2. • The bad news: It’s not easy to do.
• The good news: It’s hard to imitate.
• The HR levers for competitive advantage
• The only issue is whether we consciously
HR In Building Competitive
3. The HR value chain
It’s a three-step process that starts with HRM activities, followed by HRM outcomes and organizational objectives. It
clearly depicts how HR activities lead to organizational goals.
4. On the left of the chain, we find the HRM activities. These are
measured using the so-called efficiency metrics. Examples
• Cost of hire
• Time to hire/time to fill
• Learning and development budget
• Training time in days
• Time since last promotion
All these metrics measure HR processes and give information
about how efficient the HR function is. It doesn’t say anything
about how well HR is hitting its marks, a.k.a. HR effectiveness.
HRM activities and processes: Efficiency metrics
5. In the second category, we observe the HRM outcomes. These
are the outcomes that are traditionally seen as important HR
KPIs. Examples include:
• Retention/employee turnover
• Absenteeism rate
• Individual performance
• Team performance
• Quality of hire
All these metrics provide information about how well the
workforce is doing. This involves both HR and line management.
HRM outcomes: Effectiveness metrics
6. The last category is organizational objectives. These are the
strategic goals that the organization is trying to reach.
Examples of metrics include:
• Market share
• Profit margins
• Market capitalization
• Customer satisfaction
• Customer loyalty
These are the kind of outcomes that add value to the business
and make the business more viable in the long term.
Level 3 HR organizations focus on the business contribution
they make with all of their people policies. These are truly
strategic HR functions.
7. The HR value chain in practice
Let me give you an example about how these different levels of
HR organizations think. Say we want to increase learning in the
A level 1 HR organization will allocate more L&D budget to
employees, believing that better-trained employees will benefit
A level 2 organization will allocate more L&D budget to
employees and follow up by checking if these investments pay off.
They test knowledge retention and check if the investments lead
to better individual performance. If not, they will test and change
training programs and/or training providers in order to optimize
A level 3 organization does it the other way around. They know
that the L&D spending was increased because the organization
wanted to become more innovative and profitable. This
organization will do all of the above and test how it impacts these
two key performance indicators. They will only be satisfied when
there’s a positive relationship between the L&D spending and the
key performance indicators.
HR level Focus How Level
Focus on cost-
…through optimizing HR
Focus on HR
…through maximizing HR
outcomes. Cost efficiency
…through efficient and
effective HR policies
8. Creating value through HR: HR Strategy
9. HR motivates workers to perform at the highest level possible and maintain an
organizational culture of high morale. A primary way HR adds value to a
company is by persuading company leaders to train and develop employees
and reward strong performance through increased compensation and regular
Strategic HR has emerged as a prominent view of the role this functional area
plays in building and developing a strong organization.
How Does HR Add Value to an Organization?
• People and Performance
• Talent Acquisition and Retention
• Protection from Lawsuits
• Participation in Strategic Planning
10. People and Performance
A well-run human resources department manages an essential link to company success, quality workers and exceptional performance. The long-
term success and financial performance of a company is usually directly correlated to the talents, motivation and accomplishments of its people.
People make and sell products, work with customers and collaborate on decisions. A primary way HR adds value to a company is by promoting this
link and persuading company leaders to train and develop employees and reward strong performance through increased compensation and regular
Talent Acquisition and Retention
Hiring and retaining talent is a foundation of high-performing companies and is essential for small businesses and start-ups that want to grow
quickly. HR is largely responsible for building and managing the systems that recruit, attract, hire, train, motivate and retain a company's best
employees. This includes establishing strong job designs and hiring the right employees to match. It also involves building strong interviewing and
screening processes, planning orientation and training, developing successful employee evaluation tools and constructing motivating compensation
programs that maximize what your business has to offer. For example, a start-up may provide shares of the company while an established small
business offers a generous vacation policy.
Protection from Lawsuits
One of the less-heralded ways HR adds value to a business is through legal protection from discrimination and wrongful termination lawsuits. HR
professionals must be continually up to speed on employee laws and educate business owners and managers. They must also design hiring and
promotional systems that promote fairness and equality. Interview questions that align specifically to a job, for instance, minimize risks of a
discrimination claim. This element of HR becomes increasingly valuable as workplaces become more diverse.
