Chapter 1: How can a company obtain a competitive advantage?

What is competitiveness and human resource management?

Competitiveness refers back to the ability of companies to retain and gain market share in the desired industry. It is also related to effectiveness, which is determined by how the company satisfies stakeholders. Important "stakeholders" include "stockholders", who want something back for their investment. For example, customers who want a good quality product for the price, employees who want to be paid for the work they do.

Companies that do not meet the interests of stakeholders are less likely to have a competitive advantage over other companies in the industry.

Human resource management refers back to politics, practice, and systems that influence employee behavior, attitude, and performance. HRM means: determining and analyzing the work, determining the human resource resources (HRM planning), inspiring potential employees (recruiting), choosing employees (selecting), teaching employees how to do the work best and preparing for the future (training and development), rewarding employees (compensation), evaluating employee performance (performance management) and creating a positive work environment (employee relationship).

What are the roles and responsibilities of HR departments?

A study has shown that the amount made available by companies for HRM is on average 2.936 US dollars per employee. High impact HR teams have one person per 64 employees. These teams spend more than the average available for HRM: 4.434 USD. These high impact HR teams have furthermore a higher percentage of HR specialists than compliance-based and basic HR organizations.

There are three HR product lines:

1. Administrative service and transactions: compensation, renting and staffing.
   This emphasizes: means effectiveness and quality service.

2. Business partner service: developing effective HR systems and helping implement business plans, talent management.
   This emphasizes: knowing the business and exerting influence: solving problems, developing effective systems to ensure the necessary competences.

3. Strategic partner: contribute to the business strategy based on considerations of human capital, business capabilities, readiness and development of HR practices as strategic distinguishing factors.
   This emphasizes: knowledge of HR and the business environment, the market and business strategies.

HR managers have 2 major challenges:

1. Shifting their focus from current activities to strategies for the future.

2. Preparing non-HR managers to develop and implement HR practices.

What are strategic roles of HRM functions?

Shared service model is a way of organising HR functions (where centres of expertise or excellence, service centres and business partners are important). Centres of expertise or excellence are HR specialists in staff training. Service centers are a central place for administrative and transactional tasks such as enrolling for training courses or changing benefits that employees and managers can have online. Business partners are HR staff members who work with a business unit manager on strategic issues such as creating new compensation plans or developing programs to prepare high-level managers.

Self-service goes refers to giving employees online access to apps that provide information about HR issues. Examples of these HR issues are training, benefits, compensation and contracts. With a change to self-service, HR can focus more on consulting with managers on key personnel issues and need less time for day-to-day transactional tasks.

Outsourcing refers to the practice of providing another company with service (a vendor, third party or consultant). The most common "outsourced activities" relate to benefits administration (flexible publishing accounts, health plan status), relocation and payroll. The main reasons for companies to oursource specific services are cost savings, increased ability to recruit and manage talent, improving HR service quality and protecting the company from potential litigation by standardizing processes such as selection and recruitment.

Evidence-based HR refers to the demonstration that human resource practices have a positive impact on a company floor and key stakeholders. These key stakeholders might be employees, customers, the community and shareholders.

HR or work analytics refers to the practice or use of quantitative methods and scientific methods to analyse 'big data'. Big data combines information from human resource databases, business financial statements, employee surveys and other data sources to make evidence-based human resource decisions and demonstrate that HR practices affect the organization's bottom line, including profits and costs.

SuccesFactors use data from 3 systems. These three systems are the following: 

1. Customer relationship management
2. Learning and performance management
3. Employees record

The role of a HR senior will likely include the following tasks:

• Developing and supporting the company culture
• Employee recruitment, retention and engagement
• Success planning
• Developing the entire HR strategy of the specific company

The role of a HR junior will likely include the following tasks:

• All transactions focused on paperwork
• Benefits and payroll administration
• Answering employee questions
• Data management

The Society for Human Resource Management (SHRM) has drawn up a list of nine competencies that an HR professional should meet:

