent to which the human resource function is helping the
company's meet its strategic objectives.

Measures of human resource practices primarily relate to productivity, people, and

process.

2. Total Quality Management can be defined as "a cooperative form of doing business that
relies on the talents and capabilities of both labor and management to continually
improve quality and productivity using work teams." This is one strategy companies are
currently using.

Competing through Meeting Stakeholders Needs: Flexibility

Builds Employee, Customer, and Shareholder Satisfaction.

Owens-Corning was experiencing a problem with employee morale which stemmed from poor sales,
low cash flow, and litigation's for products that contained asbestos. Other problems included
compensation and benefits to employees, but above all, Owens-Corning needed new core values. A
new compensation and development plan known as "Rewards and Resources" was created to
increase customer satisfaction, individual dignity, and meet sales goals. The new program was a
success and many other companies are looking to model their plans after the "Rewards and
Resources" program.

3. Composition of the Labor Force-The U.S. labor force is changing and will be older, more
culturally diverse, and smaller than at any time in the last 40 years. The youth labor
force (aged 16-24) is expected to grow more rapidly than the overall labor force for the
first time in twenty-five years. The fastest-growing segments are women, Hispanics,
blacks, and Asians. Immigration is playing a more important role by increasing diversity,
as well. Immigrants may account for as many as 1 million additional persons in the work
force through 2005.

4. The structure of the economy is changing, with the manufacturing sector shrinking.
However, job growth is expected. Professional specialty occupation are expected to
grow the fastest.

5. Skill Deficiencies-Projections show that the supply of entry level labor will not have the
education and skills to meet job demands. The current labor force contains individuals
with low skills as well, literacy skills being a particularly weak area. A major research
project identified six types of skills besides academic skills (reading, writing, arithmetic)

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 that U.S employers say are basic to success in the workplace. These skills include
influence and interpersonal Professional Skills, communications skills, adaptability,
personal management skills, and knowing how to learn.

6. Changes in the Employment Contract and Place of Work-The contingent work force of
temporary, part-time, and self-employed workers is growing. The traditional lifetime
career job is no longer a prevalent arrangement-job security is much less than in
previous periods. Contingent work gives companies flexibility and lower labor costs, but
management of human resource planning is now more critical. Contingent work may fill
employees' needs for flexibility as well. Work done outside the traditional work site is
called distributed work and obviously brings new HRM challenges with it.

7. Employee Values-Because the work force is increasing in diversity, the values will be
diverse as well. Some changes, like an emphasis on the quality of non-work and family
life, are already having an impact on company policy. Shared values generally include
work as self-fulfillment, fair policies, greater responsibility, and a trustworthy manager.
Companies face a number of challenges in managing diversity, including maintaining
equitable treatment and legal compliance. Managing cultural diversity may take many
forms, including auditing HRM practices for bias and actively creating a culture that
values diversity.

Example: The Seattle Times Company, a newspaper publisher, has taken a unique
approach to assure that the content of its papers does not reflect racial stereotypes. A
committee made up of reporters, editors, and photographers regularly meets to review,
critique, and discuss the paper's contents. The company also conducts audits of the
frequency of the appearance of women and minorities in its photographs.

8. Legislation and Litigation-Five main areas in the legal environment have influenced HRM
practice: equal opportunity legislation, safety and health legislation, pay and benefits
legislation, employee privacy, and job security. Most recently, the Americans with
Disabilities Act regulations require employers to accommodate mental and physical
limitations of otherwise qualified individuals, unless undue expense would be incurred.

9. Ethical Considerations-Ethical criteria should be used in company and employee

interactions. Ethical principles include the emphasis of mutual benefits, employees
assuming responsibility for company actions, a meaningful corporate vision for
employees, and fairness.

Example: At many TI locations "subject experts" are available to speak directly with
employees concerning ethical issues involving safety or an environmental issue. TI is in
the process of developing a web site devoted exclusively to policies and procedures that
deal with ethics. Employees are also able to directly access a toll-free hotline number for
answers to questions.

C. The High-Performance Work System Challenge-To gain competitive advantage with

foreign competitors, companies must learn to integrate technology and structure into

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 high-performance work systems. Additionally, advances in telecommunications,
microprocessors, etc., are having a major impact on necessary to job success.

