BUS 680 Week 1 Work

Two Aligning Training with Strategy

Learning Objectives After reading this chapter, you should be able to:

Describe the strategic planning process, its components, and their relationships.

Describe how the external environment in�luences strategic choices.

Identify the major factors in�luencing the alignment of internal strategies with external strategies.

Distinguish between an organization’s external and internal strategies, describe their relationship and the value of each.

Describe the bene�its of including a human resource development (HRD) perspective in strategy development.

Describe the differences, similarities, and relationships among human resource (HR) and HRD strategies.

Describe the process for determining the training requirements of the strategic plan.

Describe the relationship between HRD and the other HR functions.

Describe the role of HR in outsourcing of training.

Describe the �ield of organizational development (OD) and its relationship to training activities, including the value of cross training between the two.

Identify possible HRD strategic alternatives and situations in which they might be appropriate.

2.1 Case: Hershey Aligns Training with Strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_001)

Hershey Foods is the leading North American manufacturer of chocolate-related grocery products and exports those products to over 90 countries. Hershey sells its products to distributors (such as large grocery and drug store chains, small retailers, wholesalers, and brokers) who then sell these products to their customers. Hershey’s success depends on those retailers doing a good job of promoting Hershey products in their stores. As a part of its marketing strategy, Hershey has a variety of promotional programs for its distributors that are used to stimulate sales at various times during the year. One part of this strategy was a practice known as “trade funding,” which has the manufacturer reinvest some of its pro�its back into joint promotional programs with its distributors. For example, Hershey might provide �inancial support to a grocery chain to create displays promoting Mother’s Day specials or to promote “three for the price of two” specials. Hershey’s trade funding was often done on a promotion-by-promotion basis with each customer. Both Hershey and its customers sometimes felt that these types of promotional strategies were not effective enough. Furthermore Hershey’s executives felt that a better approach to allocating these funds would maximize mutual bene�its. In addition, there wasn’t an effective-enough connection between a customer’s sales of Hershey products and how much funding they received. Negotiations over these promotional investments would also include agreements on other aspects of the customer’s relationship with Hershey, such as pricing, shelf space/location, placement of product, creation and use of promotional displays in stores, and joint promotion plans (for example, coop advertising), and these needed to be more effectively negotiated into the overall strategy for executing sales with each customer.

At the beginning of 2002, believing that its current approach to allocating trade funding was not the most effective method for maximizing return on investment (ROI) and customer satisfaction, Hershey’s senior executives decided that signi�icant changes were needed in its strategy. This was at a time when Hershey’s �irst-quarter �inancial numbers were down; they were in the middle of management reorganization; the union workers in the largest factory were on strike; and the sale of the company was being quietly explored.

Using information from a customer satisfaction survey along with their belief that a better trade funding method was possible, senior management came up with a new strategy with the following key elements:

Hershey and each customer would develop an annual promotional plan for which Hershey would allocate funds.

The annual plan would include a negotiated agreement on issues such as commitment to sales targets, pricing, shelf space, and other marketing issues outside of “special” promotional events.

The amount of funding customers would receive would be based on their past sales record and ability to execute the agreed-upon annual plan.

The new strategy was called “Blue Chip.” Successful implementation of the new strategy would require salespeople to change the way they interacted with customers. Some new task requirements would be

gaining access to key managers (sometimes different from their day to day buyers) and explaining to them the new trade funding approach;

getting the customer to share sales data and information about future plans that would be needed to help convince them of the advantages of the new Blue Chip approach;

negotiating a new and different pay for performance approach to receiving trade funding;

motivating customers to engage in a new annual (rather than “promotion by promotion”) planning process;

gaining compliance to annual promotion plans after they’ve been negotiated; and

1

negotiating during the annual promotion period when mutual goals were not achieved, or when changes to the annual plans were needed

To accomplish these tasks the salespeople would require new KSAs. Some of these included

knowledge of the new program,

knowledge of all the factors that would be discussed in future agreements with retailers, and

negotiation skills to deal with the more complex agreements they would be required to execute with retailers.

The knowledge required would be provided through meetings, management communications, and manuals; however, to effectively implement the strategy, the salespeople would need to be adept at negotiating these new long-term deals. For the negotiation skills necessary to implement the strategy, Hershey went to an outside vendor, BayGroup International. BayGroup International developed an experiential negotiations workshop designed to give the salespeople the skills necessary to make Blue Chip a success, and give their managers the skills needed to coach their teams for optimal performance back on the job after formal training ended.

