MIE330 Chapter Two
opportunities of downsizing
- allows company to get ride of dead wood and make way for fresh ideas - often a unique opportunity to change an organization's culture - can force more positive relations - can demonstrate to top management decision makers the value of the company's human resources to its ultimate success
two-way linkage
- allows for consideration of human resource issues during the strategy formulation process
integrative linkage
- dynamic and multifaceted, basing on continuing rather than sequential interaction - HRM executive is an integral member of the senior management team - HRM functions built into the strategy formulation and implementation process
one-way linkage
- firm's strategic business planning function develops the strategic plan and then informs the HRM function of the plan - often leads to strategic plans that the company cannot successfully implement
administrative linkage
- lowest level of integration - HRM function's attention is focused on day-to-day activities - HRM executive has no time or opportunity to take a strategic outlook toward HRM issues - strategic business planning function exists without any input from the HRM department - HRM completely divorced from strategic management process
learning organizations
required to be in a constant state of learning through monitoring the environment, assimilating information, making decisions, and flexibly restructuring to compete in that environment; have a competitive advantage
SWOT analysis
strengths, weaknesses, opportunities, threats; external analysis and internal analysis combined
Companies that are "steady state" tend to have evaluation systems that call for
subjective performance assessments of managers
HRM is primarily responsible for which three of the five implementation variables
task, people, reward systems
vertical alignment
the HR practices and processes are aimed at addressing the strategic needs of the business
development
the acquisition of knowledge, skills, and behaviors that improve an employee's ability to meet changes in job requirements and in client and customer demands
Executives who have extensive knowledge of the behaviors that lead to effective performance use performance management systems that focus on
the behaviors of their subordinate managers
a high level of pay relative to that of competitors can ensure that
the company attracts high quality workers
fixed costs
the costs that are incurred regardless of the number of units produced e.g., rent, depreciation, utilities, property taxes
contribution margins
the difference between what you charge for your product and the variable costs of that product; contribute to your ability to cover your fixed costs
the six "menus" of HRM function
the different functional areas of HRM job analysis/design, recruitment/selection, training and development, performance management, pay structure/incentives/benefits, and labor-employee relations
legacy workforce
the former workers to whom the firm still owes financial obligations
performance management
the means through which managers ensure that employees' activities and outputs are congruent with the organization's goals
strategic choice
the organization's strategy; the ways an organization will attempt to fulfill its mission and achieve its long-term goals
downsizing
the planned elimination of large numbers of personnel, designed to enhance organizational effectiveness
selection
the process by which an organization attempts to identify applicants with the necessary knowledge, skills, abilities, and other characteristics that will help it achieve its goals
strategy formulation
the process of deciding on a strategic direction by defining a company's mission and goals, its external opportunities and threats, and its internal strengths and weaknesses
job design
the process of defining the way work will be performed and the tasks that will be required in a given job
strategy implementation
the process of devising structures and allocating resources to enact the strategy a company has chosen
internal analysis
the process of examining an organization's strengths and weaknesses focuses on the quantity and quality of resources available to the organization--financial, capital, technological, and HR
job analysis
the process of getting detailed information about jobs
recruitment
the process of seeking applicants for potential employment
intended strategies
the result of the rational decision-making process used by top managers as they develop a strategic plan
emergent strategies
the strategies that evolve from the grassroots of the organization and can be thought of as what organizations actually do, as opposed to what they intend to do
gross margin
the total amount of margin you made; number of units sold x contribution margin
How does the HRM function implement strategy?
through administering HRM practices: job analysis/design, recruitment, selection systems, training and development programs, performance management systems, reward systems, and labor relations programs
A firm's strategic management decision-making process usually takes place at its ________ level.