1. Change in Employees' Work Roles and Skill Requirements-New technology

requires new basic skills. For example, computer-integrated manufacturing
requires employees to monitor equipment and troubleshoot problems with
sophisticated equipment. More organizations want employees cross-trained in
multiple jobs. Interpersonal skills are increasingly important as teams are used.
2. Increase in the Use of Teams to Perform Work-Employees are now expected to
make decisions at point of sale to improve customer service. Work teams form
one method of increasing both employee responsibility and control. These teams
frequently assume managerial activities. Quality control may be integrated into
the team's functions. Cost savings may be realized by the use of teams.
3. Changes in the Nature of Managerial Work- Managers are moving away from the
"control" model and towards facilitation. Decision making is more decentralized.
Empowerment means giving employees the responsibility and authority to make
decisions regarding all aspects of product development or customer service.
Employees then share in the rewards or failures that result. Managers must help
with linking roles and coordination between internal and external units.
4. Changes in Company Structure-Many companies have recognized the need to
move to an adaptive, high-involvement form of organizational structure. In this
type of structure, employees are in a constant state of learning and performance
improvement. Traditional boundaries are abolished and employees interact
freely with all areas of the organization and 'with' customers and vendors as
well.

Competing through High Performance Work Practices: Top-Grade

Material and Work Systems Mean World Class Excellence.
GE Fanuc Automation has a reputation of excellence in automation control, research and
development, and manufacturing facilities. The company's commitment to excellence has
earned them the recognition of becoming the first US companies to become a certified ISO
9000 manufacturer. The central idea to GE's award winning practices is the fact that the
employees closest to the work have the best ideas for improvement. Teams are also
extensively used at GE Fanuc Automation as well as hours of training. This combination has
led to excellence.

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 5. Increased Availability of Information Bases Related to the Company's Human
Resources—A human resource information system may contain large amounts of
data regarding the company's employees. An HRIS may be used to support
strategic decision making and ensure legal compliance, as well as to evaluate
programs and policies or support daily operating concerns.
Example: Northern Telecom has facilities in 90 countries and has created a
central database of employee records worldwide. Headcount, salary, and
recruiting data are updated regularly. This system has improved Northern
Telecom's ability to meet customer needs and address global staffing issues.
6. Competitiveness in High-Performance Work Systems-In order for new
technologies or new structures to support organizational improvement, the
integration of these two factors must be carefully examined. Human resource
practices are designed to provide employees with skills, incentives, knowledge,
and autonomy. Owens Corning Fiberglass introduced new technology (plant
automation and glassmaking) and integrated it with HRM practices (self-
managed work teams) successfully.
III. Meeting the Competitive Challenges through HRM Practices. HRM practices that help
companies respond to the four competitive challenges can be grouped into the
following five dimensions:
A. Managing the Human Resource Environment-HRM practices should be linked to
strategy, legal compliance must be assured, and work should be designed to
maximize employee effectiveness and motivation.
B. Acquiring and Preparing Human Resources-Human resource planning must
occur, employees must be recruited and placed in appropriate jobs, methods of
employee selection must be determined, and ensuring employees have skills to
perform particular jobs.
C. Assessment and Development of Human Resources-This area of HRM deals with
measuring employee performance, preparing employees for future work roles,
identifying and responding to employee interests, and creating a beneficial and
effective work environment.
D. Compensating Human Resources-Appropriate pay systems must be developed,
employee contributions must be rewarded, and employees must be provided
with benefits.
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 E. Special Issues-Labor unions create an additional HRM challenge.

Discussion Questions
1. Traditional human resource management practices were developed and administered
by the company's human resource department. Line managers are now playing a major
role in developing and implementing HR practices. Why do you think non-HR managers
are becoming more involved in developing and implementing HRM practices?
2. Staffing, training, compensation, and performance management are important HRM
functions. How can each of these functions help companies deal with high-performance
work systems challenges? Meeting stakeholders needs? Global challenges?
3. This module covers four human resource management practices: managing the human
resource environment, acquiring and preparing human resources, assessment and
development of human resources, and compensating human resources. Which area do
you believe contributes most to helping a company gain a competitive advantage?
Which area do you believe contributes the least? Why?
4. What is the "balanced scorecard"? Identify the four perspectives included in the
balanced scorecard. How can HRM practices influence the four perspectives?
5. Is HRM becoming more "strategic"? Explain your answer.
6. Explain the implications of each of the following labor force trends for HRM: aging
workforce? diverse workforce? skill deficiencies?
7. What role do HRM practices play in a business decision to expand internationally?
8. Is business emphasis on quality a "fad"? Why or why not? What might a quality goal and
high performance work system have in common in terms of HRM practices?
9. What disadvantages might result from outsourcing HRM practices? From employee self-
service? From increased manager involvement in designing and using HR practices?