The Blue Chip strategy was introduced and the related training all took place at the May 2002 Sales Summit. The training focus was to provide the entire sales force with the KSAs needed to implement the strategy. Implementation of a strategy such as this is complex and dif�icult. Most companies would put the implementation (in this case the training) of a new strategy on hold until they had a clearer picture of how everything would “shake out,” given the labor strife and possible sale of the company noted earlier. What made Hershey decide differently? Hershey needed to put both its employees and customers on notice that they were changing how they did business. As Bernie Banas, VP of sales at the time, said, “We were going through a transition. . . . It is critical to both Hershey and our customers that we execute the transition �lawlessly.” By combining the introduction of the strategy and the training required to implement it, Hershey showed that it was serious about the strategy. This wasn’t just training focused on skill gaps; it was training that connected directly to Hershey’s business goals and strategy.

So what did the training focus on? First, pre-training executive communication (reinforced at the start of each workshop) put the need for strategy change into a context that all the sales force could understand, and then provided an overview of how the Blue Chip strategy would address their needs. This was followed by BayGroup International’s negotiation training that was to provide salespeople with the skills and con�idence to successfully implement the new strategy. This training used exercises based on typical challenging negotiation situations the sales team would encounter when they went into the �ield to deploy it.

Discussions of Hershey’s strategic business needs included the following:

The need for a change in strategy to improve results for both Hershey and its customers

The need for a shift in the selling process from a relationship-based one to a more data-driven one

The need for a new pay-for-performance–based approach for working with customers

The need to handle increased sophistication of customer buyers in terms of purchasing and negotiating knowledge and skill

The need to include all sources of value and negotiating leverage in discussions with customers

The Blue Chip strategy was then described in terms of (1) its bene�its to customers, (2) its ability to motivate customers to plan better and to incorporate all aspects of product promotion within the plan, and (3) Hershey’s ability to gain compliance to the annual plans. The training was kicked off by the senior executives, who directly connected the training objectives to the business needs. These training objectives were based on what was going to be needed in terms of KSAs to effectively implement this new strategy. In other words, a future-oriented performance gap (need for effective negotiation skills) was evident based on the current salespeople’s KSAs. They

would need to be adept at negotiating in order to implement the new strategic plan effectively. This made the negotiating training highly relevant and central to the success of the strategic change. The content of this training was based on the technical aspects of the Blue Chip program and its deployment through effective negotiation skills, tools, and sales management processes. The negotiation skills helped the sales force effectively balance Hershey’s interests with the maintenance of a collaborative relationship with the customer. All the training was focused on the practical application of the new KSAs. Experiential and discovery learning techniques were used to deliver this training, which was particularly important to help the seasoned Hershey’s sales team see the weaknesses of their current negotiation approaches (built up over many years) and highlight the need for personal skill development.

The new strategy proved very successful for Hershey, as its �inancial numbers have improved and so have its surveys of customer satisfaction. Share price has improved as well. In May of 2002, Hershey was trading at $34 a share. In May of 2010, it was trading at $47. The new strategy would not have been successful had the sales force not implemented it correctly. The training provided at the summit, as well as the follow-up training and coaching of the sales teams was crucial to the strategies’ successful implementation. But just as critical were the changes to the internal reinforcement systems at Hershey that supported the changes required of the sales force. Hershey continued to build on its successes by implemented follow-up training in subsequent years, as well as consulting from BayGroup International experts for speci�ic sales teams to help them execute their strategic account strategies.

As a side note, Hershey has an interesting training philosophy. They believe that visible short-term victories lead to credibility and future funding for long-term training and development projects. One rule of thumb is that every year’s training budget should include at least one key strategic initiative that is “close to return on investment (ROI).” Clearly the Blue Chip initiative met this criterion.

2.2 Overview As indicated in Chapter 1, aligning training activities with the goals and strategy of the organization has been the top priority of HR and HRD leaders for many years. The Hershey Foods case exempli�ies this process. Note how it was done. First, the speci�ic strategic plan is analyzed and it is determined whether any new job requirements are needed. In this case some new tasks related to being able to convince customers of the value of the new Blue Chip strategy were identi�ied. Once the tasks are identi�ied, the KSAs necessary to complete these tasks are identi�ied. Then training needs to be developed, or purchased, to provide these KSAs. In the Hershey case, the training was purchased from a well-known and well-regarded consulting �irm.

Hershey realized that when you tie your training to speci�ic strategic initiatives, it ensures that training dollars are put to the best use. This chapter provides a general explanation of business strategy and ways to make sure that training is aligned with that strategy. To better understand how to align training with strategy, it is �irst necessary to understand the strategic planning process.

2.3 Strategic Planning Formalized strategic planning (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_001) is a process used to determine how best to pursue the organization’s mission while meeting the demands of the environment in the near (e.g., next year or two) and long term (e.g., next �ive to ten years). A proactive strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_002) focuses on the longer term, and its process is more formalized, typically involving sophisticated analytical and decision-making tools. This is the process Hershey used. Its purpose is to build a good �it between the organization and its future environment. However, strategy can also develop in a more reactive fashion, responding to short-term business conditions. In a reactive strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_003) less formal analysis and planning occur and more attention is focused on the immediate future. Many suggest that both reactive and proactive strategies are necessary for an organization to be effective. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_002) The proactive process uses a best guess about what the future will bring, whereas the reactive process addresses how operations will confront what exists now and in the next year or two. A strategic plan that positions the �irm for long-term expectations but is modi�ied by the �irm’s experience as it moves forward is preferable to either having a rigidly held long-term plan or reacting only to short-term experience.

