Introduction to human resource management

Fall 2008Management 412 / Intro to HRMPage 5 Approaches to Revitalizing HR • Accounting for human resources • Managing people for competitive advantage... Accounting for Human Resources

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Introduction to Human Resource Management

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• Organization’s methods and procedures for

managing people to enhance skills and motivation

• Activities to enhance the organization’s ability to attract, select, retain and motivate people

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Fall 2008Management 412 / Intro to HRM

Sources: Caudron (2003); Schuler (1990); Schuler & Walker (1990); Stewart (1996);

Sunoo & Laabs (1999); Ulrich (2000); Wells (2003)

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Outsourcing HR

• Would it just make more sense to

outsource HR functions?

• Many organizations are doing just this

Sources: Caudron (2003); Stewart & Woods (1996); Zimmerman (April 2001)

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Approaches to Revitalizing HR

• Accounting for human resources

• Managing people for competitive

advantage

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Accounting for Human Resources

• Cascio’s costing approach:

• Cost accounting for employee outcomes

• Calculate cost of interventions and outcomes on individual basis

• Tracking costs and contributions to firm net

profitability

• Human capital approach

• Employees are intangible assets, but can still be valued

• Based on assumed contribution of employees to corporate earnings

Sources: Cascio (1982); Sheley (1996) Solomon (2000); Stewart (1995); Zimmerman (February 2001)

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• Staff time to interview applicants

• Reference checking, medical exams

• Training new employees

• Costs of reducing turnover

• Additional training

• Realistic job previews

• Net savings

Calculated per person, then totaled

Source: Cascio (1982)

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Human Capital: The Steps

• Determine three years’ total pretax earnings

• Determine average assets over same three years

• Calculate firm’s return on assets (ROA)

• Determine industry average ROA

• Calculate “excess returns”

• Subtract taxes

• Calculate net present value of excess return

• Result: “intangible value” of firm’s human capital

Sources: Stewart (October 1995); Zimmerman (February 2001)

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Human Resources and

Competitive Advantage

competitive advantage through people.

• Valuable, rare, inimitable, nonsubstitutable

• Achieved not through strategy, but strategy

implementation

Source: Pfeffer (1994, 1998)

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Traditional Sources of Competitive

Advantage…and Where They’ve Gone

• Product and process technology

• Technological innovations make innovation easier and faster

• Development and manufacturing technology freely available

• Protected and regulated markets

• Move to global economy

• Deregulation

• Access to financial resources

• Global capital market

• Venture capital

• Economies of scale

• Fragmented markets

• Less important with advances in technology

• So, what’s left…people

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High-Performance Work Systems: The Seven Practices

• Reduced status distinctions

• Extensive information sharing (both financial and

performance)

Critical to remember that all of these are part of a system

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• Bundle system = traditional assembly line (the

employee receives a bundle of garments, does one thing, then passes the bundle on to the next worker)

• Modular system = small cross-trained and

self-managed work teams, team pay

Source: Pfeffer (1998)

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The Minimills

Management Practice Control Commitment

% Improvement

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The Case of the IPOs

Probability of 5 Year Survival of IPO

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Why Not?

The Downward Performance Spiral

Individual Behaviors Decreased motivation More accidents Higher turnover Reduced effort

Performance Problems

Low profits High costs Poor customer service

Low stock price

Organizational Response

Reduce training Layoffs Salary freeze Contingent staffing

Source: Pfeffer (1998)

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Aligning Strategy and HR

out the strategy

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General Economic Conditions

• Global economy

• Lower wage levels vs quality and productivity

• Ethical issues and political considerations

• Domestic factors

• Move from manufacturing economy to service / information economy

• Mergers  duplication of functions  layoffs

• Supply and demand of labor influences price

• Supply and demand of company’s product, which

determines available resources

Sources: Challenger (2003); Cole, et al (2003)

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Source: U.S Department of Labor, Bureau of Labor Statistics

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Fastest Growing Occupations, 2006-2016 (by percentage growth)

Source: Department of Labor, Bureau of Labor Statistics

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Largest Job Losses, 2006-2016

01,0002,0003,0004,000

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Legal Requirements and

Constraints

relationship between employers and

employees

usually a reflection of social attitudes and

opinions

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• Supply of labor (number of people, skills, etc.)

• New skills needed, but are they present in workforce?

• Basic skills availability?

• Different needs of different groups in the population

• Increasing number of women in paid workforce

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Participation in the Paid Labor

Force by Gender: 1948 to 2007

0 10 20 30 40 50 60 70 80 90 100

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Labor Force By Age, 2006-2016

Projected % Change in Labor Force By Age,

Labor Force By Age, 2016

65 + 6%

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Technology

• New jobs; old jobs vanish

• Need for new skills

• Need for continuous skills development

• Managing the HR function

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HR Functions: What We’ll Be

Looking At

Reward Systems

Legal Compliance

Staffing

Planning

Training and Development

Employee and

Labor Relations

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