End-of-Module Case
Daimler Has to Steer the Chrysler Merger
Summary. This case presents the description of the merger of Chrysler Corp. and Daimler Benz.

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The new company, Daimler Chrysler, will endure massive challenges that occur as a result of
international mergers. The students challenge is to provide HRM issues that Chrysler Corp. and
Daimler Benz will have to resolve and how to resolve them to become successful.

Questions
1. One way to expand business globally is to merge with another company to
create a powerful international corporation. The challenge is to unite two
different companies with distinct business processes, strategies, and cultures.
Mergers are even more challenging when they involve companies from different
countries (such as the Chrysler-Daimler Benz merger). Executives need to review
operational, financial and people processes to develop a common set of rules,
practices, and procedures for the "new" company. What HRM issues do Chrysler
Corporation and Daimler Benz have to resolve to make the merger successful?
2. How might Chrysler and Daimler Benz decide which HRM practices to adopt
company-wide (globally)?

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MODULE 2
STRATEGIC HUMAN RESOURCE MANAGEMENT
I. Introduction-The goal of strategic management in an organization is to deploy and
allocate resources in ways that provide a competitive advantage. To be maximally
effective, the HRM function must be integrally involved in the company's strategic
management process.
II. What Is Strategic Management?-Strategic Management is a process for analyzing a
company's competitive situation, developing the company's strategic goals, and devising
a plan of action and allocation of resources (human, organizational, and physical) that
will increase the likelihood of achieving those goals. Strategic human resource
management is "the pattern of planned human resource deployments and activities
intended to enable an organization to achieve its goals."
A. Components of the Strategic Management Process-There are two distinct phases
of this process.
1. Strategy Formulation: During this phase, strategic planning groups decide
on a strategic direction by defining the company's mission and goals, its
external opportunities and threats, and its internal strengths and
weaknesses.
2. Strategy Implementation: During this phase, the organization follows
through on the strategy that has been chosen. This includes structuring
the organization, allocating resources, ensuring that the firm has skilled
employees in place, and developing reward systems that align employee
behavior with the strategic goals.
B. Linkage between HR and the Strategic Management Process: The strategic
choice really consists of answering questions about competition. These decisions
consist of addressing the issues of where to compete, how to compete, and with
what to compete.

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 C. The Role of HR in Strategy Formulation-Both strategy formulation and strategy
implementation involve people-related issues and therefore necessitate the
involvement of the HR function. Four levels of integration exist between the HR
function and the strategic management function.
1. Administrative Linkage-This is the lowest level of integration, in which
the ARM function's attention is focused on day-to-day activities. No input
from the HRM function to the company's strategic plan is given.
2. One-Way Linkage The firm's strategic business planning function
develops the plan and then informs the HRM function of the plan. HRM
then helps in the implementation.
3. Two-Way Linkage-This linkage allows for consideration of human
resource. issues during the strategy formulation process. The HRM
function is expected to provide input to potential strategic choices and
then help implement the chosen option.
4. Integrative Linkage-This is based on continuing, rather than sequential
interaction. The HR executive is an integral member of the strategic
planning team.
III. Strategy Formulation-This includes five major components.
A. A mission is a statement of the organization's reasons for being; it usually specifies the
customers served, the needs satisfied and/or the value received by the customers, and
the technology used
B. Goals are what the organization hopes to achieve in the medium- to long-term future;
they reflect how the mission will be operationalized.
C. External analysis consists of examining the organization's operating environment to
identify strategic opportunities and threats.
D. Internal analysis attempts to identify the organization's strengths and weaknesses
E. Strategic choice is the organization's strategy, which describes the ways the organization
will attempt to fulfill its mission and achieve its long term goals.
Example: Delta Airlines-Delta's employees were so loyal to the company that in the
1980's the employees pitched in a bought the airline a new plane. The "Leadership 7.5"
program arguably got rid of Delta's only competitive advantage. Ideas could have been
generated to find a more effective way of cost cutting in an alternative strategy.