To be effective, strategic planning should occur throughout the organization, with each higher level of the organization providing direction to the lower levels. Once a strategic plan has been developed, organizational units develop or are given objectives by higher-level units that, when combined, will implement the strategy. The units develop their own strategies and tactics to achieve the organizational strategies. Individuals within the unit are given or develop objectives that will help achieve the unit’s objectives. Thus, from the HR unit’s perspective, the organizational strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_004) provides the direction for HR’s strategic objectives. HR develops supporting tactics that provide the HR staff with a set of objectives to achieve (see Figure 2-1). In this way, plans for implementing the organization’s strategy are developed and coordinated throughout the organization.

Figure 2-1 Linkage Between Strategy, Tactics and Objectives

So imagine you are the vice president of HR at Domtar (the case from Chapter 1). You have your objectives from the strategic plan. What is the next step? Well you need to meet with the various HR units and provide them with objectives that will help the overall strategic plan come to fruition. The unit responsible for compensation will need to consider implementation of an incentive compensation system tied to the new strategic focus. To implement an effective incentive system requires an effective performance review and feedback process. But recall that such a

2

system would also be required to attain one of the goals of the strategic plan; improving employee performance. Can you think of anything else? What about the organizational development unit? Implementation of Kaizen would be high on their list of objectives. What are the chances that all these HR projects would be approved and funded? Since they were all tied to the implementation of the strategic plan, all were funded.

Given all you now know, what will be required from the training department? A new incentive system will require some level of training for managers expected to implement such a program. Furthermore, suppose that the new performance appraisal system was focused on objective setting (i.e., Management by Objectives—MBO). This would require training in how to develop objectives with subordinates as well as effective feedback skills for the management meetings with subordinates. The new strategic focus espoused by Raymond Royer would require getting all managers on board with a solid understanding of this new focus through some level of training. Also the employee orientation program would have to be modi�ied to re�lect this new focus.

These are some of the ways in which organizational training is a key to implementing the strategic plan. What about the formation of Domtar’s strategic plan? Should the HRD unit have had any input on the front end? As you might have noted, the success of the strategy depended heavily on the competencies of the workforce. Without knowing the current capabilities of these individuals, Domtar does not know whether it has the capacity to successfully implement the strategy. The same can be said of Hershey’s strategic plan. Without Hershey having a workforce with the right competencies, the strategic plan would not get off the ground. HRD can and should be involved with strategic planning at the following three levels: organizational strategy, HR strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_005) (tactics), and HRD strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_006) (more tactics). We will review the factors that go into developing a strategic plan before covering these areas. Our goal here is to provide you with the basics needed to understand strategy development, so we will not cover the area in depth. For the sake of brevity and general understanding, we have simpli�ied many of the concepts and principles.

Organizational Mission Strategies are created to achieve the organization’s mission. A mission statement articulates why the organization exists. The mission is the focal point for strategy development because it outlines what the strategy is designed to achieve. Here are examples of relatively short and clear mission statements from two different types of organizations.

Mission of Ozone House (a Social Service Agency) Ozone House is a community-based, not-for-pro�it agency that seeks to help youth lead safe, healthy, and productive lives through intensive prevention and intervention strategies. Since 1969, Ozone House has actively developed unique, high-quality housing and support programs and services that provide support, intervention, training, and assistance to runaway, homeless, and high-risk youth and their families. Through these support services, we help youth develop essential life skills, improve their relationships, and enhance their self-image so that they may realize their full potential for growth and happiness. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_003)

Mission of Herman Miller Herman Miller, Inc., is a leading global provider of of�ice furniture and services that create great places to live, learn, work, and heal. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_004)

These statements, though different, show many similarities. A good mission statement is a fairly general description of what the organization seeks to accomplish. It describes the products or services the organization provides, to whom it provides them, and what it wishes to accomplish.

3

4

Strategic Choices Strategies re�lect choices that the organization makes about how to pursue its mission. An organization must choose from among several often contradictory strategies. The strategic choices a company makes have signi�icant implications for where HRD should focus its resources. To effectively align the unit’s activities with the strategies, a manager will need to understand the factors that have led the organization to its strategic choices. The literature dealing with strategy contains a great many categorizations and terms that refer to different types and levels of strategy. For simplicity, we choose the term competitive strategy. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_007) Competitive strategy focuses on positioning the company’s products or services in the marketplace. This important strategy encompasses the internal and external choices the company makes to improve or retain its competitive position.