Participation in Strategic Planning
As proactive HR strategies have overtaken reactive responses to employment conditions, HR professionals play a stronger role in planning. HR
directors commonly serve on company management teams and participate in strategic planning. This includes assessments of company strengths
and weaknesses and projections of opportunities and threats. HR participants contribute the current view and future expectations of people and
resource needs, discussion of compensation and training changes and research on emerging opportunities and threats.
11. Improving business performance through strategic HRM
• Strategic HRM is about improving business performance
• Organizations in all sectors (private, public or voluntary)
have to be business-like in the sense that they are in the
business of effectively and efficiently achieving their
purpose, whether this is to make profits, deliver a public
service or undertake charitable functions.
• The major concerns of strategic HRM are to meet the
business needs of the organization and the individual
and collective needs of the people employed in it.
12. How HR impacts on organizational Performance?
People are the organization’s key resource and
organizational performance largely depends on them.
Therefore, an appropriate range of HR policies and
processes is developed and implemented effectively, then
HR will make a substantial impact on firm performance.
Human Resource activities such as recruiting skilled and
talented individuals, developing them during their time
with the company and ultimately retaining them affects
positively the general performance of the company by
linking individuals to the operational, business and
strategic aspirations of the organization, providing for the
possession, improvement and retention of brilliant
workforce, who can bring higher productivity, flexibility
,innovation and who fit the corporate culture and the
planned necessities of the company
13. Section Break
Insert the Subtitle of Your Presentation
a) HR practices can make a direct impact on employee characteristics such as
engagement, commitment, motivation and skill
b) if employees have these characteristics it is probable that organizational
performance in terms of productivity, quality and the delivery of high levels of
customer service will improve
c) If such aspects of organizational performance improve, the financial results
achieved by the organization will improve.
d) If you have HR practices that focus on effort and skill; develop people’s skills;
encourage cooperation, collaboration, innovation and synergy in teams for most, if
not all employees, the whole system functions and performs better.
14. HR practice area How it impacts
Attract, develop and
retain high quality
Match people to the strategic and operational needs of the organization. Provide for the
acquisition, development and retention of talented employees, who can deliver superior
performance, productivity, fl exibility, innovation, and high levels of personal customer service
and who ‘fi t’ the culture and the strategic requirements of the organization
Talent management Ensure that the talented and well motivated people required by the organization to meet
present and future needs are available
Job and work design Provides individuals with stimulating and interesting work and gives them the autonomy and fl
exibility to perform these jobs well. Enhance job satisfaction and fl exibility which encourages
greater performance and productivity
Enlarge the skill base and develop the levels of competence required in the workforce.
Encourage discretionary learning which happens when individuals actively seek to acquire the
knowledge and skills that promote the organization’s objectives. Develop a climate of learning
– a growth medium in which self-managed learning as well as coaching, mentoring and training
Focus on organizational as well as individual learning and provide learning opportunities and
opportunities to share knowledge in a systematic way. Ensure that vital stocks of knowledge
are retained and improve the fl ow of knowledge, information and learning within the
How HRM practices make an impact
15. Increasing engagement,
Encourage productive discretionary effort by ensuring that people are positive and
interested in their jobs, that they are proud to work for the organization and want to go
on working there and that they take action to achieve organizational and individual
Develop a positive and balanced psychological contract which provides for a continuing,
harmonious relationship between the employee and the organization
Develop a performance culture which encourages high performance in such areas as
productivity, quality, levels of customer service, growth, profi ts, and, ultimately, the
delivery of increased shareholder value. Empower employees to exhibit the
discretionary behaviours most closely associated with higher business performance
such as risk taking, innovation, and knowledge sharing. of knowledge and establishing
trust between managers and their team members
Reward management Develops motivation and job engagement by valuing people in accordance with their
Employee relations Develops involvement practices and an employee relations climate which encourages
commitment and cooperation.
Working environment Core values, leadership, work/life balance, managing, diversity, secure
Develop ‘the big idea’ (Purcell et al, 2003), ie a clear vision and a set of integrated
values. Make the organization ‘a great place to work’