Competing by Meeting Stakeholders' Needs:

Sears Harnesses the Power of People:
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Faced with mounting losses and characterized by a dinosaur culture, Arthur Martinez took
over as the head of the merchandising group at Sears and sought to recreate one of
America's best known institutions. Focusing on understanding how and why its people are its
IV. Strategy Implementation-For any strategy to be implemented effectively, certain tasks
must be accomplished in pursuit of the company's goals; individuals must possess
certain skills to perform those tasks, and these individuals must be motivated to
perform them effectively. Five variables determine success in strategy implementation.
HR has responsibility for three of these: task, people, and reward systems. The role of
the HRM function is one of (1) ensuring that the company has the number of
appropriately skilled workers and (2) developing "control" systems that ensure that
those employees contribute to goal achievement. This is accomplished through various
HR practices.
A. HR Practices-—The HR function has six "menus" of practices from which
companies can choose to fit their strategic direction.
1. Job analysis is the process of getting detailed information about jobs. Job
design deals with making decisions about what tasks should be grouped
into a particular job. Jobs can range from very narrow sets of tasks that
demand a limited set of skills to a complex array of tasks that requires
multiple, high-level skills. Many jobs today are being broadened.
2. Recruitment is the process through which the organization seeks
applicants for employment. Selection refers to the process of identifying
applicants with the appropriate knowledge, skills, and ability to help the
company achieve its goals.
3. Frequently, employees need new skills when jobs are modified. Training
refers to a planned effort to facilitate learning of job-related knowledge,
skills, and behavior. Development involves the acquisition of knowledge,
skills, and behavior that improves employees' ability to meet the
challenges of a variety of existing jobs or jobs that do not yet exist. TQM
programs require extensive training of employees.
Example: When the Collins & Aiken management made the decision to
hook up their carpet tufting and shearing equipment to computers,
workers were terrified. More than a third of the plant's work force was
high-school dropouts. The company spent an average of $1,200 for each
worker's training, including lost work time. Basic skills, high school
equivalency courses, and job specific courses have been taught. Within
the tufting operations, productivity has risen 10 percent since 1989.
Returns have been cut in half during the same period.
4. Performance management is used to ensure that employees' activities
and outcomes are congruent with the organization's objectives.

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 5. Pay structure, incentives, and benefits have an important role in
implementing strategies. High pay levels help to attract and retain high-
quality employees. Performance-based pay plans help motivate
appropriate performance. The pay system includes the base pay as well
as incentives and benefits.
6. Labor and employee relations refer to the general approach the company
takes in interacting with its employees, whether unionized or not.
Companies can choose to treat employees as assets, resources to be
invested in for the long term.
B. Strategic Types-Several different "typologies" of strategies exist.
1. Porter's Generic Strategies-Michael Porter has hypothesized that
competitive advantage comes from creating value by 1) reducing costs
(overall cost leadership) or (2) charging a premium price for a
differentiated product or service (differentiation).
C. HR Needs in Strategic Types-Different strategies require different types of
employees with different skills and also require employees to exhibit different
"role behaviors." Role behaviors are the behaviors required of an individual in his
or her role as a jobholder in a social work environment.
1. Cost strategy firms seek efficiency and therefore carefully define the skills
they need in employees and use worker participation to seek cost-saving
ideas.
2. Differentiation firms need creative risk takers.

Competing by Meeting Stakeholders Needs:

A Cost Strategy That May Cost Children Their Health
In Columbia, the cut flower industry is booming at the expense of child labor. In order to
keep costs low, farms employ children at illegal pay rates, for long hours, and under
conditions that include the inhalation of pesticides. The employment "contracts" for these
children do not include health benefits. As the word leaks out to the marketplace, pressure
is being placed on the worst offenders to change their strategies.