Two types of competitive strategy are market leader (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_008) and cost leader (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_009) . Firms that choose the market leader strategy are also referred to as prospectors (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_005) and innovators. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_006) Their strategy is to �ind and exploit new product and market opportunities. Success depends on their capacity to survey a wide range of environmental conditions, trends, and events and to move quickly into windows of opportunity. Market leaders typically use multiple technologies capable of being used in many different ways.

Companies that adopt the cost leader (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_007) strategy, also referred to as the defender strategy, (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_008) represent the opposite end of the continuum. This strategy’s main goal is to be the low-cost provider in the industry. Success depends on pricing competitiveness and having a product that is acceptable to (but not necessarily the best in) the market. Success is achieved by producing a standardized product or service ef�iciently, using economies of scale low-cost labor, and introducing innovative production methods.

Most organizations with multiple products or services will have different strategies for each product or service. Additionally, there are many ways to pursue a single strategy. For example, one way to pursue a cost leader strategy is to aggressively pursue competing bids from as many suppliers as possible, then accept the lowest bids from as many suppliers as are needed to meet requirements. A different tactic is to develop long-term relationships with a few suppliers with capacity to meet your requirements, guaranteeing sole supplier status in return for meeting a speci�ied price target. For the HRD unit looking for outside training, this might mean choosing between having a large number of external training contractors or a single contractor who guarantees a low price. Both tactics can reduce the cost of needed goods and services, but they result in different effects on the purchasing activities of the organization and on supplier relationships. Among the feasible alternatives, the company seeks to choose the one that will best achieve the mission. Which will be “best” depends on how the organization addresses the strategic contingencies described in the following sections.

External Environment An organization’s external environment consists of elements outside the organization that in�luence the organization’s ability to achieve its mission, such as competitors, the economy, societal norms and values, laws and regulations, raw materials, suppliers, and technological innovation. Each organization must determine the threats and opportunities that exist in its environment and address those that are critical in the strategy. What kinds of environmental factors might be important in the Hershey Foods case? In addition to identifying the critical threats and opportunities, the organization must assess how stable these will be in the future.

5

6

7

8

Environmental uncertainty (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_010) is determined by two factors: complexity and stability. Environmental complexity (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_011) refers to the number of factors in the environment and the degree to which they are interrelated. Environmental stability (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_012) is the rate at which key factors in the environment change—the more rapid the change, the more unstable the environment. When the environment is more complex and unstable, it is more uncertain. When it is simpler and more stable, it is more certain. Figure 2-2 depicts this relationship.

Figure 2-2 Factors In�luencing Environmental Uncertainty

In more uncertain environments, the organization must be �lexible and adaptable if it is to respond effectively. A market leader strategy is consistent with this situation. More certain environments reward “getting it right and sticking to it.” A more standardized operating system can minimize costs and maximize pro�itability, a situation consistent with the cost leader strategy. Uncertain environments generally favor strategies using more decentralized decision making, whereas external environments that are certain usually �ind centralized decision making more effective. Given two similar organizations, the one choosing the market leader strategy will, by de�inition, compete in a more uncertain environment. The cost leader competes best in established and more stable markets. This environment may be more hostile, but it will experience a slower rate of change. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_009)

Internal Alignment with Strategy Once a company has chosen a competitive (external) strategy, it needs to align its internal environment with that strategy. It needs an internal strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_013) (such as becoming more �lexible) that provides direction for internal systems. For example, in the Hershey Foods case, Blue Chip was the external strategy. Internally, this meant that salespeople would be required to negotiate effectively with their customers and that trade funding allocations would be based on new criteria. Thus, some of the internal changes required were the development of negotiating skills for the sales force (training needs), a reward system that acted to reinforce the appropriate behavior of the sales force, and the decision-making system for allocating the trade funding dollars (nontraining needs). Two key factors in the internal strategy are the organization’s core technology (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_014) (how the principal products or services are created) and its structure (e.g., division of labor, policies, and procedures). Since the Hershey case didn’t require changes in the product, but rather in the behavior of employees, it was only the structure that needed to be changed to align with the new strategy. Figure 2-3 represents the relationships among environment, strategy, structure, and technology. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_010) As the �igure

9

10

indicates, strategy is the process of making internal adjustments to accommodate the demands of the external environment while remaining true to the mission. Note, however, that the arrow between strategy and environment shows in�luence in both directions, re�lecting the fact that the choice of competitive strategy may change the environment in which the �irm operates.

