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Strategic Human Resource Management Aligning HR and Business-Level Strategy

Strategic Human Resource Management Aligning HR and Business-Level Strategy

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Page 1: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Strategic Human Resource ManagementStrategic Human Resource ManagementAligning HR and Business-Level Strategy Aligning HR and Business-Level Strategy

Page 2: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Human Resource Management

Human Resource Management

HR’s focus is on attraction, retention, and motivation of employees

In many organizations, employees are key to creation of sustainable competitive advantage

Q: For Wal-Mart, in what way does HR contribute to creation of sustainable competitive advantage?

HR’s focus is on attraction, retention, and motivation of employees

In many organizations, employees are key to creation of sustainable competitive advantage

Q: For Wal-Mart, in what way does HR contribute to creation of sustainable competitive advantage?

Page 3: Strategic Human Resource Management Aligning HR and Business-Level Strategy

“HR’s Toughest Challenges for 2006”

“HR’s Toughest Challenges for 2006”

Ensuring compliance w/ federal and state employment laws

Retaining talent in an improving economy

Managing performanceDeveloping leadershipDealing w/ rising health care costs

Source: Business & Legal Reports, 5/2/06

Ensuring compliance w/ federal and state employment laws

Retaining talent in an improving economy

Managing performanceDeveloping leadershipDealing w/ rising health care costs

Source: Business & Legal Reports, 5/2/06

Page 4: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Listening to HR’s CriticsListening to HR’s Critics Quantify people-management results into

dollars Productivity of workforce Cost of vacant position Cost of keeping bad manager Dollar impact of hiring and keeping top performers

vs. average ones in mission-critical jobs Adopt “fact-based” decision-making

Not “I think” or “I believe” but “I know” re: cause and effect

Causes of turnover What motivates workers to produce more Which HR actions can turn business unit around

Source: Workforce Management, 7/31/06

Quantify people-management results into dollars Productivity of workforce Cost of vacant position Cost of keeping bad manager Dollar impact of hiring and keeping top performers

vs. average ones in mission-critical jobs Adopt “fact-based” decision-making

Not “I think” or “I believe” but “I know” re: cause and effect

Causes of turnover What motivates workers to produce more Which HR actions can turn business unit around

Source: Workforce Management, 7/31/06

Page 5: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Effective HR Strategy Formulation and Implementation

Effective HR Strategy Formulation and Implementation

OrganizationalStrategies

OrganizationalStrategies

OrganizationalCharacteristics

OrganizationalCharacteristics

OrganizationalCapabilities

OrganizationalCapabilities

EnvironmentEnvironment

HR Strategies

Consistency

Consistency

Co

nsi

sten

cy

Co

nsisten

cy

ImprovedFirm

Performance

ImprovedFirm

Performance

FitFit

FitFit

FitFit

FitFit

Page 6: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Selected HR Strategies That Fit Porter’s Three Major Types of Business

Strategies

Selected HR Strategies That Fit Porter’s Three Major Types of Business

StrategiesBusinessStrategy

Common OrganizationalCharacteristics HR Strategies

Overallcostleadership

• Sustained capital investment and access to capital• Intense supervision of

labor• Tight cost control

requiring frequent, detailed control reports• Low-cost distribution

system• Structured organization

and responsibilities• Products designed for

ease in manufacture

• Efficient production• Explicit job descriptions• Detailed work planning• Emphasis on technical

qualifications and skills• Emphasis on job-specific

training• Emphasis on job-based

pay• Use of performance

appraisal as a control device

Page 7: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Selected HR Strategies That Fit Porter’s Three Major Types of Business

Strategies

Selected HR Strategies That Fit Porter’s Three Major Types of Business

Strategies BusinessStrategy

Common OrganizationalCharacteristics HR Strategies

Differ-entiation

•Strong marketing abilities•Product engineering•Strong capability in basic research•Corporate reputation forquality or technologicalleadership•Amenities to attract highly skilled labor, scientists, or creative people.

• Emphasis on innovationand flexibility• Broad job classes• Loose work planning• External recruitment• Team-based training• Emphasis on individual-

based pay• Use of performance

appraisal as development tool

Page 8: Strategic Human Resource Management Aligning HR and Business-Level Strategy

“Women vs. Wal-Mart”“Women vs. Wal-Mart”

AVERAGE ANNUAL EARNINGS** IN 2001 -----------------------------

NO. OF % OF MALE FEMALEJOB EES* WOMEN SALARIES SALARIES

REGIONAL V-P 39 10% $419,400 $279,800DISTRICT MNGR 508 10 239,500 177,100STORE MANAGER 3,241 14 105,700 89,300ASST MNGR 18,731 36 39,800 37,300MNGT TRAINEE 1,203 41 23,200 22,400DPT HEAD 63,747 78 23,500 21,700SALES ASSOC 100,003 68 16,500 15,100CASHIER 50,987 93 14,500 13,800

