What is the loyalty HR strategy? (2023)

Development of a Human Resource Management strategy Chapter 2

Learning Objectives After reading this chapter, you should be able to: Describe the strategy development process. Describe two common competitive business strategies used by organizations. Explain the comprehensive, contingency approach to HR strategy, including key features of engagement strategies.

Learning Objectives Describe four human resource strategies commonly used by organizations. Explain how HR strategy and competitive business strategy are related.

What is a strategy? Strategy can be seen as a coordinated set of choices and actions. From a human resource management point of view, there are actually two strategies: the company's competitive strategy focusing on how to meet customer needs; choice and action; human resources strategy, which focuses on choice and action in the management of people in an organization; research has shown that long-term profitability An important key to success is a well-defined strategy that outperforms the competition and an effective workforce that executes that strategy. This is a good place to discuss the Southwest Airlines example presented in the text. When it comes to human resource management in an organization, there are actually two types of strategies. One is competitive business strategy, which focuses on choices and actions about how to meet customer needs. The second is the human resource strategy, which focuses on choices and actions related to personnel management in an organization. Talk about how Southwest Airlines uses these tactics.

strategy formulation process

Does strategy formation begin with information gathering? Companies must constantly check their external and internal environments. One way is to look at: Strengths Weaknesses Opportunities Threats Assess the external environment. The external environment includes all physical and social factors outside organizational boundaries. Fabric resistance to the external environment. (This is not mentioned in the textbook) The underlying benefit is opportunity. Other factors that give unfavorable conditions and negative factors to the organization's external environment are marked as threats. Opportunities are often easier to deal with than threats, but a clear understanding of both is essential to an effective strategy. If students can't spell SWOT, this would be a good opportunity to introduce them.

Assessing the External Environment Understanding the external business environment can help a company decide what goods and services to offer. Guidance in choosing to focus on reducing costs or delivering goods with superior functionality. Understanding broader changes outside the organization is also critical to HR strategy. Organizations need information about demographic and cultural changes to predict how many employees with specific skills will be available in the future. When it comes to the external business environment, understanding these trends can help determine what goods and services to offer. Knowledge can also guide the choice between focusing on cost reduction or providing goods with superior functions. Understanding broader changes outside the organization is also critical to HR strategy. Organizations need information about demographic and cultural changes to predict how many employees with specific skills will be available in the future.

Assessment of internal capacities Strategy development also requires an assessment of the organisation's internal capacities and resources. its advantages. HR practices can represent an organization's most important internal strengths. For example, the ability to attract and retain high-quality employees. On the other hand, the lack of effective personnel management can be a major weakness. Therefore, gathering information about human resources is an important part of an effective assessment of an organization's strengths and weaknesses. Human resource management is important because high-quality employees are relatively rare. You might want to talk about a recent report by the Workforce Development Task Force, which found that many in the workforce lack the skills they need. Not only are technical and computer skills lacking, but also more general skills such as critical thinking and communication. This shortage is not limited to the United States. Other countries, including Britain, France and Germany, have encountered similar problems. Effective methods of attracting and retaining employees thus actually represent an internal source of strength that can give the organization a competitive advantage. To be a real advantage, HR practices must also offer something that is difficult to imitate and irreplaceable.

Source for Effective Decision Making: Information from Kathleen M. Eisenhardt, "Strategy as Strategic Decision Making," Sloan Management Review, 40 (1999): 65-72.

Business Strategies There are two strategies at the business level. Cost Leadership Strategy An organization seeks to become a low-cost producer of goods and services. Their goal is to develop efficient production methods that allow them to sell at a lower price than their competitors. The cost management strategy is easily understood and applied by organizations when their decisions and actions are focused on delivering value through cost reduction. type of strategy. The goal of companies seeking cost leadership is to become efficient. Efficiency allows organizations to create value by producing goods and services at lower costs. Talk about Southwest Airlines and Walmart

Business Strategy Differentiation Strategy An organization using this strategy seeks to produce goods and services that are superior in some way to those offered by competitors. Your goal is to create unique value that customers are willing to pay more for. Organizations following this strategy focus on adding value by offering something better than their competitors—something customers are willing to pay more for. Organizations can differentiate their products or services in many ways. For example, the product itself may be unique, just as a pharmaceutical company has a drug that other companies do not. Marketing methods are another way to differentiate goods and services. Most advertisements are created to create the perception that products or services differ in some way from those offered by competitors. Excellent customer service is another potential area of ​​differentiation. Customers are often willing to pay more for a product if they know the organization will help them if something goes wrong. You might want to discuss with your students what Walmart does or what Lexus thinks. Fast food restaurants are also negotiable.