Figure 2-3 Relationships among Mission, Strategy, Technology and Structure

Technology Technology is how the work is done in the organization. Each unit in the organization uses technology to accomplish its tasks. Core technology refers to the main activities associated with producing the organization’s principal products and services. Technology can be categorized in a number of ways. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_011) Taking some liberties with these approaches, we use a simple continuum of “routine” to “nonroutine” technologies. At one end, the routine technology (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_015) label is applied to tasks with outcomes that are highly predictable, demonstrate few problems, and use well-structured and well- de�ined solutions when problems do occur. High-volume assembly lines, such as in a garment factory or some automobile plants, are examples of routine technology. Such operations consist of highly specialized tasks and well- de�ined rules for coordinating activities. Decisions are usually top–down and highly formalized, leaving little discretion to the line employee. Routine technology is most often seen in the cost leader strategy. Even though the initial infrastructure required to put this technology in place can be expensive, its ef�iciency in high-volume production provides low production cost per unit.

A task using nonroutine technology (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_016) is characterized by results that are dif�icult to predict, because problems occur unexpectedly, and solutions to these problems are not readily available and need to be developed on a case-by-case basis. With this type of technology, management needs to provide lower-level managers and line employees with more decision-making authority to meet the challenges encountered. This responsibility, of course, means that the �irm needs employees with a higher level of KSAs. This technology also requires greater task interdependence, which increases the need for coordination and integration. Managers and workers need decision-making authority within their own areas, but their activities must also be coordinated with the activities of others. Thus, employees must be given clear goals and parameters for their work outcomes but also be allowed to determine the best way to meet them. This type of technology is more typical of market leader strategies in which the development and production of new products is key. The cost of the nonroutine technology might be high, but new products can command high prices in the marketplace.

Structural Choices

11

The internal strategy should also address the ability of the organization’s structure to carry out the competitive strategy. Organizational structure (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_017) refers to how a �irm is organized (how labor is divided) in addition to the rules, policies, and procedures used for making decisions and coordinating its various activities. The organization’s structure de�ines how the internal operations interact with the external environment. To be most effective, the organization’s structure should funnel environmental input to those units best able to take advantage of opportunities and avoid threats. At the same time, it must facilitate the core technology. Although there are many structural components, we will examine only these three: organizational design, decision autonomy, and division of labor.

Organizational Design The number and formality of rules, policies, and procedures created to direct employee behavior is the essence of organizational design (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_018) . An organization’s design can lie somewhere on a continuum ranging from mechanistic to organic. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_012) A highly mechanistic design (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_019) re�lects an organization with highly de�ined tasks, rigid and detailed procedures, high reliance on authority, and vertical communication channels. A highly organic design re�lects an organization that has �lexibility in its rules and procedures, loosely de�ined tasks, high reliance on expertise, and horizontal communication channels. Few organizations operate on the extremes of this continuum; most lean more toward one end or the other.

The organic design (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_020) places more emphasis on KSAs, whereas the mechanistic focuses more on technical and �inancial systems and resources. In the mechanistic design, employees’ technical and interpersonal skills and behaviors are prescribed. In the organic design, these skills and behaviors are permitted to evolve (within broad parameters) to supplement and complement the unit’s technology. As you might suspect, the organic design is most appropriate for nonroutine technologies, whereas the mechanistic design is more appropriate for routine technologies. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_013)

Decision Autonomy Decision autonomy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_021) is the amount of authority given to employees in deciding how to complete a task, and the degree to which they are able to in�luence goals and strategies for their work unit. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_014) Individual or small-group decision autonomy is a function of whether decisions are centralized or decentralized. Cost ef�iciencies are associated with more centralization, whereas �lexibility/adaptability is associated with decentralization. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_015) Thus, centralized structures are more appropriate for cost leader strategies and decentralized structures for market leaders.

Division of Labor The way in which the work of the organization is divided among the units and organized is called division of labor (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_022) . One way in which labor is divided is between line (those working directly with the core technology) and staff (everyone else); another is between management and labor. Some organizations divide their tasks by products, some by customers, and others by geography. Some divide work into functional areas, while others organize work around the processes in their core technology. Even though each of these divisions is important, our focus is on the degree to which duties and responsibilities within the organization are specialized. We place organizations on a continuum from narrowly

12

13

14

15

de�ined (specialized) to generally de�ined (nonspecialized) duties and responsibilities. The more specialized the duties and responsibilities, the more centralized the decision making and the more mechanistic the organization. This results from the need to closely oversee and coordinate the activities of employees whose scope of responsibility is fairly narrow. In organizations with duties and responsibilities that are nonspecialized, a more organic and decentralized structure is appropriate. This allows employees to coordinate their activities less formally and provides more �lexibility and adaptability for the organization. Again, you can see the close relationship between an organization’s core technology and division of labor.

Aligning HR and HRD with Strategy The HR function must support and enhance the organization’s corporate strategy. This is accomplished by making sure that the various components in the HR system—such as staf�ing, HR planning, performance appraisal, compensation, health and safety, employee and union relations, and, of course, training—are aligned with the strategic plan. Each of these systems has a direct impact on the organization’s effectiveness. Integrated under the HR umbrella, each can enhance the organization’s ability to mobilize and motivate the employees to carry out the competitive strategy.

