Human Resource Management Gaining a Competitive Advantage Chapter 16 Strategically Managing the HRM Function

McGraw-Hill/Irwin

2008 The McGraw-Hill Companies, All Rights Reserved

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Learning Objectives
After reading this chapter, you should be able to:
Discuss the roles that HRM plays in firms today and the categories of HRM activities. Discuss how the HRM function can define its mission and market. Explain the approaches to evaluating the effectiveness of HRM practices. Describe the new structures for the HRM function. Describe how outsourcing HRM activities can improve service delivery efficiency and effectiveness. Relate how process reengineering is used to review and redesign the HR practices. Discuss the types of new technologies that can improve the efficiency and effectiveness of HR. List the competencies the HRM executive needs to become a strategic partner in the company.
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Introduction
Human resource management practices can help companies gain a competitive advantage. Virtually every HR function in top companies is going through a transformation process to create a function that can play this new strategic role while fulfilling its other roles.

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Categories of HRM Activities

Transformational Knowledge management Cultural Change Strategic redirection and renewal Management development Traditional Recruitment and selection Training Performance management Compensation Employee relations Transactional Benefits administration Record keeping Employee services
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Categories of HRM Activities

Transactional activities are the day-to-day transactions a company makes.
Low in their strategic value.

Traditional activities are the nuts and bolts of HR such as performance management, training, recruiting, selection, compensation, and employee relations.
Moderate strategic value.

Transformational activities create long-term capability and adaptability for the firm. Activities include knowledge management, management development, cultural change, and strategic redirection and renewal.
Comprise the greatest strategic value for the firm
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Strategic Management of the HRM Function

For the HR function to become truly strategic in its orientation, it must view itself as being a separate business entity. A customer orientation is one of the most important changes in the HR functions attempts to become strategic. The products of the HR department must be identified. The technologies through which HR meets customer needs vary depending on the need being satisfied.

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Customer-Oriented Perspective

Customers Line managers Strategic planners Employees

HRM function

Technology Staffing Performance management Rewards Training and development

Customers Needs Committed employees Competent employees

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Basic Process for HR Strategy

Scan the external environment

Identify strategic business issues

Identify people issues

Develop HR strategy

Communicate the HR strategy

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Involving Line Executives

Involving those in charge of running the business can increase the quality of information from which the HR strategy is created. Involvement can occur in a few ways:
Line executives could simply provide input. Line executives could be members of a team that develops HR strategy. Once strategy is developed, line managers could receive communications with the HR strategy information. Line managers could formally approve a strategy. 16-9

Characterizing HR Strategies

HR-Focused
People issues/ outcomes HR strategy

People-Linked
People issues/ outcomes

HR strategy

Business-Linked
Business issues/ outcomes

People issues/ outcomes

HR strategy

Business-Driven
Business issues/ outcomes People issues/ outcomes HR strategy
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Measuring HRM Effectiveness

Marketing the function evaluation is a sign that the HR function cares about the organization as a whole and is trying to support operations, production, marketing, and other functions in the company. Providing accountability evaluation helps determine whether the HRM function is meeting its objectives and effectively using its budget.
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Approaches to Evaluating HRM Effectiveness Audit Approach Analytic Approach

Focuses on reviewing the various outcomes of the HR functional areas. Both key indicators and customer satisfaction measures are typically collected. Employee assessment. Surveys of top-line executives. Focuses on either:
(1) determining whether the introduction of a program or practice has the intended effect or (2) estimating the financial costs and benefits resulting from an HR practice.

More demanding than the audit approach because it requires the detailed use of statistics and finance
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Restructuring to Improve HRM Effectiveness

The HRM function effectively is divided into three divisions:
The Centers for Expertise - Consist of functional specialists in the traditional areas of HR. These individuals ideally act as consultants in the development of state-ofthe-art systems and processes for use in the organization. The Field Generalists - Consist of the HRM generalists who are assigned to a business unit within the firm. The Service Center - Consists of individuals who ensure that the transactional activities are delivered throughout the organization. 16-13

Outsourcing
Outsourcing - Contracting with an outside vendor to provide a product or service to the firm. Usually this is done for one of two reasons:
The outsourcing partner can provide the service more cheaply The partner can provide it more effectively.
Firms primarily outsource transactional activities and services of HR such as payroll, pension, and benefits administration.

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Reengineering
Reengineering is a complete review of critical work processes and redesign to make them more efficient and able to deliver higher quality. The reengineering process has four steps:

Identify the process to be reengineered

Understand the process

Redesign the process

Implement the process

Feedback
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Improving HRM Effectiveness through New Technologies

New technologies - Applications of knowledge, procedures, and equipment that have not previously been used.
Transaction ProcessingComputations and calculations used to review and document HRM decisions and practices. These include documenting employee relocation, payroll expenses, and training course enrollments. Decision Support SystemsThese are systems designed to help managers solve problems. They usually include a "what if" feature. Expert systems are computer systems incorporating the decision rules of people deemed to have expertise in a certain area.
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Network and Client Server Architecture

A Network is a combination of desktop computers, computer terminals, and mainframes or minicomputers that share access to databases and a means to transmit information throughout the system. Client-server architecture is a common form of network that provides the means of consolidating data and applications into a single system.
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Relational Database, Imaging, and Groupware Relational database Information is stored in separate files that look like tables and can be linked by common elements such as name. Imaging The process for scanning documents, storing them electronically, and retrieving them. Groupware (or electronic meeting software) A software application that enables multiple users to track, share, and organize information and to work on the same document simultaneously. 16-18

Software Applications for HRM

Improving HRM Effectiveness through New TechnologiesE-HRM - The speed requirements of e-business force HRM managers to explore how to leverage technology for the delivery of traditional and transformational HRM activities. Recruitment and Selection - Technology has enabled firms to monitor hiring processes to minimize the potential for discriminatory hiring decisions. Compensation and Rewards - Leveraging technology may allow firms to better achive their compensation goals with considerably less effort. Training and Development - Technology allows firms to deliver training and development for at least some skills or knowledge faster, more efficiently, and possibly more effectively.
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The Future for HR Professionals

The future for careers in HR seems brighter than ever. Firms need to seek balance between attracting, motivating, and retaining the very best talent and keeping costs as low as possible. Finding such a balance requires HR leaders who have a deep knowledge of the business combined with knowledge of HR issues, tools, processes, and technology.

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