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HR as Strategic Business Partner BMA 360 Session 2 Human Resource Management Interpret & analyze Explain the Identify & explain HR Discuss avenues to how HRM policies & importance of the policies & practices maintain strong practices support the person-job- that motivate workers employment entire organization organization match relationships and how it can be established Legal, ethical & bottom-line foundations of HR policies Contemporary environmental issues affecting HR The financial impact of HR policies & practices HR as Strategic Business Partner Three dimensions are critical in design & practice of HR policies & programs HR as Strategic Business Partner Bottom Line Impact HR as Strategic Business Partner Legal Implications Bottom Line Impact HR as Strategic Business Partner Ethical Considerations Legal Implications Bottom Line Impact Value of Strategic HR Dr. Mark Huselid, Rutgers University 10,000 US employers Hypothesis: – “Sophisticated HR practices” will positively affect the bottom line Value of Strategic HR “High performance management practices:” – Formal information sharing device – Formal job analysis – Non-entry-level jobs filled from within – Regular employee attitude surveys – Participation teams – Company incentives, especially profit-sharing – Employee training – Formal grievance procedure or complaint resolution – Pre-hiring employment tests – Performance appraisals linked to compensation – Formal performance appraisals – Qualified applicants for frequently filled positions – Promotion decisions based on merit or performance Value of Strategic HR For employers higher in HPMP by one standard deviation, – Employee turnover is lower by 7% – Productivity is higher, $27,000 per employee – Profits and market value increase by over $3800 per employee – Increase in market value by over $18,000 per employee Innovative Management Practices HR challenge – Globally competitive environment – Downsized organizations – Precarious balance of competitive demands and employee needs & desires HR Measures Traditional measures – Behavioral – Statistical “Costing” HR – New approaches – Critical to HR becoming strategic partner Costing HR Fixed costs Variable costs Opportunity costs Costing HR All aspects of HR management can be quantified and measured – Compensation – Benefits, especially insurance premiums – Personnel taxes – Recruiting – Training and development – Affirmative action – Turnover – Outplacement Qualitative assessments also important Costing HR Other areas in which costing is useful – Absenteeism & sick leave – EAPs & wellness programs – Employee attitudes – Labor contracts – Economic value of job performance – Selection device validity Example: Utility Analysis “Utility of a selection device is the degree to which its use improves the quality of the individuals selected beyond what would have occurred had that device not been used” (Blum & Naylor, 1968). Example: Utility Analysis U = ntrxySDyZx-NC U = Productivity in dollars n = Number of people hired t = Average job tenure of those hired rxy = Validity coefficient SDy = Standard deviation of job performance in dollars Zx = Average predictor score of those chosen N = Number of applicants C = Cost per applicant Example: Results of Attitude Change models Three needed – Cost model – Effectiveness model – Synthesizing model Example: Results of Attitude Change Each behavior has a cost $17.55 per shortage $49.14 per absenteeism incident $5,379.31 per turnover Absenteeism Turnover Shortages Correlations: Satisfaction -.81* -.20* .10 Involvement -.08 -.29* -.12 Motivation -.26* -.16* -.23* Example: Results of Attitude Change Present cost level – Average number of balancing shortages (3.07) x cost per incident ($17.55): 3.07 x $17.55 = $53.88 per month Estimated behavioral improvement – Planned improvement in attitude (in SD units), or .5 x SD of balancing shortages (1.74) x correlation (r, -.23) of shortages & motivation .5 x 1.74 x (-.23) = -.20 Example: Results of Attitude Change New behavioral rate – Average number of shortages (3.07) + estimated behavioral improvement (-.20) 3.07 + -.20 = 2.87 per employee per month New cost level – New behavioral rate (2.87) x cost per incident ($17.55) 2.87 x $17.55 = $50.37 per employee per month Example: Results of Attitude Change Original cost level – Average number of balancing shortages (3.07) x cost per incident ($17.55): 3.07 x $17.55 = $53.88 per month New cost level – New behavioral rate (2.87) x cost per incident ($17.55) 2.87 x $17.55 = $50.37 per employee per month Savings of $3.01 per employee; for 100,000 employees, total savings > $300,000.
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