Why should companies invest in developing a strategic HR management capability? Two reasons. First, as Kristi Yowell, the former Training and Development Manager of Towson University says, “I always ensured at least 75 percent of all training had a strategic connection. Why? To ensure funding.” Second, evidence indicates that �irms that do so will signi�icantly increase their market value. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_016) Data collected from more than 2,400 �irms show that when HR systems achieve operational excellence and are aligned with the �irm’s strategic goals, the market value of the �irm increases by about 20 percent. So investing in HR excellence and bringing HR systems into alignment with business strategies provides a clear competitive advantage.

HR should contribute to the development of the organization’s competitive strategy and of course support those strategies once they are adopted. Decisions about competitive strategy need to be re�lected in HR strategy, and vice versa. For example, if the company’s operations are labor intensive and a strong union consistently demands high wages and restrictive work rules, it would be foolish to adopt a cost leader strategy without addressing these issues. Similarly, once the company makes the decision to adopt a cost leader strategy, HR must develop its own strategies for supporting cost leadership. Assume that a cost leader strategy requires a change in production technology that adds more automated equipment. This change would eliminate many labor-intensive jobs and add some technical jobs, thus providing a net labor saving. Such a change could be successful only if HR can �ill the new technical positions with quali�ied people. Other HR factors would also need to be considered, such as the effect on labor relations and the �inancial costs associated with eliminating the old and staf�ing the new jobs. The HR department’s input into the strategy formulation process would be to assess the HR issues critical to the strategic alternatives. Failure to address the HR side of the strategy could lead to the purchase and installation of a new technology that, among other things, is too costly to staff, creates labor con�lict, produces con�licts in the existing culture, or requires lengthy training, thus delaying the implementation of the technology. What were the critical HR issues at Hershey Foods and Domtar?

We are not suggesting that HR issues should be the only, or the most important, in�luence on the strategic direction taken by an organization; however, they should be part of the equation. The relative importance of strategic variables such as technology, �inancial assets, product mix, and HR varies from one context to the next. Likewise, the importance of HRD issues to competitive strategy depends on how central employee competencies are related to successful implementation. Figure 2-4 shows how HR and HRD are related to the organization’s business strategy.

Figure 2-4 Strategy Development at Different Levels

16

Training in Action 2-1 describes the experience of Hewlett-Packard Canada in strategy reformulation. As illustrated in this example, the external strategy must be supported by internal strategies that bring the structure and core technology into proper alignment. HR and HRD are typically key players in the development of these internal strategies.

HRD is a part of the HR unit and contributes to the development of new strategy by providing an assessment of employee strengths and weaknesses relating to the competitive strategy being developed. Unfortunately, many organizations do not think of HRD in this strategic sense. Business strategies are often formulated with little consideration of employee capabilities, and it is only after implementation problems surface that HRD considerations arise. These problems often result in costly delays in implementing the strategy, and in some cases, even doom the strategy to failure. If the competitive strategy requires increasing the competencies of employees, the various methods of approaching this task would need to be examined. As a part of this, HRD would make an estimate of the time and resources required for employees to be ready to implement the strategy. This allows the strategic planning group to determine the feasibility and cost/bene�it of the strategy.

2-1 Training in Action Back from the Brink (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_017)

In the early 1980s, Hewlett-Packard (HP) Canada was considered to be a slow-moving, inef�icient company compared with its new competitors in the computer equipment business. Although it had state-of-the-art printers and other computer-related equipment, it was slow to get these products to the market, and its prices were comparatively high. Business results were poor and projected to worsen. Furthermore, a recession was in full swing. How did it manage to turn that around to become a market leader? A rethinking of the competitive strategy was necessary. Top management performed the normal strategic planning activities, but it also formed teams to target companies in need of computer equipment and to determine what HP Canada needed to do to win their business. After analyzing their environment and internal

17

strengths and weaknesses, the HP strategic planning team adopted a strategy combining elements of both quality and cost leadership.

To address the internal weaknesses related to this strategy, HP Canada cut staff and streamlined operations. The sales force, for example, had been organized into separate groups specializing in one or a few products. Under the new structure, the groups were merged into a sales force organized around customers but familiar with all products. HP Canada also relied on developing economies of scale in the production of its printers and pricing them competitively rather than taking large pro�it margins on their popular models. This strategy of getting a smaller unit pro�it from a larger volume of units, combined with improvements in product quality, vaulted HP Canada back into a market leadership position. Pro�its increased in spite of a continued Canadian recession. By the late 1980s, HP Canada positioned itself to be one of the toughest competitors in a competitive industry.

