Title: Sustained Competitive Advantage Through Inimitable Human Resource Practices
1Chapter 9
- Sustained Competitive Advantage Through
Inimitable Human Resource Practices
Mike Noel David Oesch Matt Pearson
February 12, 2003 MGMT 610 Dr. Mike Bedell
2Agenda
- Define Terms
- 3 Perspectives of HR System Strategies
- Behavior Orientation Types
- Principles of Congruence
- Group Activity (Design a Congruent HR System)
- Tradeoffs In System Design
- Examples Of Competitive Strategies
- Chapter 1 Tie-in
- Figure 1.1
- Conclusions
3Terms
- Competitive Advantage Advantage over other
firms in the same industry - The basic idea establishing and maintaining
competitive advantage through people. - Competitive advantage
- Valuable, rare, inimitable, non-substitutable
- Traditional sources of competitive advantage no
longer as effective - Instead, the organizations people are its
competitive advantage
4Terms (contd)
- Congruent Systems Focused on the same goal /
integrated and mutually supportive - The internal consistency and synergy among HR
practices for promoting key employee behaviors - Inimitable Systems Difficult to copy
- Provides a competitive advantage through skilled
human capital
5Traditional Sources of Competitive Advantageand
Where Theyve Gone
- Product and process technology
- Technological innovations make innovation easier
and faster - Development and manufacturing technology freely
available - Protected and regulated markets
- Move to global economy
- Deregulation
- Access to financial resources
- Venture capital
- Economies of scale
- Fragmented markets
- Less important with advances in technology
Source Pfeffer (1994)
6Competitive Advantage Through People
- Viewing the work force as an asset, not an
expense - The result
- Harder work, from increased involvement and
commitment - Smarter work, through enhanced skills and
competence - Lower overhead, by pushing responsibility downward
Source Pfeffer (1998)
7Three Perspectives of HR Systems
- Universalistic perspective
- Some HR Practices are better than others
- Contingency perspective
- HR Practices should be consistent with other
aspects of the organization, particularly
strategy - Configurational perspective
- Holistic Approach
- HR systems must achieve a horizontal and a
vertical fit
8Behavior Orientation Types
- Individual oriented
- Group-oriented
- Organizational oriented
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10Individual Oriented
- Tying extrinsic rewards to performance
- Setting realistic and challenging goals
- Evaluating employee performance accurately and
providing feedback - Promoting employees on the basis of skill and
performance - Building the skill level of employees through
development activities - Enriching jobs through increases in
responsibility and skill variety
11Group-Oriented
- Organizing work around intact groups
- Groups charged with selection, training, and
rewarding of group members - Using groups to enforce strong norms of behavior
- Group involvement in off-the-job and on-the-job
behavior - Distributing resources on a group basis
- Allowing and/or promoting inter-group rivalry
- Build within-group solidarity
12Organizational Oriented
- Socialization into the organization as a whole
- Foster identification with the entire business
- Job rotation around the company
- Loyalty is not limited to one subunit
- Long training periods with the development of
non-transferable skills specific to the company - Commits people to the employing organization
- Long-term or protected employment to gain loyalty
13Organizational Oriented (contd)
- Decentralized operations
- Decreases competition among departments
- Few status distinctions between employees
- Dissention and separatism are not fostered
- Economic education and sharing of organization
information - Increases knowledge of products, financial
condition, and strategies of the firm - Use of various forms of profit sharing, stock
options, and bonuses - Ties individual rewards to organizational
performance
14Principles of Congruence
- Managers must focus powerful forces on the target
behaviors - Managers must make sure that staffing, reward,
and development practices do not conflict - Managers must ensure that interrelated HRM
practices are sufficiently supportive of each
other
15Congruent System
- Decide on a target behavior aligned with the
business strategy - Provide training to achieve behavior
- Create rewards to encourage behavior
- Measurement system
- Feedback system
16Example Incongruent System
- Target behavior Teamwork
- Training Team training in group interaction
skills - Contribution Analysis How has the individual
(in isolation) performed? - Reward Individual employee bonuses
- Measurement Individual employee performance
- Feedback Individual feedback
17Example Congruent System
- Target behavior Teamwork
- Training Team interaction skills
- Use interaction skills in an exercise
- Contribution Analysis How has individual
performed in teams? - Reward Financial reward for achieving team
goals - Measurement Measure team performance
- Feedback Provide feedback regarding teamwork
18Group Activity
- Design a congruent HR system focused on one of
the following topics - 1. Decreasing absenteeism
- 2. Improving job performance
19Characteristics of System Design
- Target behavior
- Training
- Contribution Analysis
- Reward
- Measurement
- Feedback
20Tradeoffs with a Congruent System
- For any given goal, there will be tradeoffs
necessary - Example Goal of hiring creative personnel
- Training vs. Selection
- Factors to consider
- Availability in labor market
- Availability, costs, and benefits of training vs.
selection - History, culture, and strategy of the firm
21Competitive Strategies
- Innovation
- Highly creative, cooperative employees
- Moderate concern for quality and quantity
- Risk takers
- Quality-Enhancement
- Low concern for margins.
- Highly conscientious and meticulous
- Risk averse
- Cost-Reduction
- Focused on economies of scale, little concern for
quality - Highly creative
- Risk takers
22Aligning Strategy and HR
- Determine the firms strategy
- Determine the competencies needed to carry out
the strategy - Examine current management practices
- Determine congruence
- Do the current practices work to enhance needed
competencies? - Are the current practices internally consistent?
Source Pfeffer (1998)
23Frost Inc.
- Medium size manufacturer of overhead conveyor
trolleys for the auto industry - Focus on Innovation
- Major changes in production to enhance
flexibility - HRM practices to support innovation
- Celebration Fund
- Quarterly bonuses based on cooperative behavior
- Incentives with a long-term focus
- Elimination of special perks
- Extensive training programs
24Types of Human Resource Systems
- Control
- Cost reduction oriented
- Reduce direct labor cost
- Improved efficiency
- Achieve by compliance with rules and procedures
- Measurable output linked to rewards
- Centralized decision making
- Increased use of bonuses and incentives
25Human Resource Systems (contd)
- Commitment
- Link employee goals with organization goals
- Decentralized decision making
- Encourage group problem solving
- Decreased attention to compliance with rules
- Emphasis on training
26How Does This Fit In to the HRS Design?
Labor markets
Business Strategy
Organizational Design/Work Processes
Behavioral/role requirements
HRM systems
Technology
Legal environment
Figure 1-1. HRM system design
27Conclusion
- Should not consider HR practices in isolation
- HR system that is well integrated and complete is
very difficult to duplicate which gives the
system a sustainable competitive advantage. - Interrelated HR practices should be supportive
and make use of available synergies.