* Full-time ** Including bonuses Data: Richard Drogin

AVERAGE ANNUAL EARNINGS** IN 2001 -----------------------------

NO. OF % OF MALE FEMALEJOB EES* WOMEN SALARIES SALARIES

REGIONAL V-P 39 10% $419,400 $279,800DISTRICT MNGR 508 10 239,500 177,100STORE MANAGER 3,241 14 105,700 89,300ASST MNGR 18,731 36 39,800 37,300MNGT TRAINEE 1,203 41 23,200 22,400DPT HEAD 63,747 78 23,500 21,700SALES ASSOC 100,003 68 16,500 15,100CASHIER 50,987 93 14,500 13,800

* Full-time ** Including bonuses Data: Richard Drogin

Page 9: Strategic Human Resource Management Aligning HR and Business-Level Strategy

“Women vs. Wal-Mart”“Women vs. Wal-Mart” Wal-Mart culture built on inspirational leadership,

autonomy, trust Bring Ees into org, convert them to principles: respect for

individual, customer service, excellence, and imperative to buy and sell at lowest price possible

But practices also may create barriers, e.g., job posting Wal-Mart famous for promotion from within – more than two-

thirds of managers started as hourly Ees Hourly job posted within stores, but until current suit, Co had

never posted openings for mngt training positions Not the Wal-Mart way, thought to be too bureaucratic… Wal-Mart way was to trust that store mngrs will promote those who

merit promotion Co now also developing formula for pay increases based on evaluation

ratings, experience, and other factors to make raises more uniform Another aspect of culture which may create barrier is

willingness to move for the job Single mother Asst Mngr involved in litigation moved nine

times in eight years across three states Key for Wal-Mart is making processes fair without losing

culture that makes it special Source: Fortune, 7/21/03

Wal-Mart culture built on inspirational leadership, autonomy, trust Bring Ees into org, convert them to principles: respect for

individual, customer service, excellence, and imperative to buy and sell at lowest price possible

But practices also may create barriers, e.g., job posting Wal-Mart famous for promotion from within – more than two-

thirds of managers started as hourly Ees Hourly job posted within stores, but until current suit, Co had

never posted openings for mngt training positions Not the Wal-Mart way, thought to be too bureaucratic… Wal-Mart way was to trust that store mngrs will promote those who

merit promotion Co now also developing formula for pay increases based on evaluation

ratings, experience, and other factors to make raises more uniform Another aspect of culture which may create barrier is

willingness to move for the job Single mother Asst Mngr involved in litigation moved nine

times in eight years across three states Key for Wal-Mart is making processes fair without losing

culture that makes it special Source: Fortune, 7/21/03

Page 10: Strategic Human Resource Management Aligning HR and Business-Level Strategy

“Big Retailers Face Overtime Suits As Bosses Do More

‘Hourly’ Work”

“Big Retailers Face Overtime Suits As Bosses Do More

‘Hourly’ Work” Retailers such as Wal-Mart, RadioShack, Dollar General

facing lawsuits accusing them of using low-level managers to do work of non-managers in order to avoid paying overtime Suits claim little difference between job duties of hourly ees

and asst mngrs, esp nighttime asst mngrs (“glorified stockers”)

RadioShack mngrs required to work at least 52 hrs/wk Under FLSA, mngrs may be entitled to overtime if more

than 40% of their time is not spent supervising or if jobs don’t include decision making

Wal-Mart tries to hold labor costs to 8% of sales, cf. 9-10% on average at other large-store retailers Alleged that to stay within budget, Wal-Mart district mngrs

have encouraged store mngrs to send hourly ees home before shift is over, then asst mngrs (who are required to work at least 48 hrs/wk) may stay on job for as much as 75 hrs/wk to cover

Portion of store mngr compensation is annual bonus pegged to store profit

Source: Wall Street Journal, 5/26/04

Retailers such as Wal-Mart, RadioShack, Dollar General facing lawsuits accusing them of using low-level managers to do work of non-managers in order to avoid paying overtime Suits claim little difference between job duties of hourly ees

and asst mngrs, esp nighttime asst mngrs (“glorified stockers”)

RadioShack mngrs required to work at least 52 hrs/wk Under FLSA, mngrs may be entitled to overtime if more

than 40% of their time is not spent supervising or if jobs don’t include decision making

