Comptetitive Advantage Thro People Revised
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Transcript of Comptetitive Advantage Thro People Revised
Competitive Advantage thro’ Peopleby
Srinivas Thummalapalli
Topics
Sources of Competitive Advantage
Construct of Successful People Friendly Firms
Financial Impact of Human Capital
A framework of Talent Management
Questions
Sustainable Competitive Advantage
Distinguishable from competitors
Provide positive economic benefits
Not readily duplicated
The Changing Basis of Competitive
Success
Traditional Sources
Product and Process Technology (Sun, GM)
Regulated Markets
Access to Financial Markets
Economies of Scale
Current Sources
Leveraging Organization Culture
Firms Capabilities
People Management Practices
Importance of the Work Force and How It Is
Managed: Southwest Airlines
Fewer Employees per Aircraft (79 vs. 131)
Flies more passengers per employee (2318 vs. 848)
More available seat miles per employee (1,891,082 vs.
1,339,995)
80% of flights turns in </= 15 Min (vs. 45min)
Exceptional Service: Triple Crown 9 times (vs. no
competitor has ever won)
The “Externalization” of Employment: A
Counter Intuitive Observation
Most motivated & loyal employees are those whose
companies help them become star performers by
providing a comprehensive set of personal and career
development opportunities across the whole
enterprise, without functional or divisional restrictions
Companies need to make their employees more
attractive to the external market so that they satisfy the
employees’ real desires for growth & development
Many professionals who switch jobs often do so
because they don’t feel that they have any tangible
impact on their company
What Effective Firms Do with People
Learn what employees really want most by
communicating with them, including receiving continual
feedback
Provide a wide range of growth & development
opportunities for all levels of employees
Adopt measurement & reward systems that clearly
articulate what is expected from employees, and
reward them accordingly
Sixteen Practices for Managing People Employment Security
Selectivity in Recruiting
High Wages
Incentive Pay
Employee Ownership
Information Sharing
Participant and Empowerment
Teams and Job Redesign
Training and Skill Development
Cross-Utilization and Cross-Training
Symbolic Egalitarianism
Wage Compression
Promotion from Within
Long-Team Perspective
Measurement of the Practices
Overarching Philosophy
Example: The Lincoln Electric Company
Had a policy on employment security stating that no employee with 3 years or more of service would be laid off for lack of work.
New United Motor Manufacturing Guaranteed workers’ job as part of formal labor contract in return for a
reduction in the number of job classifications and an agreement not to strike over work standards.
1. Employment Security
Signals long-standing commitment by the organization
to its work force
Enhances employee involvement as employees are
more willing to contribute to the work process
Contributes to training as both employer and employee
have greater incentives to invest in training
2. Selectivity in Recruiting
Choosing the right people, in the right way
Rigorous selection process instills a feeling in the
person that he/she is joining an elite organization; high
expectations for performance are created; and the
message sent is that people matter
Example: Southwest Airlines
Some of its best customers are involved in the Flight Attendant hiring process as the customers are the ones who deal with front-line employees.
Japanese Auto Manufacturing Plants in the US Extensive screening to find people who could work best in new environment,
could learn & develop with minimal supervision, weed out people who were likely to be pro-union.
3. High Wages
Attracts more applicants, permitting the organization to
be more selective in its hiring
Makes employee turnover less likely
Sends a message that the organization values its
people
Example: Wendy’s a popular fast-food chain company
When facing declining company profitability, the company decided the best way to become the customers’ restaurant of choice was to become the employer of choice.
Improved benefits and base compensation & created employee stock option plan, which resulted in a stable and able work force, thus leading to rise in sales.
4. Incentive Pay
People are motivated by other than money, such as
recognition, security, fair treatment, etc.
Example: The Lincoln Electric Company
Factory workforce is paid on a piecework basis and incentive bonus plan. Workforce is paid for good pieces only, hence workers correct quality
problems on their own time. Quality is emphasized as well as productivity. Bonuses are based on company’s profitability, encouraging the workforce to
identify with the whole firm.
5. Employee Ownership
Aligns interests of employees with those of
shareholders by making employees shareholders too
Puts stock in the hands of employees, who are more
inclined to take a long-term view of the organization, its
strategy and investment policies
Example: The Lincoln Electric Company
80% of the workforce have stake in the ownership of the firm. 40% of the revenues are distributed in the form of incentives/bonuses. Healthy balance between the shareholders of the firm and employees in the
ownership. Facilitated greater participation of employees in the overall success of the
firm.
6. Information Sharing
Disclosure is an integral part of profit sharing
Employee identification with Employee enterprise is
heightened
Informed basis for employees to appreciate the
interests of Organization and Self
Example: Levi Strauss
Installed a quality enhancement program accompanied by gain sharing at its manufacturing plant.
Six-month evaluation of the program revealed employees understood the concept and the measures, and thought that they were fair and could affect them.