Human Resources Strategy Two basic approaches to Human Resources Strategy The universal approach aims to identify a set of HR practices that benefit all organizations. This approach identified a set of practices, called Engagement Strategies, that appear to be generally beneficial. The practice of engagement packages sends the message that the management cares about its employees. Engagement strategies also help ensure that employees are empowered and free to perform important work tasks. Universal approach – seeks to identify best practices to be followed by all organizations. An important conclusion from the comprehensive study is that HR practices are most effective when grouped together to form internally consistent groups. A single effective HR practice, such as the use of good employee selection tests, provides only limited benefits unless combined with other effective practices. Two examples: When using computer skills tests to screen employees, there can be additional benefits if these tests are combined with a compensation system that rewards people who actually use computer skills to do their jobs. It is most effective when a training program that encourages innovation is combined with an evaluation and compensation system that measures and rewards the behaviors learned during training. A set of HR practices that are internally consistent and mutually reinforcing is known as an HR package.

HR strategy The contingency approach aims to align HR practices with competing business strategies. This approach focuses on cost leadership rather than differentiation. Organizations primarily concerned with cost reduction emphasize overall processes and roles. They carefully prescribe appropriate behavior to do their job. Another distinction is whether the organization has an internal or external workforce orientation. Internal work-oriented organizations seek long-term relationships with employees, while external work-oriented organizations seek flexibility and do not make long-term commitments to employees. An emergency approach to HR strategy aims to align people management practices with competing business strategies. Since this book approaches human resource management from a strategic perspective, we emphasize contingency approaches. Organizations with a cost leadership strategy focus their efforts on improving efficiency. Employees tend to be generalists who work in a variety of positions. Organizations tightly control workflows and define precisely what they want employees to do. Appropriate behavior is specifically prescribed for employees, and HR practices focus on minimizing labor costs. When an organization knows exactly what it wants people to do, it makes sense to focus on a cost leadership strategy with tightly controlled processes. This usually happens when consumer needs are well known and rarely change. The result is mass production of standardized goods or services at the lowest possible cost. Example: You might want to talk about Toyota and Morgan Stanley's approaches.

HR Strategic differentiation

Four Human Resource Strategies There are four human resource strategies that are often used by organizations. Loyal Soldier Bargain Worker Commitment Expert Free Agency Loyal Soldier brands because of the strategy's emphasis on hiring and retaining loyal employees who will do what the company asks of them. Organizations with this strategic design allow employees to fill a wide variety of roles and perform a variety of tasks. People are recruited and hired because they fit the organizational culture and because they have the potential to be loyal employees. Strive to meet the needs of your employees and create strong bonds to reduce the likelihood of employee turnover. Organizations that employ this HR strategy hire people early in their careers and offer extensive training in many different skill sets. Careers often include many very different positions, and promotions are often not closely tied to previous experience. Performance appraisals are designed to promote collaboration rather than competition. Compensation includes long-term incentives and benefits, usually tied to the organization's overall performance. It is often seen in these organizations that trade unions help to create a sense of togetherness.

HR Strategic structure

Loyal Soldier Strategy The Loyal Soldier brand emphasizes hiring and retaining loyal employees who will do what the company asks of them. Organizations with this strategic design allow employees to fill a wide variety of roles and perform a variety of tasks. People are recruited and hired because they fit the organizational culture and because they have the potential to be loyal employees. Strive to meet the needs of your employees and create strong bonds to reduce the likelihood of employee turnover. The Loyal Soldier brand emphasizes hiring and retaining loyal employees who will do what the company asks of them. Organizations with this strategic design allow employees to fill a wide variety of roles and perform a variety of tasks. People are recruited and hired because they fit the organizational culture and because they have the potential to be loyal employees. Strive to meet the needs of your employees and create strong bonds to reduce the likelihood of employee turnover.

Loyal Soldier Strategy Organizations hire people early in their careers and provide extensive training in many different skill sets. Careers often include many very different positions, and promotions are often not closely tied to previous experience. Performance appraisals are designed to promote collaboration rather than competition. Compensation includes long-term incentives and benefits, usually tied to the organization's overall performance. Unions often help create a sense of unity. Loyal Soldier Strategy's ongoing organization hires people early in their careers and provides extensive training in many different skill sets. Careers often include many very different positions, and promotions are often not closely tied to previous experience. Performance appraisals are designed to promote collaboration rather than competition. Compensation includes long-term incentives and benefits, usually tied to the organization's overall performance. Unions often help create a sense of unity. You might want to talk about UPS as an example.