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 D. Directional Strategies-Five types follow:
Concentration strategies focus a company on what it does best in its established
markets.
Internal growth strategies include market development, product development,
innovation, or joint ventures.
Mergers and Acquisitions include consolidation within industries and mergers
across industries.
External growth strategies include vertical and horizontal integration as well as
diversification.
Downsizing most often requires reducing the size of the work force. Downsizing
presents a number of challenges and opportunities for HRM: careful reduction of
the work force, boosting the morale of employees who remain, increasing fresh
ideas, and changing the company's culture.
1. Implications for Human Resources-Each strategy necessitates different HR practices. For
example, companies with concentration strategies require the maintenance of current
skills. Compensation must therefore focus on retaining skilled employees.

Competing through Globalization:

Upjohn and Pharmacia Merger
Upjohn and Pharmacia were both pharmaceutical companies that merged in 1995. Both
companies were relatively the same size with similar business interests. The merger was
supposed to bring size and synergy but ended up bringing heat and headache. Major culture
clashes arose because Upjohn is an American company and Pharmacia is a Sweden based
company. The merger is not yet a total failure but costs of the merger have exceeded
projections by $200 million.

E. Strategy Evaluation and Control-This is the final component of the strategic

management process that includes the monitoring of the effectiveness of strategic
choice and implementation.
F. The Role of Human Resources in Providing Strategic Competitive Advantage

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 1. Emergent Strategies-Those that evolve from the grass roots of the organization:
that is, what actually is done versus what is planned. HR plays an important role
in facilitating the communication of emergent strategies between levels in the
hierarchy.
2. Enhancing Firm Competitiveness- By developing a rich pool of talent, HR can
assure the company's ability to adapt to a dynamic environment.
Example: When Compaq Computer was founded, building compact computers
that were free of defects was its intended strategy. In 1992, after a difficult
period of price competition, Compaq's strategy was changed to being a low-cost
producer.

Competing through High-Performance Work Teams:

Motorola's Strategy Uses All Its Resources
Motorola's use of high-performance work systems (teamwork, empowerment, training, and
education) to move its strategy forward can be seen in the example of its new Harvard,
Illinois, location. This site was chosen for a new $100 million plant because of the availability
of well-qualified workers. In order to prepare for the future, Motorola is working with the
local school district to help develop curricula for the 21st century worker.

G. Strategic Human Resource Executives-The increasing importance of these roles

demands new skills. Four basic competencies include:
1. Business Competencies-Understanding the company's economic and financial
capabilities.
2. Professional/Technical Knowledge-In HR practices such as selection
techniques and compensation systems.
3. Change Processes or Organizational Development Techniques— The ability to
diagnose the need for change and develop and implement the appropriate
intervention.
4. Integration Competencies-A generalist perspective with the skills of a specialist
in the above three areas.

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 Discussion Questions
1. Pick one of your university's major sports teams (e.g., football or
basketball). How would you characterize the team's generic strategy?
How does the composition of the team members (in terms of size, speed,
ability, etc.) relate to that strategy? What are the strengths and
weaknesses of the team? How do these dictate the team's generic
strategy and its approach to a particular game?
2. Do you think that it is easier to tie human resources to the strategic
management process in large or in small organizations? Why?
3. Consider some of the organizations you have been affiliated with. What
are some examples of human resource practices that were consistent
with that organization's strategy? What are examples of practices that
were inconsistent with its strategy?
4. How can strategic management within the HR department ensure that
HR plays an effective role in the company's strategic management
process?
5. What types of specific skills (e.g., knowledge of financial accounting
methods) do you think HR professionals will need in order to have the
business, professional/technical, management, and integrative
competencies necessary in the future? Where can you seek to develop
each of these skills?
6. What are some of the key environmental variables that you see changing
in the business world today? What impact will those changes have on the
HR function in organizations?

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 End-of-Module Case
Unisys Aims for the Top of the Tree
Summary With a history of financial debt and a bleak future, Unisys found itself, in
1997, with a new CEO dedicated to turning things around. Increasing financial services
telecommunications are just a couple ways that Unisys hopes to revitalize.
Questions
1. Describe the change in strategy and/or the major strategic thrusts taking place
under
Lawrence Weinbach at Unisys.
2. What are the implications of these strategic business issues for people issues
(culture, competencies, critical behaviors, etc.)?
3. How can HR play a role in executing this strategy?

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