BA 105 HRM Chapter 16

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Chapter 16
Strategically Managing the
HRM Function

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Learning Objectives 1 of 2
LO 16-1 Describe the roles that HRM plays in firms today
and the categories of HRM activities.
LO 16-2 Discuss how the HRM function can define its
mission and market
LO 16-3 Explain the approaches to evaluating the
effectiveness of HRM practices.
LO 16-4 Describe the new structures for the HRM
function.

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Learning Objectives 2 of 2
LO 16-5 Describe how outsourcing HRM activities can
improve service delivery efficiency and
effectiveness.
LO 16-6 Relate how process reengineering is used to
review and redesign HRM practices.
LO 16-7 Discuss the types of new technologies that can
improve the efficiency and effectiveness of HRM.
LO 16-8 List the competencies the HRM executive needs
to become a strategic partner in the company.

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Activities of HRM
Transactional activities
• Day-to-day transactions such as benefits
administration, record keeping, and employee
services
Traditional activities
• Performance management, training, recruiting,
selection, compensation, and employee relations
Transformational activities
• Knowledge management, management
development, cultural change, and strategic
redirection and renewal
LO 16-1

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Figure 16.1 Categories of HRM Activities and
Percentages of Time Spent on Them
Jump to long description in appendix

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Strategic Management of the HRM Function
Customer-oriented approach
• HRM function as a strategic business unit defined
in terms of the customer base, the customers’
needs, and the technologies required to satisfy
customers’ needs

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Figure 16.2 Customer-Oriented Perspective of
the HRM Function
Jump to long description in appendix

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Building an HR Strategy 1 of 2
The Basic Process
• Scan the environment
• Examine strategic business issues or needs
• Identify people issues to address
• Design HR strategy
• Communicate to relevant parties
LO 16-2

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Figure 16.4 Basic Process for HR Strategy

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Building an HR Strategy 2 of 2
Involving Line Executives
• Can increase the quality of information from which
the HR strategy is created
• Provide input
• Team members
• Receive communications
• Approve the strategy

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Figure 16.7 Approaches to Developing an HR Strategy
Jump to long description in appendix

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Measuring HRM Effectiveness 1 of 3
Benefits
• Marketing the function
• Shows how HR supports the organization
• Providing accountability
• Shows how HR is meeting its objectives
LO 16-3

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Measuring HRM Effectiveness 2 of 3
Audit Approach
• Key indicators
• Staffing
• Equal employment opportunity
• Compensation
• Benefits
• Training
• Employee appraisal and development
• Succession planning
• Safety
• Labor relations
• Overall effectiveness

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Figure 16.9 Comparing HR and Line Executives’
Evaluations of the Effectiveness of HRM Roles
Jump to long description in appendix

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Figure 16.10 Comparing HR and Line Executives’
Evaluations of the Effectiveness of HRM Contributions
Jump to long description in appendix

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Measuring HRM Effectiveness 3 of 3
The Analytic Approach
• Determines whether the introduction of a program
or practice has the intended effect
• Estimates the financial costs and benefits resulting
from an HRM practice
• Human resource accounting
• Utility analysis
• Uses analytic data to increase organizational
effectiveness

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Table 16.2 Types of Cost–Benefit Analyses
Human resource accounting
• Capitalization of salary
• Net present value of expected wage payments
• Returns on human assets and human investments
Utility analysis
• Turnover costs
• Absenteeism and sick leave costs
• Gains from selection programs
• Impact of positive employee attitudes
• Financial gains of training programs
SOURCE: Based on A. S. Tsui and L. R. Gomez-Mejia, “Evaluating HR Effectiveness,” in Human Resource Management: Evolving Roles and Responsibilities,
ed. L. Dyer (Washington, DC: Bureau of National Affairs, 1988), pp. 1–196.

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Improving HRM Effectiveness 1 of 6
Improving both the efficiency and effectiveness in
performing each of the activities
Eliminating as much of the transactional work as
possible (and some of the traditional work) to free
up time and resources to focus more on the
higher-value-added transformational work
LO 16-4

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Figure 16.11 Improving HRM Effectiveness
Jump to long description in appendix

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Improving HRM Effectiveness 2 of 6
Restructuring to Improve HRM Effectiveness
• Traditional structured around basic HRM
subfunctions, such as staffing, training,
compensation, appraisal, and labor relations
• Generic structure divides the HRM function into
three divisions
• The centers for expertise
• The field generalists
• The service center

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Figure 16.12
Old and New
Structures for
the HRM
Organization
Jump to long description in appendix

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Improving HRM Effectiveness 3 of 6
Outsourcing to Improve HRM Effectiveness
• An outside source may provide a service more
cheaply or more effectively (more expertise) than
doing it internally
• Primarily outsource transactional activities and
services
• Pensions and benefits administration
• Payroll
LO 16-5

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Improving HRM Effectiveness 4 of 6
Improving HRM Effectiveness Through Process
Redesign
• Reengineering
• Identify the process to be reengineered
• Understand the process
• Redesign the process
• Implement the new process
LO 16-6, 16-7

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Improving HRM Effectiveness 5 of 6
Improving HRM Effectiveness Through Process
Redesign continued
• New technologies—E-HRM
• Leveraging technology for the delivery of traditional and
transformational HRM activities

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Improving HRM Effectiveness 6 of 6
Improving HRM Effectiveness Through Process
Redesign continued
• Recruitment and selection
• Online recruiting one out of every eight hires
• Enables firms to monitor hiring processes to minimize the
potential for discriminatory hiring decisions
• Compensation and Rewards
• Training and Development

