Strategic Use of HR: Building
Human Capital
OS652 HRM
Fisher
August 26, 2004
Agenda
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In-class writing
What is human capital?
Linking HRM and strategy
In-class writing
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Goals
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Develop your thoughts about certain issues
Help facilitate in class discussions
Demonstrate your preparedness for class
Will be scored 0, ½, 1
Counts as part of your participation grades
Looking at trends
In-class writing
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HR practices can be proactive or reactive.
What is the difference?
Give an example of each in relation to the
Toyota article we read on Tuesday.
Strategy and human capital
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Overall, strategy involves developing and sustaining a
competitive advantage
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Source of value
Rare
Difficult to copy
Highly skilled, motivated employees can meet these
resource characteristics
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Human capital
Reputation as a top place to work can also help provide an
advantage (www.fortune.com)
Developing human capital
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How do each of these systems contribute to
the development of human capital?
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Recruitment
Selection
Training
Performance management
Compensation
Retention is key
Human Resource Strategy
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A firm’s deliberate use of human
resources to help it gain or maintain an
edge against its competitors in the
marketplace.
HR can respond to organizational
strategy
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Three general business strategies*
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Operational excellence
Product leadership
Customer intimacy
How would HR respond to each strategy?
How do these strategies relate to the two described in
the book?
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Growth-prospector-high tech-entrepreneurial
Mature-defender-cost efficiency
*Based on Beatty, R.W., Huselid, M.A., & Schneier, C.E. (2003). New HR Metrics: Scoring on the Business
Scorecard. Organizational Dynamics, 32, 107-121.
Continental Airlines example
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Four prong change strategy
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Fly to win. Improve revenue and deliver a profit.
Fund the future. Cut the debt burden.
Make reliability a reality. Improve service.
Working together. Create an environment of dignity
and respect. Employees should feel valued, enjoy
going to work.
Which of these would drive HR strategy or
actions?
HR can also inform strategy
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Organization’s internal strengths and weaknesses
often inform strategic decisions
Identify areas of competitive advantage
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Identify environmental changes
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Core skill areas
Corporate culture
Labor/management relations
Pending legislation
Competitor strengths and weaknesses
HR as part of the dominant coalition
HR responds to external forces
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Labor market demands
Competitors’ actions
Regulatory environment
Industry best practices
But must also consider internal
factors
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Best practices may not be effective due to
characteristics of the organization
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Industry, Size, History, Culture, Knowledge and
skills
“..you can’t copy anyone else. Because then
you really don’t know how to fix things…” (Pernille
Spiers-Lopez, president of IKEA North America, in Meisler 2004)
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Need to tailor HR activities
HR activities must be aligned
Southwest Airlines discussion
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What strategy is Southwest pursuing?
What is the HR strategy? Is it consistent with
the overall strategy?
For next class
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Evaluating effectiveness of HR systems
Read Beatty, Huselid and Schneier
article, and Chapter 2 pages 56-59.