7. Participation and Empowerment
Broader employee participation
Empowerment in controlling one’s environment
Decentralization of decision making process
Autonomy is integral part of job design
Example: Eaton, a unionized manufacturer
Workers tired of fixing equipment that broke down, suggested and built new automated machines themselves.
Did it for a fraction of what outside vendors would have charged and doubled the output of the department.
Nordstrom Rules Use your good judgment in all situations. There will be no additional rules.
8. Teams and Job Redesign
Fosters group norms, conformance pressures
Better perspective on interdependency and
complimentary competencies
Example: Monsanto, a large chemical company
Implemented work organization based on self-managed teams at one of its manufacturing plants.
Teams of workers were responsible for hiring, purchasing, job assignments and production.
Management was reduced from 7 levels to 4 and the plant experienced increases in both profitability and safety.
9. Training and Skill Development
Continuous competency and capability improvement is
encouraged across workforce relevant to its roles
Example: Advanced Micro Devices’ Submicron Development Facility
Training demonstrated the firm’s commitment to its employees and staffed their facilities with qualified people
10. Cross-Utilization & Cross-Training
Variety in role is most influencing motivator for
workforce
Change in people, situations, experiences prepare for
adaptability and effective utilization of resources
Example: People Express
Processes are simple and straightforward for multitasking and enhancing productivity.
Mazda Factory Workers to Product Sellers.
Lechmere: a Retail Chain Pay for skill: number of jobs learned and used.
NUMMI Cross functional teams is a way of life.
11. Symbolic Egalitarianism
Reduction in social categories
Powerful signal to both insiders and outsiders on
egalitarianism
Example: New United Motor Manufacturing
No executive dining room; common dress code; common parking lots.
12. Wage Compression
Pay compression across categories of job families
Pay dispersion mainly due to rewards and monetary
recognition
Intrinsic enjoyment of job is paramount importance
than external tangible pay
Focus on economic rewards of having accomplished
than being a potential entity
Example: Herman Miller
CEO’s salary is only 20 times that of the average worker’s salary and bonus.
Ben and Jerry CEO’s salary is only 7 times that of the average worker.
13. Promotion from Within
It exemplifies the recognition of an individual with
overall knowledge of business, technology and
processes
Promoting the culture
Example: Nordstrom
Every new recruit, even those with advanced degrees, start on the sales floor.
Promotion is strictly from within.
14. Long-Term Perspective
Diffusion of people practices take longer lead times
But provide with enduring results
Firms must be aware and acknowledge this long term
benefit
Example: Wal-Mart
Decisions on the people management are not based on pleasing the stock market results but on the long term view of the firm as a whole.
15. Measurement of the Practices
Provides a feedback on the impact of people
processes
What gets measured is what gets noticed and thereby
prospect for improvement
Example: Levi Strauss
Gain sharing, role, responsibility, quality and productivity.
16. Overarching Philosophy
Coherent whole of disparate practices
Example: Lincoln Electric
Do unto others as you would haven them do unto you.
Nordstrom Organizational culture.
AMD Seamless organizational boundaries, technical excellence, empowerment
Fortune “100 Best” vs. Stock Market 1998-
2005: Shareholders’ Perspective
Reset Annually portfolio invests
equal dollar amounts in the
stock of each of the 100 Best
Firms-Publicly traded
100 Best Buy and Hold invests
onetime in the beginning of ’98
and hold these stocks for all
years covered in the charts
Source: Russell Investment
Group Inc.
Enhancing the Workplace brings in
Results: Firm’s Perspective
Benefit from Higher productivity & profitability
Greater Innovation, creativity & risk taking
Higher levels of customer satisfaction and loyalty
Receive more qualified job applications
Higher rate of retention
Took about 3 years to demonstrate the impact of
people practices on financial performance
A Diagnostic Framework: Internal &
External Consistency
Models like People Capability Maturity Model
Management Tools like HR Score Card
Why PCMM or any other model on People
Practices?
Integrated approach to people process improvement
Metricate the HR processes
Aligning with business strategy
Levels Developing
Competency
Building
workgroups &
culture
Motivating &
managing
performance
Shaping the
workforce
5
Optimizing
Continuous Capability Improvement Organizational
Performance
Alignment
Continuous
workforce
Innovation
4
Predictable
Competency
based assets
Mentoring
Competency
Integration
Empowered
Workgroups
Quantitative
Performance
Management
Organizational
Capability
Management
3
Defined
Competency
Development
Competency
Analysis
Workgroup
Development
Participatory
Culture
Competency
based practices
Career
Development
Workforce
Planning
2
Managed
Training and
Development
Communication &
Coordination
Compensation
Performance
Management
Work environment
Staffing
Threads in the People CMM
References/Acknowledgements:
Competitive Advantage Through People – by Jeffrey
Pfeffer
Human Performance: Stemming the tide – by Tony
Clancy and Arnaud Andre
Great Place to Work® Institute Inc.