Aligning Hr with Business Strategy

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					Strategic Human Resource
Aligning HR and Business-Level Strategy:
    Human Resource Management

 HR‟s focus is on attraction, retention,
  and motivation of employees
 In many organizations, employees are
  key to creation of sustainable
  competitive advantage
 Q: For Wal-Mart, in what way does HR
  contribute to creation of sustainable
  competitive advantage?
    “HR‟s Toughest Challenges for
 Ensuring compliance w/ federal and
  state employment laws
 Retaining talent in an improving
 Managing performance
 Developing leadership
 Dealing w/ rising health care costs
            Source: Business & Legal Reports, 5/2/06
        Listening to HR‟s Critics
   Quantify people-management results into
       Productivity of workforce
       Cost of vacant position
       Cost of keeping bad manager
       Dollar impact of hiring and keeping top
        performers vs. average ones in mission-critical
   Adopt “fact-based” decision-making
       Not “I think” or “I believe” but “I know” re: cause
        and effect
            Causes of turnover
            What motivates workers to produce more
            Which HR actions can turn business unit around
                     Source: Workforce Management, 7/31/06
                Effective HR Strategy Formulation
                        and Implementation

Organizational             Consistency          Environment
                    Fit                   Fit


                          HR Strategies                                  Firm

                    Fit                   Fit
Organizational                                  Organizational
Characteristics            Consistency          Capabilities
  Selected HR Strategies That Fit Porter‟s
 Three Major Types of Business Strategies
Business     Common Organizational
Strategy     Characteristics              HR Strategies
Overall      • Sustained capital          • Efficient production
cost           investment and access      • Explicit job descriptions
leadership     to capital                 • Detailed work planning
             • Intense supervision of     • Emphasis on technical
               labor                        qualifications and skills
             • Tight cost control         • Emphasis on job-specific
               requiring frequent,          training
               detailed control reports   • Emphasis on job-based
             • Low-cost distribution        pay
               system                     • Use of performance
             • Structured organization      appraisal as a control
               and responsibilities         device
             • Products designed for
               ease in manufacture
 Selected HR Strategies That Fit Porter‟s
Three Major Types of Business Strategies
Business    Common Organizational
Strategy    Characteristics             HR Strategies
Differ-     •Strong marketing           • Emphasis on innovation
entiation    abilities                    and flexibility
            •Product engineering        • Broad job classes
            •Strong capability in       • Loose work planning
             basic research             • External recruitment
            •Corporate reputation for   • Team-based training
             quality or technological   • Emphasis on individual-
             leadership                   based pay
            •Amenities to attract       • Use of performance
             highly skilled labor,        appraisal as
             scientists, or creative      development tool
           “Women vs. Wal-Mart”
                                                       AVERAGE ANNUAL
                                                       EARNINGS** IN 2001
                      NO. OF       % OF                MALE               FEMALE
JOB                   EES*           WOMEN             SALARIES SALARIES

REGIONAL V-P             39          10%               $419,400        $279,800
DISTRICT MNGR           508          10                 239,500         177,100
STORE MANAGER         3,241          14                 105,700          89,300
ASST MNGR            18,731          36                  39,800           37,300
MNGT TRAINEE          1,203          41                  23,200           22,400
DPT HEAD             63,747          78                  23,500           21,700
SALES ASSOC         100,003          68                  16,500           15,100
CASHIER              50,987          93                  14,500           13,800

