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Paradigms in HR strategy - What It Means For Organisation

 
By : kooveli madom on 18 August 2015 E-mail Comments     Print Print  Report Abuse
 



Paradigms in HR strategy - What It Means For Organizations To Be Strategic In Their Approach To Human Resource Management.

 

(1)  Strategy – employee engagement

Strategy is a set of coordinated choices and actions. From a Human Resource Management perspective, there are two types of strategy: competitive business strategy, which focuses on choices and actions about how to serve the needs of customers; and human resource strategy, which focuses on choices and actions concerning the management of people within the organization (1). Two basic approaches to human resource strategy are (1);

The contingency approach that seeks to match human resource practices with competitive business strategies. This approach focuses on cost leadership versus a focus on differentiation.  Organizations mainly concerned with reducing costs, emphasize processes and general roles.  They carefully prescribe appropriate behaviors for performing work.  Another difference is whether the organization has an internal or an external labor orientation. Organizations with an internal labor orientation, seek long-term relationships with employees, while organizations with an external labor orientation, seek flexibility with no long-term commitment to employees.

In contrast, the universalistic approach seeks to identify a set of human resource practices that is beneficial for all organizations.  This approach has a bundle of practices, labeled the commitment strategy. Practices in the commitment bundle communicate the message that management cares about employees. The commitment strategy helps ensure that employees have the training and freedom to pursue important job tasks and encourage their continuance.

HR and organizational strategy are integral to the business strategy through (a) cost leadership and (b) transition to differentiation, strategy. Organizations should capitalize on the organizational and people capital it already commands, and move up the ladder for a gradual transition from their current position. The transition strategy will address (a) the HR strategy and practices and (b) the organization strategy on how the tasks are to be performed.

The loyal soldier HR strategy paradigm is featured by  

  1. Emphasizing hiring and retaining loyal employees who do whatever the company asks of them (job enrichment through a wider role definition and flexibility to handle situation dependent task variety).
  2. Design work so that employees have broad roles and perform a variety of different tasks. 
  3. Encourage employee loyalty by embedding fitment of the organization culture and employee attributes in employee recruitment  
  4. Satisfy employees’ needs to build a strong bond that reduces employee turnover 
  5. Hire people early in their careers and provide them with extensive training in a number of different skills to help grow with the organization
  6. Provide for a number of different positions, with opportunity for promotions into positions not closely related to previous experiences. This will encourage loyalty and reduce turnover
  7. Design performance appraisals to facilitate cooperation rather than competition
  8. Introduce long-term incentives in compensation and benefits linked to the overall performance of the organization 
  9. Work with unions to help build feelings of unity

Organizations should align the transition from bargain laborer with no commitment to one of mutual long term commitment and growth. Strategies should focus on full time employees and staggering work schedule (flexibility associated with loyal soldiers), which will eventually be a cost advantage for the company.

During the next phase of transition to committed expert, employees should be considered specialists in their field, thus encouraging them to have longevity with the organization, a further reinforcement of the loyal soldier paradigm. This will also enable a smooth transition to leadership through differentiation.

Enabling activities that form the backbone of a knowledge strategy are to be aimed at improving the capacity-to-act, of people both inside and outside the organization (2). These involve knowledge transfers:

(1) Between individuals;

(2) From individuals to external structure;

(3) From external structure to individuals;

(4) From individual competence into internal structure;

(5) From internal structure to individual competence;

(6) Within the external structure;

(7) From external to internal structure;

(8) From internal to external structure; and

(9) Within internal structure.

For this transition to happen, the organization practices shall be one of mutual adjustments (Mintzebeg, through standardization of workers but keeping the low level processes flexible to meet customer needs. The standardization will be on the output not much on the input side) (3). As the complexity is increasing and the degree of difficulty of the work is growing, mutual adjustment as the main coordination mechanism will turn on again (4) (5).

a)     Free Agent HR Strategy

 The main emphasis associated with this strategy is hiring people who have critical skills but who are not necessarily expected to remain with the organization for a long period of time.  Work is designed so that employees have extensive responsibility within specific areas, and substantial freedom to decide how to go about their work. Long-term commitments are avoided, and no efforts are made to encourage strong attachments between employees and the organization.  People are recruited because they already have the skills and experience that they need to perform specific jobs.  They are not led to expect long-term careers in the organization.  Higher-level positions are performance appraisal focused on outcomes and results.  Training is rare.  Short-term compensation is usually high, which is necessary if the organization is to obtain people with top skills. Pay is linked specifically to individual performance results.  Benefits and long-term compensation packages, which tie employees to the organization, are avoided.  Unions are rarely seen in these organizations, frequently given to people from outside the organization. 