1. Human resource technical expertise and practices. This is the ability to apply the principles of human resource management to contribute to the success of the company.
   Examples of how to behave: stay up-to-date on relevant laws, legal statements and regulations: develops and uses best practices.
2. Relationship management. This is the ability to manage interaction with and between others with specific goals such as providing service and organizational success.
   Examples of how to behave: provides customer service to stakeholders in the organization, ensures alignment within HR in delivering service and information to the organization.
3. Consultation. This means providing guidance to stakeholders such as employees and leaders who seek expert advice on different circumstances and situations.
   Examples of how to behave: acts like an expert in the field of personnel and people management and develops advisory and coaching skills.
4. Organizational leadership and navigation. This is the ability to lead initiatives and processes within the organization and to buy from stakeholders.
   Examples of how to behave: promotes collaboration, shows behaviour that is consistent with and conforms to the organizational culture.
5. Communication. This is the ability to effectively and freely exchange information with and between different stakeholders at all levels of the organization to produce meaningful results.
   Examples of how to behave: provides constructive feedback effectively, helps managers communicate not only on HR issues.
6. World and cultural effectiveness. This consists of managing human resources between and across borders. Examples of how to behave: working effectively with different cultures and population groups.
7. Ethical practices. This includes the tntegration of core values, integrity, and responsible for all organizational and business practices.
   Examples of how to behave: maintains confidentiality, acts with personal, professional and behavioral integrity.
8. Critical evaluation. This is the ability to interpret information to determine the return on investment and the impact of the organization in making recommendations and business decisions.
   Examples of how to behave: collects critical information, makes good decisions based on evaluation of available information.
9. Business insight. This is the ability to understand business function and statistics within the organization and business.
   Examples of how to behave: displays an ability to understand business operations and functions within the organization, understands organizational statistics and their relationship to business success.

Which competitive challenges affect human resource management?

There are thee challenges where an increased importance of human resource management is crucial:

1. The sustainability challenge.
2. The challenge on a global level (global challenge).
3. The challenge of technology.

Competing through sustainability means: 

• a return on shareholders.
• high-quality products, services and work experience for employees.
• add value to intangible assets and human capital.
• social and environmental responsibility.
• adapt to changing characteristics and expectations of the workforce.
• legal and ethical issues.
• effectively use new working arrangements.

Sustainability is defined as the ability of a company to achieve their needs without sacrificing the ability of future generations to serve their interests.

Examples of stakeholders are shareholders, the community, customers, employees and all other parties who are interested if a company is or becomes successful.

Competing through globalization means:

• Expanding into foreign markets
• Preparing employees to go to work abroad

Competing through technology means:

• Change employees and managers work roles
• Create high performance work systems by integrating technology and social systems
• Developing Ecommerce and E-HRM
• The use of social networking systems
• Develop HR dashboards and use HR analytically in problem solving

Companies might have problems with attracting and retaining talented employees. Most companies increase wages, pay for benefits and provide training to provide a solution for these problems. New technologies eliminate administrative and transactional HR activities. About 80% of all jobs are in the service sector. Jobs in the service sector are in healthcare, local municipalities, professional business service and retail. The number of jobs are decreasing in the agriculture sector. Examples are farmers, fishing, forestry. This decrease in jobs is the result of for example technical developments, foreign competition, cost reduction and more efficient work processes. There is a shortage of employees with skills in science, technology, technology and mathematics (STEM skills).

Currently, more companies are interested in using intangible assets and human capital as a way to gain a competitive advantage. A business value consists of assets which are important to provide goods and services:

• Financial assets. Examples are cash and securities.
• Psychological assets. Examples are property and equipment.
• Intangible assets.

There are three examples of intangible assets.

1. Human capital: tacit knowledge, education and work related knowledge.
2. Social capital: corporate culture, management philosophy, coaching/mental relations
3. Intellectual capital: patents, copyrights, trade secrets.

The Magic Selling Program stands for:

• Meet and make contact and / or a connection
• Ask questions and listen
• Give options and advice
• Inspire to buy
• Celebrate the purchase

This program is designed to allow sales people to make more personal connections with shoppers.

Knowledge workers are employees who contribute to the company by what they know about customers or have specialized knowledge. They do not contribute not by manual labour. Knowledge workers share specialised knowledge that managers do not have such as specific information about customers. Knowledge workers are very much in demand due to the fact that companies need their skills and the jobs they need are growing.

Empowering means that employees have every responsibility to make decisions on all aspects of product development or customer service.

A learning organization includes a culture of lifelong learning, allowing all employees to continuously acquire and share knowledge.

Change refers to the approval of a new idea or behaviour by a company.

Employee engagement refers to the extent to which employees are fully involved in their work and the strength of their commitment to their work and the company.

Talent management refers to a company's systematically planned strategic effort to use bundles of human resource management practices, including the acquisition and assessment of employees, learning and development, performance management and compensation for attracting, retaining, developing and motivating highly skilled employees and managers.

Alternative work arrangements include the following:

• Independent contractors
• On-call, temporary and contract company employees

Total quality management (TQM) is a business effort to continuously improve the way people, machines and systems perform their work. This results in the following core values:

• Methods and processes have been developed to meet the needs of internal and external customers.
• Every employee is trained in quality.
• Quality is designed in a product or service. Therefore, errors can be prevented rather than detected and corrected.
• The company works with vendors, suppliers and customers to improve quality and keep costs down.
• Managers measure progress with data-based feedback.