Cheap Labor Human Resources Strategy This strategy focuses on acquiring employees who do not require high wages. Organizations designed with this strategy allow managers to closely control the efforts of employees. Each employee has clearly defined and easy-to-learn tasks. People are recruited and employed to perform simple tasks that do not require explicitly developed skills. Little attention is paid to meeting the long-term needs of employees. Organizations using this type of HR strategy do not provide clear paths to career advancement and progression. The strategy focuses on acquiring employees who do not need high salaries. Organizations designed with this strategy allow managers to closely control the efforts of employees. Each employee has clearly defined and easy-to-learn tasks. People are recruited and employed to perform simple tasks that do not require explicitly developed skills. Little attention is paid to meeting the long-term needs of employees. Organizations using this type of HR strategy do not provide clear paths to career advancement and progression.

Retail employee HR strategy performance reviews focus on daily feedback and rarely incorporate formal measures. Training is largely limited to practical techniques that teach specific ways to perform specific tasks. Compensation is generally based on hours worked, with minimal benefits and long-term incentives. The lack of consistency among employees often makes unions somewhat rare. Performance reviews focus on daily feedback and rarely include formal measures. Training is largely limited to practical techniques that teach specific ways to perform specific tasks. Compensation is generally based on hours worked, with minimal benefits and long-term incentives. The lack of alignment among employees tends to make unions somewhat rare in organizations seeking cost efficiencies through external labor management. For example, you might want to discuss it with hospitality students.

Dedicated specialist HR strategy The main purpose of this strategy is to hire and retain employees specialized in certain tasks. Organizational design jobs that use this strategy give employees a lot of freedom to innovate and improve the way tasks are done. People are recruited and hired for their potential to fit the organizational culture and their ability to become experts in a given field. These organizations hire people early in their careers and train them to be experts in a specific area, such as accounting or sales. The main objective of this strategy is to hire and retain employees specialized in specific tasks. Organizational design jobs that use this strategy give employees a lot of freedom to innovate and improve the way tasks are done. People are recruited and hired for their potential to fit the organizational culture and their ability to become experts in a given field. These organizations hire people early in their careers and train them to be experts in a specific area, such as accounting or sales.

Specialist engaged in the HR strategy The performance evaluation aims to balance cooperation and competition between the employees. Careers often include multiple promotions to similar positions with increasing responsibility. Employees receive long-term training that helps them develop strong expertise. The compensation is relatively high and usually includes a good benefits package that binds the employee to the organization. Performance reviews are designed to balance cooperation and competition between employees. Careers often include multiple promotions to similar positions with increasing responsibility. Employees receive long-term training that helps them develop strong expertise. The compensation is relatively high and usually includes a good benefits package that binds the employee to the organization. You can discuss Merck's Human Resources strategy with your students.

Free Agency HR Strategy The main focus associated with this strategy is to hire people who have key skills but who do not necessarily want to stay with the organization for the long term. Jobs are designed so that employees take on a wide range of responsibilities in specific areas and have a great deal of freedom to decide how their work is done. Long-term commitments are avoided and no effort is made to foster a strong bond between employees and the organization. People are recruited because they already have the skills and experience needed to do a particular job. They do not expect to have a long career in the organization. Top positions are usually assigned to people from outside the organization. The main focus associated with this strategy is to hire people who have key skills but who do not necessarily want to stay in the organization for a long time. Jobs are designed so that employees take on a wide range of responsibilities in specific areas and have a great deal of freedom to decide how their work is done. Long-term commitments are avoided and no effort is made to foster a strong bond between employees and the organization. People are recruited because they already have the skills and experience needed to do a particular job. They do not expect to have a long career in the organization. Top positions are usually assigned to people from outside the organization.

Free agency HR strategies focus on hiring people who possess critical skills but are not expected to stay in the organization. Employees have broad responsibilities in specific areas and are given a great deal of freedom to decide how their work is carried out. Long-term commitments were avoided and no effort was made to foster a strong bond with the organization. Performance reviews focus on results and outcomes. Training is rare. Performance reviews focus on results and outcomes. Training is rare. Short-term compensation is often high, which is necessary if organizations want to hire people with the best skills. Compensation is specifically tied to individual performance outcomes. Avoid long-term benefits and compensation packages that lock employees into the organization. Unions are rarely seen in these organizations. Example: Information technology career field.

Free agent HR strategy High salary in short term. Compensation is linked to individual performance. Long-term benefits and rewards are avoided. Unions are rare.

Alignment of Human Resources to Competitive Business Strategy An organization may have human resources aligned to its competitive business strategy. Organizations whose HR strategy matches their competitive strategy perform better. Research shows that organizations that employ a competitive cost management strategy outperform when they follow a loyal soldier HR strategy. Organizations with differentiated competitive strategies performed better when using specialist engagement strategies. An organization may have HR practices that fit its competitive business strategy. Organizations whose HR strategy matches their competitive strategy perform better. Research shows that organizations that employ a competitive cost management strategy outperform when they follow a loyal soldier HR strategy. Organizations with differentiated competitive strategies performed better when using specialist engagement strategies.