OS 352 1/15/08

I. Strategic behavior of organizations

A. HRM trends.

B. Theories of strategy

C. Application: jetBlue Airways.

Trends in Human Resource Management

Change in the labor force (i.e., people who are willing and able to work)

High performance work systems Focus on strategy Technological change in HRM Change in the employment relationship

Change in the U.S. Labor Force

Areas of skill deficiencies: mathematical, verbal, interpersonal skills.

The workforce is aging. Between 2002-2012, the fastest growing age groups are ees ages 55 and older.

The workforce is growing more diverse.– The 2012 workforce is expected to be 66% white, 15% Hispanic

(any race), 12% black, and 7% Asian and other minorities.– At present, women comprise 47% of the workforce.– At present, 61% of mothers with a child under the age of 3 are

working.

Minorities are the fastest growing segment of the U.S. workforce:

Working Mothers

High Performance Work Systems

Require: Knowledge workers: ees whose main

contribution to the firm is specialized knowledge.

Ee empowerment: giving ees responsibility and authority to make decisions.

Teamwork: assignment of work to groups of ees with various skills who interact to assemble a product or provide a service.

Change in the Employment Relationship

New psychological contract– Traditional: ee contributes time, effort, skills,

abilities, and loyalty; firm provides job security and opportunities for promotion.

– New: ee contributes top performance, current skills, and longer hours; firm provides flexible schedules, more ee control over how accomplish work, training and development, and financial incentives.

The Behavior of Organizations: Two Perspectives

1) Firm behavior is a function of environmental pressures (sociology)

2) Firm behavior is a function of the goals and actions of the firm (economics, business strategy).

Strategy

Plan for meeting broad goals such as profitability, quality, and market share.

3 Levels:

Firm / organization

Business unit

Function / department

Three HRM Strategy Theories

Contingency perspective

Best practices

Resource-based

Contingency Perspective

Organizations will be most successful when strategies “fit” environments.

Organizations will be most successful when HR strategies “fit” organizational strategies.

Firms should tailor HR activities.

Diagram of the Contingency Perspective

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

How to Interpret the Diagram

Contingency Perspective says that firms that match their HR activities / strategies to the 4 boxes (organizational strategies, environment, organizational characteristics, organizational capabilities) will be more successful than those that do not.

Examples

Organizational Strategies– JetBlue Airlines –– Wegmans Food Markets – customer service, high

quality goods, variety of products

Business Environment– JetBlue Airlines –– Wegmans Food Markets – competition from low

cost providers, poor economy, good reputation

Examples

Organizational Characteristics– JetBlue Airlines –– Wegmans Food Markets – growing/expanding, retail

food industry, privately-held

Organizational Capabilities– JetBlue Airlines –– Wegmans Food Markets – excellent reputation as

employer and as grocery store, ability to attract and retain high quality workers

If you fully understand the contingency perspective …

You should be able to give examples of the “four boxes.”

You should be able to think of HR activities that would “fit” or match the “four boxes.” For example, Wegman’s strategy of providing a excellent customer service should lead it to select new employees based upon their degree of interest in solving customer problems.

Best Practices Approach

Some practices work better than others (e.g., variable pay bonuses for managers).

Some practices are more progressive than others (e.g., paid family leave).

Firms should imitate HRM leaders.

Resource-Based Approach

Invent unique practices or combinations of practices.

Or … imitate successful practices in other companies and tailor to your firm and integrate it with your firm’s systems.

How to Assess A Firm’s Human Resource Strategy:

The combination of HR practices used by a firm.

Company statements regarding mission, values, strategies, and references to its workers.

Terms You Should Know

Psychological contract Knowledge workers Ee empowerment Strategy

You Should be Able To …

Know basic statistics about the changing demographics of the U.S. workforce.

Identify and discuss key environmental trends affecting HR.

Explain in depth and using examples the contingency theory of strategy.

Explain and compare the three theories of strategy.