Malcolm Balbridge National Quality Award is an award to promote quality awareness, recognize quality of companies and publish successful quality strategies.

ISO 9000:2000 is a quality standard which is used worldwide. It consists of eight quality management principles. These principles are the following:

1. Customer focus
2. Leadership
3. Human engagement
4. A process approach
5. A system approach to management
6. Continuous improvement
7. Using facts to make decisions
8. Establish equal relationships with suppliers of the firm

ISO develops standards which are related to management. These standards also include a wide variation in other areas such as education, music and protecting children.

The Six Sigma process is defined as the process of measuring, analyzing, improving and then controlling processes once they are brought within the narrow six sigma quality tolerance or standards.

Lean thinking is a way to do more with less effort, time, equipment, space but still offer customers what they need and want.

Company performance of existing employees is often referred to internal workers. Employees identify and recruit new employees from the external workforce through recruitment and selection. The external labour market includes people actively seeking employment and actively searching for a job.

Important changes in demography and diversity in the field of work are:

• The age in the workfield is rising.
• The field of work is more diverse in terms of race, gender and generation.
• Immigration will continue to influence the size and diversity of the working population.  

Different generations have different names for these generations. The generations are find below:

• 1925-45: Traditionalist, silent generation
• 1946-64: Baby boomers
• 1965-80: Generation X
• 1981-95: millenials, generation Y, Echo Boomers
• 1996: generation Z, digital natives

To successfully manage with a diverse field of work, a manager must develop a new set of skills. Examples of these new skills are:

• Effective communication with employees that have many different cultural backgrounds.
• Coaching and developing employees of different ages, educational backgrounds, ethnic, psychological and religious backgrounds.
• Provide performance feedback that is based on objective outcomes. These managers should make sure that there are no values and stereotypes that work against women, minorities and people with disabilities. They should look at their personal abilities and talents rather than judging too early.
• Develop a work environment that makes it comfortable for employees from different backgrounds to be creative and innovative.
• Recognising and responding to generational problems.

Ethics is defined as the fundamental principles of right and wrong that employees and companies deal with.

Ethically successful companies can be characterized by four principles:

1. Employees take responsibility for company actions.
2. The company emphasizes fair treatment of employees, customers, vendors and clients.
3. Employees value and use a sense of purpose or vision in their work.
4. The company emphasizes mutual benefits in customers, sellers, clients and common relationships.

Sarbanes-Oxley Act of 2002 sets strict rules for business conduct and imposes severe fines for non-compliance.

Human resource managers must meet three basic standards to be ethically responsible. These three standards are the following:

1. The HRM practices must result in the best outcome for a large group of people.
2. It must respect basic human rights in the area of privacy.
3. Managers must treat employees and customers fairly and equally.

Offshoring is defined as exporting jobs from developed countries to countries where labour and other costs are lower. Examples of these countries are India, Mexico and Brazil.

Reshoring is defined as jobs moving from other countries to the United States of America. Reshoring occurs more often than offshoring. There might be several reasons for this occurrence. Some of these reasons are:

• Political stability
• Customer preference
• Local health and safety standards
• Image: building a factory in a poor country might result in negative publicity.

Social networking means visiting websites and social media channels such as Facebook, Twitter, LinkedIn and blogs that facilitate interaction between people usually with shared interests.

Human Resource Information System (HRIS) is a computer system used to collect, store, retrieve and disseminate information which relate to a company's human resources.

Cloud computing refers to a computer system that provides an information technology (IT) infrastructure via a network in a self-service, customizable, and on demand model.

A HR dashboard is used in firms for managers and employees to have access to the company intranet or human resource information system.

High performance work systems maximize the gap between the enterprise social system (employees) and its technical system.

Virtual teams are defined as teams separated by time, geographical distance, culture and / or organizational boundaries. These teams almost always rely solely on technology (i.e. email, internet, Skype) to interact and successfully complete assignments.

What are competition challenges due to HRM practices?

There might be different challenges for firms. There might be global challenges and challenges in the area of sustainability. 

Examples of global challenges are the following:

• HRM strategy is matched to business strategy
• Knowledge is divided
• Work is divided into teams
• Selection systems are work-related and legal  

Examples of sustainable challenge are the following:

• Creating a continuous learning environment
• Discipline systems are progressive

The HRM practices that help companies deal with competitive challenges in 4 dimensions:

1. Managing the human resource environment
2. Acquiring and preparing human resources
3. Assessment and development of human resources
4. Compensating human resources