You might think that hiring from outside the organization to improve the competency base of the organization wouldn’t involve HRD much. In this approach, competencies are imported through recruitment and hiring. Even here, however, HRD needs to be involved in orientation and any other new employee training. If current employees are to be terminated or reassigned, HRD is likely to be involved in outplacement or training for the new job.

In the Domtar case, it became clear that no one had the knowledge and skills to implement a Kaizen approach to quality management. Domtar brought in an expert from outside to oversee the implementation process, but he would not be able to train the workforce by himself. The company wanted to improve customer service skills throughout the organization. It also needed to instill the Domtar values in the new employees it had inherited from mergers and acquisitions. Clearly, HRD needed to be a part of these strategic discussions.

Of course, the HRD unit’s primary responsibility is to align itself with and support the organization’s strategies. It does this by developing training that focuses on critical competencies that are needed to meet strategic performance objectives and delivering that training to the right people. HRD can better align itself with the organization’s strategy by maintaining close connections to the product development area. Every business, whether it delivers goods or services, develops and delivers a product. New products are often a part of new strategy and require training for one or more of the following: the sales force, customers, and production employees. The earlier the training unit is able to understand the training needs relating to the new product, the better able it will be to meet those needs.

The HRD unit also plays a key role in identifying and assisting in the removal of barriers to desired performance. This last role is addressed in more depth in the next section.

2.4 OD, Strategy, and Training The very best outcome that training, by itself, can achieve is the increase in trainee capabilities, that is, the trainee’s ability to perform. The value of this comes from the transformation of this capability into improved job performance. Getting improved performance from improved capability is a performance management challenge. The HRD unit is focused on achieving the “capability,” and organizational development (OD) (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_023) is focused on the management of performance. Thus, the two should go hand in hand. The planning and implementation of strategy involves change—both in the way the organization interacts with its external environment and in how it manages its internal operations. OD deals with creating and implementing planned change. Thus, strategic planning and OD should go hand in hand. Unfortunately, in many organizations, these three sides of the organizational effectiveness triangle are not always aligned. In the sections that follow, we discuss what OD is and how it relates to strategic planning and training.

OD provides a research base and set of techniques related to organizational effectiveness and managing change. As the organization’s objectives and strategies change, the KSAs required of employees also change. However, it is not enough simply to provide new KSAs. The organization’s systems and procedures must change to support the use of the new KSAs if the desired change in performance is to occur. In the Hershey Foods case, what types of systems and procedures needed to change to make the new strategy successful? The reward system? The way Hershey is organized? The HRD process? The �ield of OD provides processes for identifying when systems and procedures need to change and how to manage the change. So let’s examine the strategic planning process and the ways that HRD and OD can support each other in the implementation of a strategic plan.

OD and Strategy Whether an organization’s strategies are developed proactively or reactively, they require support from the internal systems. Organizational change is an inherent part of the process of developing and implementing strategy. Organizations must resolve the following three core issues in developing and implementing strategy: (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_018)

1. Technical design issues. These issues arise in relation to how the product or service will be determined, created, and delivered.

2. Cultural/ideological issues. These issues relate to the shared beliefs and values that employees need to hold for the strategy to be implemented effectively.

3. Political issues. These issues occur as a result of shifting power and resources within the organization as the strategy is pursued.

These three issues are critical to the organization’s ability to achieve its objectives. In developing strategy, decisions such as what products to develop, how to manufacture them, and what marketing techniques to use will signal shifts in organizational values, power, and resources. These issues will need to be managed effectively to create support for, rather than resistance to, the strategic plan. The �ield of OD can help organizations manage change effectively. OD techniques provide methods for change to occur in an objective, goal-directed manner that addresses the needs of both the organization and the employees affected by the change. OD uses an open-system, planned-change process that is rooted in the behavioral sciences and aimed at enhancing organizational and employee effectiveness. A model of a generic planned-change process is provided in Table 2-1.

Table 2-1 Steps in a Generic Planned Change Model

18

1. Establish a compelling need for change.

2. Develop, in collaboration with the concerned parties, the goals to be achieved.

3. Determine what is causing the need for change.

4. Identify and evaluate alternative approaches for addressing the need for change.

5. Select an approach for addressing the need for change.

6. Implement the approach.

7. Evaluate the results.

8. Feedback the results to the organization.

A. If results are favorable, go to step 9.

B. If results are unfavorable, go back to step 4.

9. Internalize the change. The changes made become routine and the normal way the organization conducts its business.

The strategic planning process, if done properly, is an OD approach to change. The �irst step, establishing a compelling need for change, occurs in strategic planning during the environmental scanning phase. The need for change is made apparent when the strategic planners identify the threats and opportunities in the external environment and compare that information with what the organization is currently doing. A need for change is established when a gap exists between what the organization is doing and what the external environment requires (or will require). Next, the company’s business objectives are set (step 2 in the change model). The company’s current strengths and weaknesses are analyzed to determine what internal changes are necessary (step 3). This information provides the compelling need for internal change, and internal strategic objectives are developed for these areas. The rest of the steps in the OD model concern the development of tactical activities to achieve the strategic objectives.

