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Sustained Competitive Advantage Through Inimitable Human Resource Practices

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Chapter 9. Sustained Competitive Advantage Through Inimitable ... Elimination of special 'perks' Extensive training programs. Types of Human Resource Systems ... – PowerPoint PPT presentation

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Title: Sustained Competitive Advantage Through Inimitable Human Resource Practices


1
Chapter 9
  • Sustained Competitive Advantage Through
    Inimitable Human Resource Practices

Mike Noel David Oesch Matt Pearson
February 12, 2003 MGMT 610 Dr. Mike Bedell
2
Agenda
  • 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

3
Terms
  • 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

4
Terms (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

5
Traditional Sources of Competitive Advantage…and
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)
6
Competitive 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)
7
Three 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

8
Behavior Orientation Types
  • Individual oriented
  • Group-oriented
  • Organizational oriented

9
(No Transcript)
10
Individual 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

11
Group-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

12
Organizational 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

13
Organizational 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

14
Principles 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

15
Congruent 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

16
Example 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

17
Example 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

18
Group Activity
  • Design a congruent HR system focused on one of
    the following topics
  • 1. Decreasing absenteeism
  • 2. Improving job performance

19
Characteristics of System Design
  • Target behavior
  • Training
  • Contribution Analysis
  • Reward
  • Measurement
  • Feedback

20
Tradeoffs 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

21
Competitive 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

22
Aligning 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)
23
Frost 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

24
Types 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

25
Human 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

26
How 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
27
Conclusion
  • 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.
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