b)     Committed expert strategy

The primary objective of this strategy is to hire and retain employees who specialize in performing certain tasks.  Organizations using this strategy design work so that employees have a great deal of freedom to innovate and to improve methods of completing tasks.  People are recruited and hired because of their potential fit with the organizational culture, as well as their aptitude for becoming experts in particular areas.  These organizations hire people early in their careers and train them to be experts in specific fields, such as accounting or sales. Performance appraisals are designed to balance cooperation and competition among employees. Careers generally include numerous promotions into similar jobs with increasing responsibility.  Employees receive long-term training that helps them develop strong expertise.  Compensation is relatively high and usually includes a good benefits package that ties employees to the organization. Organizations are likely to have human resource practices that fit with their competitive business strategies. Organizations whose human resource strategies match their competitive strategies do indeed perform better. 

Organizations with a cost leadership competitive strategy excel when they follow a Loyal Soldier HR strategy and Organizations with a differentiation competitive strategy excel when they use a Committed Expert strategy.

c)     Internal /cost, external cost, internal/differentiation and external/differentiation)

As depicted in the diagram below there are 4 paradigms in the strategic framework for HR

The loyal soldier and committed expert focus on internalizing the HR costs of employees with the intention of encouraging long term loyalty, commitment and grow with the organization. These two strategies are characterized by mutual caring and growing together. The transition from loyal soldier to committed expert facilitates higher level of differentiation in the organization’s business strategy. The bargain laborer and free agent tend to externalize the costs with limited loyalty and long term commitment.

As we move from internal to external cost scenario, the strategy is one of engaging labor (bargain labor and free agent) for defined tasks with no long term commitment. The HR strategy adopted by any organization depends on the nature of the business, the levels of expertise felt to be needed, its long term needs, and cost factors

 

(2)  HR strategy (compensation) - regulatory framework

Equal Employment Opportunity Laws, laws which prohibit discrimination on the basis of race, color, religion, sex, national origin, physical handicap and mental handicap in any terms, conditions, or privileges of employment need addressing while working on compensation policy

(a)   Lower pay for the same job for women than for men, is a violation of the Equal Pay Act. The EPA act requires employers to pay men and women equal pay for equal work. The substance or content of a job including the position's skill, effort and responsibility, and the conditions under which the employees work is what counts (6).

 

(b)  Under the Equal Employment Opportunity (EEO) policy, no employer shall discriminate between employees on the basis of sex by paying wages to employees at a rate less than the rate at which he pays wages to employees of the opposite sex, for equal work, on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions (7).

 

(c)   Under the EEO law, it is necessary to achieve the numerical goal of bringing   the percent of women and minority group members working at appropriate grade levels and classifications, closer to their percentage in the labor market.

 

 The other factors to be considered are job content based on any job evaluation study, criticality of the individual, individual / level wise contribution to the organization, industry practices, job market conditions, relevant regulations, need for incentivizing the employees based on their performance, organizational structure, company’s bearing capacity, employee attraction and retention needs, employee needs and preferences on compensation. Compensation system should also take into account the various components that can go into the package for various levels and nature of tasks assigned,  balance between monetary and nonmonetary compensation, need for organisational harmony, sustenance of the compensation package in the long run, need for sharing risks and  rewards with various levels of employees, among others.

 

(3)  HR-business strategy - considerations

  1. Factors for considerations

HR strategy has to take into consideration the following factors

  1. Whether the target organization is a green field or a brown field one. A green field organization provides a clean slate to conceive, design and implement the whole gamut of HR strategy unconstrained by the carried forward legacy of culture, structure, practices, expectations, and the inertia of change. The strategy becomes one of adjustment, convergence and optimum alignment and becomes an organization change process (8). The brown field paradigm is constrained by legacy of the past and present and calls for the best possible within the context.
  2. The size of the organization determines the contours of the elements of the strategy, what is possible in large organization not sometimes  not fitting in a small one.
  3. The kind of business / activity being engaged in by the organization, business – product /  services, government, NGOs, 
  4. Organizational culture – open, closed, formal, informal, flat, hierarchical, practices, expectations  and so on
  5. The reward system – fixed, variable, monetary, non monetary
  6. Unionized  versus non unionized, management employees relationships