top
goals
what an organization hopes to achieve in the medium- to long-term future; they reflect how the mission will be operationalized usually to maximize stockholder wealth
strategies to create a competitive advantage come in two basic forms:
1) overall cost-leadership: producing the lowest cost products or services 2) differentiation strategy: creating the perception that products or services are different from others in the industry
the link between strategy and HR practices is primarily through:
people
SHRM process model
*see diagram and memorize
challenges of downsizing
- HRM function must surgically reduce the workforce by cutting only the less valuable worker - boosting morale of employees who remain after the reduction
concentration strategy
a strategy focusing on increasing market share, reducing costs, or creating and maintaining a market niche for products and services appraisals more behavioral
mission
a statement of the organization's reason for being; usually specifies the customers served, the needs satisfied and/or the values received by the customers, and the technology used often accompanied by a statement of a company's vision and/or values
Porter discusses five forces that shape strategy:
1. Rivalry among existing competitors; 2. Threat of new entrants; 3. Bargaining power of suppliers; 4. Threat of substitute products or services; 5. Bargaining power of buyers
five major components of the strategic management process relevant to strategy formulation
1. external analysis 2. mission 3. goals 4. internal analysis 5. strategic choice
five important variables to determine success in strategy implementation
1. organizational structure 2. task design 3. the selection, training, and development of people 4. reward systems 5. types of information and information systems
two-way linkage steps
1. strategic planning team informs the HRM function of the various strategies the company is considering 2. HRM executives analyze the HR implications of the various strategies, presenting the results of this analysis to the strategic planning team 3. after strategic decision has been made, the strategic plan is passed on to the HRM executive, who develops programs to implement it
business model
a story of how the firm will create value for customers and, more important, how it will do so profitably
strategic management
a process to address the organization's competitive challenges by integrating goals, policies, and action sequences into a cohesive whole
internal growth strategy
a focus on new market and product development, innovation, and joint ventures appraisals combination of behaviors and results
the pay systems role in implementing strategies
a high level of pay and/or benefits relative to that of competitors can ensure that the company attracts and retains high-quality employees, but this might have a negative impact on the company's overall labor costs by tying pay to performance, the company can elicit specific activities and levels of performance from employees
strategic human resource management (SHRM)
a pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals
training
a planned effort to facilitate the learning of job-related knowledge, skills, and behavior by employees
four levels of integration that exist between the HRM function and the strategic management function
administrative linkage, one-way linkage, two-way linkage, and integrative linkage
external growth strategy
an emphasis on acquiring vendors and suppliers or buying businesses that allow a company to expand into new markets
role behaviors
behaviors that are required of an individual in his or her role as a job holder in a social work environment
four possible categories of directional strategies
concentration strategies, internal growth strategy, external growth strategy, and divestment or downsizing strategy
variable costs
costs that vary directly with the units produced
generic strategy types
describe the consistent way the company attempts to position itself relative to competitors
overall cost leadership strategy
provides above-average returns within an industry, and tends to bar other firms' entry into the industry because the firm can lower its prices below competitors' costs
Diversified companies are more likely to use ___________ measures of performance to evaluate managers because
quantitative; because top managers have less knowledge about how work should be performed by those below them in the hierarchy
During the strategic implementation stage of the strategic management process, an organization
ensures it has skilled employees in place
external analysis
examining the organization's operating environment to identify strategic opportunities and threats opportunities examples: customer markets that are not being served, technological advances that can aid the company, and labor pools that have not been tapped threats examples: potential labor shortages, new competitors entering the market, pending legislation that might adversely affect the company, and competitors' technological innovations
companies engaged in a cost strategy require employees to ________; they promote and develop _______
have a high concern from quantity and a short term focus, to be comfortable with stability, and to be risk averse; repetitive behaviors performed autonomously promote internally and develop internally consistent pay systems with high pay differentials between superiors and subordinates
companies engaged in differentiation strategy need to have employees that are
highly creative and cooperative; only have a moderate concern for quantity, a long term focus, and a tolerance for ambiguity; risk takers
differentiation strategy
if successful, above average returns, and differentiation may protect it from price sensitivity
the role of HR in competitive advantage should continue to ______________ because of the fast-paced change characterizing today's business environment
increase
When executives are unclear about the specific behaviors that lead to effective performance, they tend to focus on evaluating the _______ of their subordinates.
objective performance results