Wal-Mart tries to hold labor costs to 8% of sales, cf. 9-10% on average at other large-store retailers Alleged that to stay within budget, Wal-Mart district mngrs

have encouraged store mngrs to send hourly ees home before shift is over, then asst mngrs (who are required to work at least 48 hrs/wk) may stay on job for as much as 75 hrs/wk to cover

Portion of store mngr compensation is annual bonus pegged to store profit

Source: Wall Street Journal, 5/26/04

Page 11: Strategic Human Resource Management Aligning HR and Business-Level Strategy

“In Ad Blitz, Wal-Mart Counters Public Image as

Harsh Employer”

“In Ad Blitz, Wal-Mart Counters Public Image as

Harsh Employer” Wal-Mart bought full-page ad space in January

2005 in more than 100 newspapers nationwide Co said ads are attempt to set record straight on labor

issues “It’s becoming clear that we have to do more and be more

aggressive in telling our story. The purpose is to be proactive and initiate debate.”

New web site: www.walmartfacts.com Amid criticism of labor practices, in 2004 Co

initiated new wage structure to increase pay of some hourly Ees, created 40-person compliance team to ensure labor laws adhered to and diversity goals met Also linked percentage of executive bonuses to certain

diversity goals Source: Wall Street Journal, 1/14/05

Wal-Mart bought full-page ad space in January 2005 in more than 100 newspapers nationwide Co said ads are attempt to set record straight on labor

issues “It’s becoming clear that we have to do more and be more

aggressive in telling our story. The purpose is to be proactive and initiate debate.”

New web site: www.walmartfacts.com Amid criticism of labor practices, in 2004 Co

initiated new wage structure to increase pay of some hourly Ees, created 40-person compliance team to ensure labor laws adhered to and diversity goals met Also linked percentage of executive bonuses to certain

diversity goals Source: Wall Street Journal, 1/14/05

Page 12: Strategic Human Resource Management Aligning HR and Business-Level Strategy

“The Wegman’s Way”“The Wegman’s Way”

Wegman’s labor costs run between 15% and 17% of sales, cf. 12% for most supermarkets

Annual turnover rate is 6%, cf. 19% for grocery chains w/ similar number of stores

Industry’s annual turnover costs can exceed entire profits by more than 40%

Gallup survey found that over one-month period, shoppers who were emotionally connected to supermarket spent 46% more than shoppers who were satisfied but lacked emotional bond w/ store

Source: Fortune, 1/24/05

Wegman’s labor costs run between 15% and 17% of sales, cf. 12% for most supermarkets

Annual turnover rate is 6%, cf. 19% for grocery chains w/ similar number of stores

Industry’s annual turnover costs can exceed entire profits by more than 40%

Gallup survey found that over one-month period, shoppers who were emotionally connected to supermarket spent 46% more than shoppers who were satisfied but lacked emotional bond w/ store

Source: Fortune, 1/24/05

Page 13: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Current Developments in Union Organizing

Current Developments in Union Organizing

Wal-Mart has won all but one of seven union votes in U.S. (as of 10/02) One U win was butcher’s dept in TX store, which was

disbanded two weeks after election Co announced plans to phase out butchers and use prepackaged

meat in 180 stores, said timing of decision was a coincidence When Wal-Mart acquired Woolworth’s operations in Canada,

it bought 120 stores, but not the seven that were unionized Wal-Mart EVP of People: “Where associates feel free to

communicate openly with their management, why would they need a third party to represent them?”

Co gives managers 56-page guide, “The Manager’s Toolbox to Remaining Union Free”

“It’s important for you to be constantly alert for efforts by a union to organize your associates”

Wal-Mart has won all but one of seven union votes in U.S. (as of 10/02) One U win was butcher’s dept in TX store, which was

disbanded two weeks after election Co announced plans to phase out butchers and use prepackaged

meat in 180 stores, said timing of decision was a coincidence When Wal-Mart acquired Woolworth’s operations in Canada,

it bought 120 stores, but not the seven that were unionized Wal-Mart EVP of People: “Where associates feel free to

communicate openly with their management, why would they need a third party to represent them?”