      * Full-time ** Including bonuses Data: Richard Drogin
               “Women vs. Wal-Mart”
   Wal-Mart culture built on inspirational leadership, autonomy, trust
        Bring Ees into org, convert them to principles: respect for individual,
         customer service, excellence, and imperative to buy and sell at lowest
         price possible
   But practices also may create barriers, e.g., job posting
        Wal-Mart famous for promotion from within – more than two-thirds of
         managers started as hourly Ees
        Hourly job posted within stores, but until current suit, Co had never
         posted openings for mngt training positions
             Not the Wal-Mart way, thought to be too bureaucratic…
             Wal-Mart way was to trust that store mngrs will promote those who merit
             Co now also developing formula for pay increases based on evaluation ratings,
              experience, and other factors to make raises more uniform
   Another aspect of culture which may create barrier is willingness to
    move for the job
        Single mother Asst Mngr involved in litigation moved nine times in eight
         years across three states
   Key for Wal-Mart is making processes fair without losing culture that
    makes it special
                        Source: Fortune, 7/21/03
     “Big Retailers Face Overtime Suits As
        Bosses Do More „Hourly‟ Work”
   Retailers such as Wal-Mart, RadioShack, Dollar General facing
    lawsuits accusing them of using low-level managers to do work
    of non-managers in order to avoid paying overtime
        Suits claim little difference between job duties of hourly ees and
         asst mngrs, esp nighttime asst mngrs (“glorified stockers”)
        RadioShack mngrs required to work at least 52 hrs/wk
   Under FLSA, mngrs may be entitled to overtime if more than
    40% of their time is not spent supervising or if jobs don‟t
    include decision making
   Wal-Mart tries to hold labor costs to 8% of sales, cf. 9-10% on
    average at other large-store retailers
        Alleged that to stay within budget, Wal-Mart district mngrs have
         encouraged store mngrs to send hourly ees home before shift is
         over, then asst mngrs (who are required to work at least 48
         hrs/wk) may stay on job for as much as 75 hrs/wk to cover
        Portion of store mngr compensation is annual bonus pegged to
         store profit
                      Source: Wall Street Journal, 5/26/04
 “In Ad Blitz, Wal-Mart Counters
Public Image as Harsh Employer”
   Wal-Mart bought full-page ad space in January 2005
    in more than 100 newspapers nationwide
       Co said ads are attempt to set record straight on labor
            “It‟s becoming clear that we have to do more and be more
             aggressive in telling our story. The purpose is to be proactive
             and initiate debate.”
            New web site:
   Amid criticism of labor practices, in 2004 Co initiated
    new wage structure to increase pay of some hourly
    Ees, created 40-person compliance team to ensure
    labor laws adhered to and diversity goals met
       Also linked percentage of executive bonuses to certain
        diversity goals
                      Source: Wall Street Journal, 1/14/05
        “The Wegman‟s Way”
   Wegman‟s labor costs run between 15% and
    17% of sales, cf. 12% for most supermarkets
   Annual turnover rate is 6%, cf. 19% for
    grocery chains w/ similar number of stores
   Industry‟s annual turnover costs can exceed
    entire profits by more than 40%
   Gallup survey found that over one-month
    period, shoppers who were emotionally
    connected to supermarket spent 46% more
    than shoppers who were satisfied but lacked
    emotional bond w/ store
               Source: Fortune, 1/24/05
    Current Developments in Union
   Wal-Mart has won all but one of seven union votes in
    U.S. (as of 10/02)
       One U win was butcher‟s dept in TX store, which was disbanded
        two weeks after election
            Co announced plans to phase out butchers and use prepackaged
             meat in 180 stores, said timing of decision was a coincidence
       When Wal-Mart acquired Woolworth‟s operations in Canada, it
        bought 120 stores, but not the seven that were unionized
       Wal-Mart EVP of People: “Where associates feel free to
        communicate openly with their management, why would they
        need a third party to represent them?”
       Co gives managers 56-page guide, “The Manager‟s Toolbox to
        Remaining Union Free”
            “It‟s important for you to be constantly alert for efforts by a union
             to organize your associates”
     Current Developments in Union
   “In the 1970s, General Motors was the nation‟s largest
    corporate employer, and thanks to its contracts with the
    UAW, it not only set the standards, but it raised the
    standards for all workers. Wal-Mart is doing the exact
    opposite. Nowadays it is the nation‟s largest corporate
    employer, and it is lowering standards for everyone.”
       Organizing director for UFCW
   Wal-Mart says its average hourly pay for FT ees is
       UFCW counters that it‟s only $8.23/hr (based on independent
        statistical analysis)
       BLS estimates average hourly wage for all non-supervisory retail
        ees is $12.34
            Wal-Mart spokesman says BLS data inflated by overtime, and that
             Wal-Mart‟s pay scale is competitive
                     Source: CNNMoney, 7/27/05
    Current Developments in Union
   Legal union avoidance tactics have impact
        Las Vegas Sam‟s Club held mandatory Ee meetings every week to
         express anti-U views
             “You can speak for yourself” (Some ees started wearing “I can speak for
              myself” buttons)
             “The union only wants your money”
   Former Wal-Mart manager, now UFCW organizer, reports
    surveillance cameras “sprouted” at Scottsburg, IN store (N of
    Louisville) after he started talking to workers there
        Co says the 15 cameras installed there “have nothing to do with union
   Other former managers say that when they telephoned Co hot line
    to report U literature was being distributed in their stores, LR
    specialists were flown in on Co jet that afternoon
   Other complicating factors include turnover, which may be 100%
    annually at some stores
                       Source: Business Week, 10/28/02; New York Times, 11/8/02; Business
                        Week, 10/6/03
     “Wal-Mart Says It Would Allow
    Unions in Its Chinese Operations”
   Wal-Mart said it would allow trade unions in its
    Chinese operations, an apparent response to
    pressure from Chinese authorities
       Wal-Mart has 42 outlets in China, ~20,000 ees
            Wal-Marts in Germany aren‟t unionized per se, although they
             have works councils
   Labor officials hope development will put pressure
    on other MNCs to follow suit
       In March, national legislature began investigation of
        compliance w/ country‟s labor law
       Finding: some leading MNCs were resisting efforts to set up
        unions within operations
                     Source: Wall Street Journal, 11/24/04
                       Closing Case
   Wal-Mart hiring more than 1 million ees over next
    five years
       Advancement opportunities
            65% of store managers began in hourly jobs
       College recruiting
            Diversity recruiting
            Internships in pharmacy and merchandising
       Management trainee program for college students
       Networking
            Students in Free Enterprise
   Case questions
       What corporate- and business-level strategies is Wal-Mart
       Discuss how Wal-Mart‟s growth plans affect and are
        affected by its HR strategy
            SWOT analysis

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