A Strategic View on Winning Employees’ Hearts and Minds

Clint Chadwick

Associate Professor of Strategy and Human Resource Management

4/2/15

Topics of Discussion

• Topic 1: What people are saying about strategic HRM

• Topic 2: Principles of strategic HRM • Topic 3: How do organizations put this into

practice?

Topic 1: What People Are Saying about Strategic HRM

• The focus of strategy has shifted to internal factors

• Today, labor comprises approximately 65% of companies’ cost structures– People management has traditionally been either

oversimplified or seen as an art– Thus, people management is a key untapped

strategic leverage point

Traditional HRM vs. SHRM

• Individual HR policies and practices

• Individual or group level performance

• Transactional decision making

• HR systems

• Organizational performance

• Strategic choice

Lots of evidence linking commitment-based HR systems and organization performance• This has led to universalistic prescriptions • But there are lots of reasons to be skeptical…• Is this accurate?– Lots of differences between systems – “File drawer” problem that non-significant results go

unpublished• Is this interesting?– Strategy is about choice, and universal prescriptions

run counter to choice

SHRM Research Emphasizes “More HRM is Better”

Always upward sloping?

Source: Chadwick, C. 2007

-3.7

5-3

.5-3

.25 -3

-2.7

5-2

.5-2

.25 -2

-1.7

5-1

.5-1

.25 -1

-0.7

5-0

.5-0

.25 0

0.25 0.

50.

75 11.

25 1.5

1.75 2

2.25 2.

52.

75 33.

25 3.5

3.75 4

4.25 4.

54.

75 55.

25

-1.5

-1

-0.5

0

0.5

1

1.5

Meetings Rotation Selection Training expense

Standard Deviations of the Standardized HR Practice Variables

Estim

ated

Effe

cts o

n Lo

g of

Val

ue A

dded

It’s easy to overdo it with part-time workers

Source: Chadwick & Flinchbaugh, 2012

0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 4.25 4.5

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

PT Workers (Model 2)

PT Workers2 (Model 3)

Values of Log Part-time Workers

Effec

ts o

n Lo

g of

Val

ue A

dded

Can Strategy Theory Get Us Past Sloganeering?

Topic 2: How People Issues Influence Organization Performance--Principles

• The Resource-based View• Strategic Factor Markets• Human Capital• “Mind the gap”

The Resource-based View

• Value• Rareness• Inimitability• Non-Substitutability• Immobility

Some Attributes of Perfect Market Competition

• Perfect price and product quality information• Costless transactions• Free exchange between parties in the market• Free movement into and out of the market• Participants that behave in their rational self-

interest

Implications of the RBV• Operational effectiveness vs. competitive

advantage• Business units: What do you do that isn’t a

commodity service or activity? Does a stakeholder care enough to pay for it?

• Organizations: Not all employees matter to the same degree

Strategically Valuable Characteristics of Human Beings

• Adaptability• Inherent uniqueness• Coordination• Knowledge, creativity, innovation• Non-depletion with use• Relationships• Free will

What Does This Mean For Me?

• The RBV: What do I do for the organization that they can’t get from anyone else?– Labor can be a commodity, like anything else– How can I signal to my organization that I’m

providing this value?– Differentiation isn’t just uniqueness

Topic 3: How do organizations put this into practice?

• HRM systems• Portable vs. Organization-specific Human

Capital• The Dual Nature of Employment• Discretionary effort/Types of commitment

HR Systems on the Organization Level

HRM Systems

Strategy

Performance

Example HR system:Pfeffer’s HR Best Practices

• employment security• selective recruiting• high wages• incentive pay• employee ownership• information sharing• participation and

empowerment• self-managed teams

• training and skill development

• cross-utilization and cross-training

• symbolic egalitarianism

• wage compression• promotion from

within

Portable vs. Organization-specific Human Capital

• Portable HC: Valuable for many organizations– Employees typically make these investments– Organizations need assurances that they will not forfeit

their investment

• Organization-specific HC: Valuable only for one organization– Organizations typically make these investments– Employees need assurances that organizations will not take advantage of them if they invest in organization-specific skill

The portable skill/organization specific skill paradox

Organization Specific Portable

Common n/a OK for organizations, bad for workers

Scarce Great for organizations Great for workers

• What can your organization credibly offer you to induce you to make bigger investments in organization specific skill?

The Dual Nature of Employment

• Employment as an economic exchange– Labor for wages– Uncertain contracts– Indefinite contracts

• Employment as an affective relationship– Reciprocal exchanges– Psychological contracts– Importance of non-economic factors

Example: Profit-sharing• Behavioral modification view: Employees work

harder to increase profitsharing payouts– 1/n problem– Line of sight problems– Is the amount large enough?

• Affective view: Employees reciprocate the gift of profitsharing with greater effort

Discretionary Effort/Types of Commitment

• Behavioral/Compliance• Normative• Affective

Control Systems and Types of Commitment

• Behavioral/Compliance: bureaucracy, hierarchy, budgetary

• Normative/Affective: culture, leadership, relationships with co-workers, mission

Conclusion• Thank you – Let’s continue the conversation

Clint ChadwickAssociate Professor of Strategy and Human Resource ManagementUniversity of Kansas School of Business 326 Summerfield Hall office: (785) 864-75591300 Sunnyside Avenue fax: (785) 864-5328Lawrence, KS 66045-7601 web: www.business.ku.edu/faculty/chadwick-clint/