Strategic Use of HR: Building Human Capital

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Strategic Use of HR Building Human Capital

• OS652 HRM
• Fisher
• August 26, 2004

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Agenda

• In-class writing
• What is human capital?
• Linking HRM and strategy

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In-class writing

• Goals
• Develop your thoughts about certain issues
• Help facilitate in class discussions
• Demonstrate your preparedness for class
• Will be scored 0, ½, 1
• Counts as part of your participation grades
• Looking at trends

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In-class writing

• HR practices can be proactive or reactive. What
  is the difference?
• Give an example of each in relation to the Toyota
  article we read on Tuesday.

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Strategy and human capital

• Overall, strategy involves developing and
  sustaining a competitive advantage
• Source of value
• Rare
• Difficult to copy
• Highly skilled, motivated employees can meet
  these resource characteristics
• Human capital
• Reputation as a top place to work can also help
  provide an advantage (www.fortune.com)

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Developing human capital

• How do each of these systems contribute to the
  development of human capital?
• Recruitment
• Selection
• Training
• Performance management
• Compensation
• Retention is key

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Human Resource Strategy

• A firms deliberate use of human resources to
  help it gain or maintain an edge against its
  competitors in the marketplace.

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HR can respond to organizational strategy

• Three general business strategies
• Operational excellence
• Product leadership
• Customer intimacy
• How would HR respond to each strategy?
• How do these strategies relate to the two
  described in the book?
• Growth-prospector-high tech-entrepreneurial
• Mature-defender-cost efficiency

Based on Beatty, R.W., Huselid, M.A.,
Schneier, C.E. (2003). New HR Metrics Scoring
on the Business Scorecard. Organizational
Dynamics, 32, 107-121.
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Continental Airlines example

• Four prong change strategy
• Fly to win. Improve revenue and deliver a profit.
• Fund the future. Cut the debt burden.
• Make reliability a reality. Improve service.
• Working together. Create an environment of
  dignity and respect. Employees should feel
  valued, enjoy going to work.
• Which of these would drive HR strategy or actions?

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HR can also inform strategy

• Organizations internal strengths and weaknesses
  often inform strategic decisions
• Identify areas of competitive advantage
• Core skill areas
• Corporate culture
• Labor/management relations
• Identify environmental changes
• Pending legislation
• Competitor strengths and weaknesses
• HR as part of the dominant coalition

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HR responds to external forces

• Labor market demands
• Competitors actions
• Regulatory environment
• Industry best practices

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But must also consider internal factors

• Best practices may not be effective due to
  characteristics of the organization
• Industry, Size, History, Culture, Knowledge and
  skills
• ..you cant copy anyone else. Because then you
  really dont know how to fix things (Pernille
  Spiers-Lopez, president of IKEA North America, in
  Meisler 2004)
• Need to tailor HR activities
• HR activities must be aligned

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Southwest Airlines discussion

• What strategy is Southwest pursuing?
• What is the HR strategy? Is it consistent with
  the overall strategy?

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For next class

• Evaluating effectiveness of HR systems
• Read Beatty, Huselid and Schneier article, and
  Chapter 2 pages 56-59.