Human Resources and Culture

Chapter 3

Learning Objectives Define and explain the importance of human

resources to an organization Explain the purpose of a human resource audit Explain what a human resource audit contains Understand HR benchmarking Understand CSF’s and how human resources can

be CSF’s Define culture and understand its sources and

types

Importance of Human Resources Human resources are an important part of

the value chain They can be unique, and thus a source of

core competence in an organization If a core competence is related to HR, then

HR can contribute to competitive advantage

Strategic Analysis of HR: Purpose People related strategies may be important to

new strategy (for example, a change in the way the organization does business)

In today’s technologically complex business world, analysis of existing human resources is important in order to determine what options are available

The network of people within an organization and their relationships with people can be an important part of strategy

HR and Sustainable Competitive Advantage In some industries, people are the most important factor in

success- advertising and creative development- leisure and tourism- management consulting- hospitals and medical professions

The adaptability of people to changing environments is an important skill

“The ability to learn faster than your competitors may be the only sustainable advantage” – Arie De Geus, former head of planning at Royal Dutch Shell

How is Human Resource Analysis Done? Human Resource Audit Purpose: (1) To identify the size, skills and

structure surrounding current employees and (2) to identify future human resource needs of the organization

Question Answered:

Are the human resources a strength or a weakness?

The Audit: Principles Obtain some basic information on the

people and policies involved in the organization

Explore in detail the role and contribution of the human resources management function in the development of strategy

The Audit: Contents People in the

Organization

Role and Contribution of HR strategy

Employee numbers and turnover

Organization structure

Structures for controlling the organization

Use of special teams, e.g. forInnovation

Level of skills and capabilitiesrequired

Morale and rewards

Employee and industrial relations

Selection, training and development

Staffing levels

Capital investment/employee

Role of quality and personal servicein delivering the products or servicesof the organization

Role of professional advice indelivering the product or service

HR Audit: People in the Organization

Relationship with strategy

Key characteristics of HR strategy

Consistency of strategy across different levels

Responsiveness of HR strategy in leading change in the organization

Role of HR strategy in leading change in the organization

Monitoring and review of HR strategy

Time horizon for operation of HR strategy

Role and Contribution of HR Strategy

What the Audit Achieves Provides information that is useful in deciding how

feasible a strategy is Identifies any human resource “gaps” (human

resources necessary for a proposed strategy minus the current state of human resources)

Allows the organization to “benchmark” their performance against other organizations (benchmark is a process of comparison)

Human Resources as a CSF Critical Success Factor (CSF) = a reason

why one organization is superior to another HR can be a CSF if employees are have

unique skills

Organizational Culture

Why is organizational culture important? Culture can influence every part of an

organization, including the strategy process Thus, culture is important in both the

strategic analysis and “doing” the strategy stages

The culture of any group of people is that set of beliefs, customs, practices and ways of thinking that they have come to share with each other through being and working together.

- Stacey

Determinants of Culture Philosophy of the founders Nature of the business and industry Management style National or regional characteristics Power distance Organizational structure Level of dependency on technology

What is Power Distance? Power distance (Hickson and Pugh) - how

far employees feel from their bosses In organizations with high power distance,

inequality is accepted In organizations with low power distance,

employees feel closer to their bosses and are often consulted to share in decision-making

Analysing organisational culture-1

Environment

Cultural factors specific to organisation

Identification of cultural style of the organisation

Analysis of the strategic implications

People, corporate cultures, labour policies, international issues.

History? Size? Products and technology?Leadership? Cultural Web?

Power? Role?Task? Personal?

Prescriptive or emergent?Competitive advantage?Core competence? Miles and Snow Culture types

Analysing organisational culture-2Organisational culture: “Beliefs, values and learned ways of

managing” Important to distinguish between organisational and

national/international culture Analyse organisational culture through these main

elements: History and ownership Size Technology Leadership and mission Cultural Web - developed by Johnson Cultural Typologies – Handy Culture types – Miles and Snow

Cultural Typologies (Handy) Handy classified organizational cultures

into 4 types:

- Power Cultures

- Role Cultures

- Task Cultures

- Person Cultures

Cultural Typologies (Handy) Power culture – dominated by one very

powerful person or small group and decisions are very centralized

Role culture – Found in established organizations in stable environments, with hierarchical structures, i.e. very bureaucratic

Cultural Typologies (Handy) Task culture – Found in organizations

involved in non-repetitive activities Person culture – Found in organizations

that exist primarily for the benefit of the members of the organization

Miles and Snow Typology

ReactorReactorLittle consideration of Little consideration of

environment; drift environment; drift with little concern for with little concern for

strategystrategy

ProspectorProspectorStress innovation Stress innovation and growth; seek and growth; seek new opportunitiesnew opportunities

AnalyzerAnalyzerStress maintenance of Stress maintenance of

status quo with status quo with moderate innovation moderate innovation

and growthand growth

DefenderDefenderStress stability, Stress stability,

conservatism, and conservatism, and maintenance of maintenance of

status quostatus quo

Dynamic, growingDynamic, growingenvironment environment characterizedcharacterized

by high uncertaintyby high uncertaintyand riskand risk

Moderately stableModerately stableenvironment withenvironment withsome uncertaintysome uncertainty

and riskand risk

Very stableVery stableenvironment withenvironment withlittle uncertaintylittle uncertainty

and riskand risk

Four strategic types and their approaches to strategy (Miles and Snow)

Defender: protect market share hold current position

Analyser: seek market opportunities but protect existing areas hold market share but with some innovation

Prospector: find new opportunities exploit and take risks

Reactor: respond only to others often late and inadequate

Miles and Snow TypologyExamples

Defender: McDonald’s

Prospector: Reebok International, Mrs. Fields

Analyzer: Procter & Gamble (Crest), Starbucks

Reactor: W.T. Grant

Analysis/Testing For Strategic Fit The analysis of culture should be more than just a

list of factors describing culture The analysis process should be done with

reference to possible areas of strategic interest I.e., the analysis should include testing for

whether the culture is a strategic fit with the current strategy

Ten Guidelines for Analyzing culture and its meaning for strategy How old is the organization? Does it exist in a stable or fast-

changing environment? Who owns it and what is the structure? How is it organized? How are results judged? How are decisions made? What qualities make a good boss? A good employee? How are people rewarded? How are groups and individuals controlled? Do people work in teams or as individuals?