 

  1. Options that    influence the value of an HR strategy?
  1. Green field versus brown field
  • In a brown field organization, the strategy of change shall be incremental
  • Strategy shall be consensus driven through a consultative process
  • Strategy to be preceded by open communication of its objectives and need
  1. Organizational size
  • HR strategy for a small organization shall be designed on philosophy of informality and consultation versus formal systems for a large organization
  • Driven by risk sharing among all employees and management
  • A collective approach

 

  1. Nature of business or activity
  • Differentiate strategy directions among a service, government, product based business
  • Strategy based on industry norms and practices
  • Strategy to reflect key success factors
  1. Reward system
  • Reward system driven by bearing capacity of organization, levels, roles, expectations and incentivizing performance
  • Rewards to consider need for differentiating the individual versus the group
  • Rewards to take into account the market for Hr resources (9)
  1. HR   strategy and nature of activity engaged in

It is to be appropriate irrespective of the nature of activity engaged in –  for profit business, not for profit voluntary activities, or government services. HR strategy is needed to optimally align the efforts of the HR resource to meet the organizational objectives in a manner consistent with the several elements of individual expectations and organizational needs. It is neither a one size fits all nor a take it or leave it approach. It is an orchestration of several elements to derive maximum value for all stakeholders (8) (9).

  1. HR strategy and economic model

When the economic model for the organization is different from that of a business organization, the relevant driving factors could bem the need to meet psychological needs of job satisfaction, respect for the individual, recognition, and alignment of individual philosophy with that of the organization. These may be met through non monetary reward system comprising job content, autonomy, recognition, collective decision making and so on, the soft factors of motivation 

It is necessary to distinguish between business and non-business economic models when developing a HR strategy since in a not for business organization, the ability to use monetary rewards may be limited, fuzzy working context, outputs not necessarily monetizable, there is no profit element derived from output, need for informality in working practices and outputs not necessarily relatable to individual efforts only.

 

(4)  HR strategy (compensation) and job evaluation

Job evaluation is a process that serves the needs of the compensation system in a company by determining the value of one job in relation to another. The basic purpose of job evaluation is to eliminate pay inequities which may exist because of illogical pay structures, such as might develop over time, if care is not taken in how compensation is determined. Job evaluation programs are generally administered by the human resource department and is usually conducted by committee. The jobs people carry out, are major determinants of the amount of financial compensation they will receive, and organizations pay for the value attached to certain duties, responsibilities, and other job-related factors, such as working conditions. The relative worth of jobs is usually determined through a combination of job analysis, job descriptions, and job evaluation. Job analysis and job description determine and express the content of a given job, while job evaluation makes use of this data to compare jobs and set compensation (10).

Job evaluation is used to accomplish the following tasks:

* Identify the job structure of the organization.

* Bring order and equity to the relationship among jobs.

* Develop a hierarchy of job value to create a pay structure.

* Achieve a consensus among managers and employees concerning jobs and pay within the company

Job evaluation and individual performance evaluation are entirely different. Job evaluation is done to analyze the content of the job for various purposes such as compensation fixing based on skill requirement to perform the job, the difficulty of doing the job, the criticality for the organization’s business, the fixing of hierarchical level to be assigned for the job, the no. of persons required to carry it out, work load assessment, and finally fixing the level and compensation and its components.

In contrast, performance evaluation is to assess how well the individual put on the job has performed the task.

Job evaluation is independent of the individual who may be asked to carry out the job and the outcome of the job evaluation is applicable to any individual who may be assigned to do it. It is done to fix the compensation and its break up for the job not for the individual who may be already assigned the job.