Co gives managers 56-page guide, “The Manager’s Toolbox to Remaining Union Free”

“It’s important for you to be constantly alert for efforts by a union to organize your associates”

Page 14: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Current Developments in Union Organizing

Current Developments in Union Organizing

“In the 1970s, General Motors was the nation’s largest corporate employer, and thanks to its contracts with the UAW, it not only set the standards, but it raised the standards for all workers. Wal-Mart is doing the exact opposite. Nowadays it is the nation’s largest corporate employer, and it is lowering standards for everyone.” Organizing director for UFCW

Wal-Mart says its average hourly pay for FT ees is $9.68/hr UFCW counters that it’s only $8.23/hr (based on

independent statistical analysis) BLS estimates average hourly wage for all non-supervisory

retail ees is $12.34 Wal-Mart spokesman says BLS data inflated by overtime, and

that Wal-Mart’s pay scale is competitive Source: CNNMoney, 7/27/05

“In the 1970s, General Motors was the nation’s largest corporate employer, and thanks to its contracts with the UAW, it not only set the standards, but it raised the standards for all workers. Wal-Mart is doing the exact opposite. Nowadays it is the nation’s largest corporate employer, and it is lowering standards for everyone.” Organizing director for UFCW

Wal-Mart says its average hourly pay for FT ees is $9.68/hr UFCW counters that it’s only $8.23/hr (based on

independent statistical analysis) BLS estimates average hourly wage for all non-supervisory

retail ees is $12.34 Wal-Mart spokesman says BLS data inflated by overtime, and

that Wal-Mart’s pay scale is competitive Source: CNNMoney, 7/27/05

Page 15: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Current Developments in Union Organizing

Current Developments in Union Organizing

Legal union avoidance tactics have impact Las Vegas Sam’s Club held mandatory Ee meetings every

week to express anti-U views “You can speak for yourself” (Some ees started wearing “I can

speak for myself” buttons) “The union only wants your money”

Former Wal-Mart manager, now UFCW organizer, reports surveillance cameras “sprouted” at Scottsburg, IN store (N of Louisville) after he started talking to workers there Co says the 15 cameras installed there “have nothing to do

with union activity” Other former managers say that when they telephoned Co

hot line to report U literature was being distributed in their stores, LR specialists were flown in on Co jet that afternoon

Other complicating factors include turnover, which may be 100% annually at some stores

Source: Business Week, 10/28/02; New York Times, 11/8/02; Business Week, 10/6/03

Legal union avoidance tactics have impact Las Vegas Sam’s Club held mandatory Ee meetings every

week to express anti-U views “You can speak for yourself” (Some ees started wearing “I can

speak for myself” buttons) “The union only wants your money”

Former Wal-Mart manager, now UFCW organizer, reports surveillance cameras “sprouted” at Scottsburg, IN store (N of Louisville) after he started talking to workers there Co says the 15 cameras installed there “have nothing to do

with union activity” Other former managers say that when they telephoned Co

hot line to report U literature was being distributed in their stores, LR specialists were flown in on Co jet that afternoon

Other complicating factors include turnover, which may be 100% annually at some stores

Source: Business Week, 10/28/02; New York Times, 11/8/02; Business Week, 10/6/03

Page 16: Strategic Human Resource Management Aligning HR and Business-Level Strategy

“Wal-Mart Says It Would Allow Unions in Its Chinese

Operations”

“Wal-Mart Says It Would Allow Unions in Its Chinese

Operations” Wal-Mart said it would allow trade unions in its

Chinese operations, an apparent response to pressure from Chinese authorities Wal-Mart has 42 outlets in China, ~20,000 ees

Wal-Marts in Germany aren’t unionized per se, although they have works councils

Labor officials hope development will put pressure on other MNCs to follow suit In March, national legislature began investigation of

compliance w/ country’s labor law Finding: some leading MNCs were resisting efforts to

set up unions within operations Source: Wall Street Journal, 11/24/04

Wal-Mart said it would allow trade unions in its Chinese operations, an apparent response to pressure from Chinese authorities Wal-Mart has 42 outlets in China, ~20,000 ees

Wal-Marts in Germany aren’t unionized per se, although they have works councils

Labor officials hope development will put pressure on other MNCs to follow suit In March, national legislature began investigation of

compliance w/ country’s labor law Finding: some leading MNCs were resisting efforts to

set up unions within operations Source: Wall Street Journal, 11/24/04

Page 17: Strategic Human Resource Management Aligning HR and Business-Level Strategy

Closing CaseClosing Case

Wal-Mart hiring more than 1 million ees over next five years Advancement opportunities

65% of store managers began in hourly jobs College recruiting

Diversity recruiting Internships in pharmacy and merchandising

Management trainee program for college students Networking

Students in Free Enterprise Case questions

What corporate- and business-level strategies is Wal-Mart pursuing?

Discuss how Wal-Mart’s growth plans affect and are affected by its HR strategy

SWOT analysis

Wal-Mart hiring more than 1 million ees over next five years Advancement opportunities

65% of store managers began in hourly jobs College recruiting

Diversity recruiting Internships in pharmacy and merchandising

Management trainee program for college students Networking

Students in Free Enterprise Case questions

What corporate- and business-level strategies is Wal-Mart pursuing?

Discuss how Wal-Mart’s growth plans affect and are affected by its HR strategy

SWOT analysis