Human Resources And Culture

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 

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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 

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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 

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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?  

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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 

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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

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Role and Contribution of HR strategy

HR Audit: People in the Organization Employee numbers and turnover Organization structure Structures for controlling the organization

Selection, training and development Staffing levels

Use of special teams, e.g. for Innovation

Capital investment/employee

Level of skills and capabilities required

Role of quality and personal service in delivering the products or services of the organization

Morale and rewards Employee and industrial relations

Role of professional advice in delivering the product or service

Role and Contribution of HR Strategy

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

What the Audit Achieves 

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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 

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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? 

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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? 

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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 decisionmaking

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-2 Organisational 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) 

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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) 

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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 Reactor

Little consideration of environment; drift with little concern for strategy

Prospector

Analyzer

Stress innovation and growth; seek new opportunities

Stress maintenance of status quo with moderate innovation and growth

Dynamic, growing environment characterized by high uncertainty and risk

Moderately stable environment with some uncertainty and risk

Defender

Stress stability, conservatism, and maintenance of status quo Very stable environment with little uncertainty and risk

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

Defender:  

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Analyser:  

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

Prospector:  

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protect market share hold current position

find new opportunities exploit and take risks

Reactor:  

respond only to others often late and inadequate

Miles and Snow Typology Examples

 Defender: 

McDonald’s

 Prospector: 

Reebok International, Mrs. Fields

 Analyzer:  Procter & Gamble (Crest), Starbucks  Reactor: 

W.T. Grant

Analysis/Testing For Strategic Fit 

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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 

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How old is the organization? Does it exist in a stable or fastchanging 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?