Hr Strategy Notes

Topic 3

HR Strategy- Part 1

Review of previous lecture

Value proposition

• What an organization does to bring value to its customers
• Value proposition enables us to determine that there is a product market focus.
• Involves trade-offs.
• From the VP and product market focus, flows the core activities. Activities that the organization performs to implement the VP

Effective Strategic analysis

• Examine the effectiveness of the VP by examining the environment around the organization
• 5 forces analysis- strengths of the competition, buyers, suppliers, new entrants
• Do fit analysis of the internal attributes of the organization, do we have the organization resources to perform these activities, do we have organization capabilities that enables us to do what need to do

Examples of VP

• Tim Hortons

• 20 minutes fresh
• Largest fresh baked goods provider in Canada
• Tim Hortons is everywhere
• Fast service

• Holt Renfrew

• Premium brands
• Curated shopping experience

• Apple

• Ease of use
• Seamless integration of its product and services
• Notion of innovative industrial design

Resource Based View

• Firm resources

• Physical capital- plant, equipment, geographical location
• Organizational structure- Planning, controlling, coordinating systems and people
• Human Capital- Training, experience, judgment, intelligence, relationships and insight

• Physical capital- represents 20 % of organizational value
• Other two structures are heavily influenced by Human resources are responsible for large parts of organizational value
• Sustained competitive advantage- example Apple- a value creating strategy not simultaneously being implemented by a current or potential competitor
• In order for a resource to provide a competitive advantage, it has to embody four attributes

• Value- bring something that the customer values
• Rare- few other firms can access this resource
• Inimitable- other firms can’t access it. They can’t get the same benefit from a different/similar product
• Non substitutable-  you can’t substitute for something else to get the same benefits

• Very few things are non-inimitable and non-substitutable so how do we get competitive advantage?

• Homogeneity- where companies benchmark each other, copy each other to become competitive. Lack of competitive advantage because they are pretty much the same , use same resources
• Heterogeneous- firms are using different set of resources hence establishing competitive advantage. They perform different set of activities. Tim Hortons vs Starbucks
• Causal ambiguity- when a company imitates resources of another company, they don’t necessarily achieve the same benefits as the other company. Example- Microsoft copying Apple’s retail idea but not enough sales.
• Social complexity- combination of VP + the way that employees are treated

Strategic HRM

• Possible for HR to be resource that is value, rare, inimitable and non-substitutable
• HRM practices contribute to the bottom-line benefits for the firm (research)
• Bottom- line- higher productivity, greater profits, lower turnover, and better return on assets.
• Huselid- Sets of HR practices contributes to the bottom-line performance
• Combs, Liu, Hall, and Ketchen

• Performed the first meta-analysis
• Meta-analysis- aggregation- bunch of individual studies. They combined these studies to see what the overall effect was or is of these HR practices on firms’ performance
• Meta-analysis showed that overall a set of best HR practices contributes to bottom-line performance such that as much as 20 %  or more of variable in bottom-line performance is attributable to HR practices
• 20% of the variability in profits is in the realm of HR practices.

Universal Mode

• There is a best set of HR practices that contributes to bottom-line performance
• Best set comprises of 10 HR practices. See the diagram
• If you use the entire set of HR practices in an organization, you will improve firm performance.
• Universal mode suggests that there is a set of HR activities that can be universally applied in any organization to improve bottom-line performance.
• However, is this strategic?

• According to resource based view, this mode not present a strategic view of HR as all companies have access to it, hence, it is called universal mode.

• If all firms in the same industries applied these so called best HR practices, the entire industry will become more competitive, productive, better, however, no firm will rise above its counterparts.

Contingency mode

• Suggests that there is a best set of practices (subset of HR practices that are best used to increase firm performance and these set of practices is contingent upon some other aspect of firm like its overall strategic view.
• Suggests that instead of a firm’s strategy, we could have a firm’s industry dictating control over what sort of HR practices are best suited to improve firm’s performance. For example, banking industry offering very little managerial sight, offer incentive pay over high commitment tasks.
• Contingency mode- Is it strategic based on resource based view?

• Is getting the idea of being strategic but according to resource based view, it is not strategic yet

           Configural Mode

• Suggests that HR practices that a frim should use to maximize its performance are not predetermined, or based on benchmarking or best practices
• Suggests that best set of HR practices emerges within the organization according to organization’s capability requirements and current capabilities, according to its existing resources and what resources an organization needs to have and according to the management preferences.
• HR system that comes out of configural perspective is one

• Arrives through a socially complex way
• HR practices complement one another to make it causally ambiguous as to which HR practice is providing the benefit to firm’s competitive advantage.
• Set of HR practices that are used are going to be unique to the firm because this set of HR Practices serves unique attributes of the way the firm is structured, the way it interacts with environment and the way it complements its value proposition.
• All these aspects of what is strategic and come together in a way that resource based view will support.

               Competencies

• Way of trying to understand what the strategic competencies are required to be successful in strategic goals at the firm level.
• Behavioural themes- combination of KSAO’s that come together in a way makes a person good at something.
• For example, if you want to work at Starbucks, a person will need to have core competencies like personable, open, and friendly, remember other people and their preferences. Interact with a wide variety of people.
• TD Bank- Value proposition

• Be the better bank
• Banking can be this comfortable

• Competencies can de suffer from being either ambiguous or not enough closely related  to implement a value proposition or be meaningful to the individual in interpreting what they should be doing to implement the value proposition.