 

  1. Maximum rate of pay for every job in the organization

There should be a maximum rate of pay for every job. This is to ensure that there is no conflict (anomaly) in compensation across levels and positions. For instance, however well the receptionist does her job, she cannot draw more than the CEO who may be rated to have done an above average job, not exceptional. This is because each job in an organization has a level of contribution it is to make to the overall organization’s business, and this relationship cannot be violated. Though a person may do a simple job extremely well, the contribution from another person who does a very difficult job at an acceptable level may be more than that of the former.  Moreover no organization can function only with the exceptional contribution of a few heroes who are assigned simple jobs in terms of complexity, competency required, risk associated and so on. Also, all jobs are placed in certain bands within which the compensation has to fit in (11). If a person is fit for another task due to his/her competency, he/she should be put on the new job to reward her/him for their contribution, if the former job does not reward as much as they believe / it is assessed, they deserve

 

  1. Rewards for outstanding performance?

Employees can be rewarded for outstanding performance through variable pay based on performance tracked against benchmarks, stock options based on ratings, she/he can be put on a skill building program which will enable her/him to occupy another higher position where her/his competency can be exploited and rewarded, given additional responsibilities that fits with skill as well as organizational needs

(5)  Employee selection methods and competitive advantage.

A selection process initially tests the candidate’s own assessment of his /her fitment into the organizational culture and measure up to the expectations based on the dimension of performance, behavioral expectations and vision of the organization, shared with the candidate is more valuable and sustainable . This helps the candidate to understand the organization, the tasks to be carried out, clear skill, job and behavioral expectations, and assess if he or she is cut out for it. It is possible that many candidates get screened out due to reasons of shift working, flexible working hours, multi tasking, accountability, job rotation, reward systems, performance parameters, culture etc. A self assessment brings out only those who have the right (required) orientation, and are trainable for the specific needs, and those who quit at this stage are better being out of the organization at the early stage. This helps the organization in not having the wrong candidate inside, who may upset the apple cart within that has been carefully crafted through cultural socialization by the organization. Subsequent analysis of the candidate’s response to questionnaire as well the tests and interview, will help to pick only those who have the right basic attitudinal,  and behavior orientation to fit into the organization. A right person in the right place through the three stage screening process ensures HR driven competitive advantage.

The right employee selection process helps in positive experience for all employees and lower turnover. Lower turnover helps build expertise and service quality, and positive customer experience enhancement. In a service industry, customer experience is key and will help build market. Thus right employees, particularly in a service industry is the ultimate competitive advantage.

  1. Individual fitment

Fitment is the qualitative aspect of an individual’s behavioral orientation and expectation matching with situational job requirements. Particularly, in the service industry, behavioral fitment in sync with customer expectations is more important than skill and knowledge. Behavioral fitment is innate to an individual while skills can be trained for, if there is attitudinal alignment. Service industry calls for flexible service orientation of staff to meet varying customer expectations and be able to rise up to an occasion when a need arises. Customer orientation is the super ordinate goal!

  1. Selection process

This three stage process helps weed out those who do not pass through lower level filters that test for basic fitment, before they are put through the higher level ones. Thus, we end up with progressively spending expensive organizational resources only on assessing candidates who are likely to fit the bill. Thus higher level management can focus their attention on those who are of interest, and avoid employee recruitment and retention cost incurred on the wrong candidates. Service industry is basically taking care of the customer, customer sensitivity, customer orientation than job orientation, holistic approach than compartmentalized one. All these attitudinal expectations differentiate an employee in a service industry from a non service oriented employee and hence qualifying a potential candidate for these qualities is key to competitiveness rather than skills. Sharing employee expectations and benefits up-front helps expectation setting, and build a team of satisfied and enthusiastic employees that will further add to competitive advantage

 

 

 

References

  1. elearning.najah.edu/.../ch02%20Making%20hrm%20strategic.ppt
  2. http://www.zenska-mreza.hr/prirucnik/en/en_read_organisations_1.htm
  3. http://mgmt.iisc.ernet.in/~piyer/Knowledge_Management/C%20G%20KM%20Ppaer%20A%20knowledge-based%20theory%20of%20the%20firm%20to%20guide%20in  %20strategy%20formulation%2027-02-2007.pdf
  4. Mintzberg: Structures in five. Prentice Hall,1983
  5. Mintzberg: Mintzberg on management .Free press, NY,1989
  6. http://labor-employment-law.lawyers.com/wage-and-hour-law/Equal-Pay-Laws.html)
  7. http://www.law.cornell.edu/uscode/html/uscode29/usc_sec_29_00000206-000-.html)
  8. http://www.cipd.co.uk/subjects/corpstrtgy/general/hrbusprtnr.htm
  9. http://www.deloitte.com/assets/Dcom-weden/Local%20Assets/Documents/se_consulting_HR-Strategy_Sweden.pdf
  10. http://www.hr-guide.com/data/016.htm
  11. http://www.performanceprograms.com/

 

Source : several as in the document references ,
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