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Improving HRM Effectiveness through New
Technologies—HRM Information Systems
Three broad functions HRM has used in the past
• Transaction processing, reporting, and tracking
• Decision support systems
• Expert systems
New technologies
• Predictive analytics
• Customization

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The Future for HR Professionals
Four Basic Competencies
• Business competence
• Professional-technical knowledge
• Management of change processes
• Integration competence
LO 16-8

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The Role of the Chief Human
Resource Officer
Chief HR Officer
• Bear the responsibility for leading the HR function
• Ensure that HR systems and processes deliver
value to the company
• Seven roles
• Strategic advisor to the executive team
• Talent architect
• Counselor/confidante/coach
• Leader of the HR function
• Liaison to the board
• Workforce sensor
• Representative of the firm

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Figure 16.17 Percentage of Time CHROs
Spend in Each Role
Jump to long description in appendix

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Table 16.5 Roles of the CHRO 1 of 2
Strategic advisor to the executive team: activities focused
specifically on the formulation and implementation of the
firm’s strategy.
Counselor/confidante/coach to the executive team:
activities focused on counseling or coaching team
members or resolving interpersonal or political conflicts
among team members.
Liaison to the board of directors: preparation for board
meetings, phone calls with board members, attendance at
board meetings.

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Table 16.5 Roles of the CHRO 2 of 2
Talent architect: activities focused on building and
identifying the human capital critical to the present and
future of the firm.
Leader of the HR function: working with HR team members
regarding the development, design, and delivery of HR
services.
Workforce sensor: activities focused on identifying
workforce morale issues or concerns.
Representative of the firm: activities with external
stakeholders, such as lobbying, speaking to outside
groups, etc.

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Appendix of Image Long Descriptions

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Appendix 1 Figure 16.1 Categories of HRM Activities and
Percentages of Time Spent on Them
Transformational (5-15 percent)
• Knowledge management
• Strategic redirection and renewal
• Cultural change
• Management development
Traditional (15-30 percent)
• Recruitment and selection
• Training
• Performance management
• Compensation
• Employee relations
Transactional (65-75 percent)
• Benefits administration
• Record keeping
• Employee services
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Appendix 2 Figure 16.2 Customer-Oriented Perspective
of the HRM Function
Customers include line managers, strategic planners, and
employees.
Customers’ needs include committed employees and
competent employees.
Technology includes staffing, performance management,
rewards, and training and development.
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Appendix 3 Figure 16.7 Approaches to Developing an HR
Strategy
An outside-in perspective
• Business Driven (5 cases)
Business issues/outcomes
People issues/outcomes
HR strategy
3 Different Inside-Out strategies
• Business-linked (5 cases)
Business issues/outcomes
People issues/outcomes
HR strategy
• People-linked (7 cases)
People issues/outcomes
HR strategy
• HR-focused (3 cases)
People issues/outcomes
HR strategy
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Appendix 4 Figure 16.9 Comparing HR and Line Executives’
Evaluations of the Effectiveness of HRM Roles
On a scale of 0 to 8, HR managers rated their effectiveness
in 5 areas. Line managers also rated HR managers in
these 5 areas.
Providing HRM services – HR mean is 7.3, line mean is 6.1
Change consulting – HR mean is 6.2, line mean is 4.7
Business partner – HR mean is 6.1, line mean is 5.3
Developing the organization – HR mean is 6.5, line mean is
5.2
Tailoring HRM practices to strategy – HR mean is 6.8, line
mean is 5.3
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Appendix 5 Figure 16.10 Comparing HR and Line Executives’
Evaluations of the Effectiveness of HRM Contributions
On a scale of 0 to 7, HR managers rated their effectiveness in 7 areas.
Line executives also rated HR managers in these 7 areas.
Performing the expected job – HR mean is 4.5, line mean is 3.9
Responsive to customer needs – HR mean is 5.0, line mean is 4.2
Providing useful information – HR mean is 4.8, line mean is 4.3
Enhancing competitiveness – HR mean is 5.0, line mean is 3.8
Value-added contribution – HR mean is 5.0, line mean is 4.1
Contributing to core competence – HR mean is 4.8, line mean is 4.2
Building human capital – HR mean is 4.8, line mean is 4.2
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Appendix 6 Figure 16.11 Improving HRM
Effectiveness
From top to bottom:
Transformational (5-15 percent)
• Knowledge management
• Strategic redirection and renewal
• Cultural change
• Management development
Traditional (15-30 percent)
• Recruitment and selection
• Training
• Performance management
• Compensation
• Employee relations
Transactional (65-75 percent)
• Benefits administration
• Record keeping
• Employee services
On the bottom level are two more categories – outsourcing and process redesign, information
technology
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Appendix 7 Figure 16.12 Old and New
Structures for the HRM Organization
Historical structure
• At the top is the VP of HRM, followed by a second level with
the directors of staffing, compensation, training and
development, and planning.
New structure
• At the top is the VP of HRM, followed by a second level with
3 areas: centers for expertise (rewards, staffing, training and
development, communications). This is labeled
traditional/transformational. Next to this is field staff (HR
generalists), which is labeled transformational/traditional. And
finally service center (information technology, claims
processing), which is labeled transactional.
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Appendix 8 Figure 16.17 Percentage of
Time CHROs Spend in Each Role
What percent of your time would you say you spend in each of the
following roles?
Functional leader 22 percent
Workforce sensor 8 percent
Firm representative 5 percent
Talent architect 17 percent
Board liaison 10 percent
Executive coach 17%
Strategic advisor 21%
Other 0%
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