Levels of Change and Resistance Whenever internal change is planned, the plan should address the following three levels in the organization:

1. The organization itself: The way the organization is put together (i.e., what we call structure and design) must be examined to ensure that work is allocated appropriately and organizational systems are supportive of the change. This level of analysis identi�ies how labor is to be divided and what rules and procedures will govern operations.

2. Groups and their interrelationships: The way work is performed in the organizational units (i.e., the sociotechnical systems) and how the outputs of the various units are integrated are the focus of this level of analysis. The issues here concern the design of jobs within units of the organization and the interrelationships of the jobs to one another.

3. Individuals within groups: The changes in performance that will be required of employees must be identi�ied and mechanisms—facilities, machines, equipment, and KSAs—put into place to enable the desired performance to occur.

Resistance to change is a common occurrence. Without suf�icient motivation to change, resistance is natural. Change requires effort, new learning, and possible shifts of resources and outcomes. Often, those satis�ied with the status quo can create enough resistance to derail the change effort, even to the point that the business fails. A major factor

in this resistance is the failure of the change process to address all three levels of change. For example, instituting a work-team system in the organization without addressing the performance appraisal system will naturally cause resistance to the new approach. People may ask, “Why should we work as a team if we’re getting evaluated as individuals?” Training in Action 2-2 provides a good example of what can happen if all three levels are not addressed in the change strategy.

Achieving successful change at one level can require analysis and possibly interventions at the other levels. Consider the effect of a change in the organizational structure. Work would be allocated differently so that some units might get work they have not done before while others might have certain jobs taken away. The affected units would need to change their work processes because they would have different amounts or types of work to do. These changes would require OD interventions at the group level. Here, the OD practitioner is involved in the design or redesign of jobs and work systems and the associated interpersonal relationships. In addition, changes in how these work groups interact with others would be required because they would now be producing something different. Employee resistance to new procedures would need to be addressed as jobs are being redesigned. At the individual level, employees would also need to acquire the knowledge and skills necessary to perform their redesigned jobs.

You might think that these three levels of change are intertwined only if the change occurs at the organizational level. However, they are integrated no matter where the initial change takes place. This is why it is important to take a systems perspective. Suppose you want employees to increase their skill at integrating quality control (QC) into their production work. Of course, training at the individual level is required. But is it the only thing necessary for the change to be successful? Even if employees’ KSAs are developed, the job itself and the organizational systems must support using the KSAs. The company will need to ensure that the design of the job supports the performance desired from its employees. For example, the equipment and tools might need to be changed. Also, if employees feel that QC is just a way for management to eliminate their jobs, they might resist this intervention, and providing new KSAs will not be enough. Work group norms (i.e., attitudes) will need to be changed to be consistent with QC objectives. At the organizational level, reward and appraisal systems would need to support the desired performance outcomes and work procedures. If the focus of the appraisal system does not assess the quality of the employees’ work but only the quantity produced, employees will not be likely to sacri�ice quantity for quality. The appraisal system needs to re�lect the importance of quality as well as quantity. The point is that the components of the organization (structure and design, jobs and employees) are interdependent, and changes in one need to be addressed as part of the overall change effort. The training needs analysis process (Chapter 4 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i48#ch04) ) provides a model for determining not only what training is needed, but also what other changes are necessary to manage performance so that increased capabilities get transformed into increased job performance.

2-2 Training in Action Self-Managed Work Groups at an Automotive Parts Plant A southeast Michigan automotive parts manufacturing plant was divided into three manufacturing areas (Areas A, B, and C). The Area B manager, after some initial research, decided to install self-managed work groups (SMWGs). An outside consultant was brought in by the manager to assist in the change. The following activities were carried out in the order presented:

1. A steering committee was formed consisting of the plant bargaining committee chairperson, and two other United Auto Workers (UAW) representatives, the area manager, the plant industrial relations manager, two area superintendents, and the consultant. This group developed and managed the change process.

2. An analysis of Area B employees, supervisors, and production systems was conducted to identify areas for piloting the SMWG concept. Three production processes were selected on the basis of

employee and supervisor interest and on the ability of the production process to create natural groupings of employees. While the equipment in these areas would remain the same, some of the tasks, and how work was assigned to individuals, would change as a result of the team concept.

3. Training was provided as described here, with duration indicated in parentheses.

A. All Area B employees received a general orientation to SMWGs. This orientation included an overview of the changes that would occur in the pilot groups, the process of determining how those changes would occur, the role of staff support functions (e.g., engineering, accounting, etc.), and a question-and-answer period. (2 hours)

B. Supervisors and line employees in the SMWGs were provided with the following:

A more in-depth orientation, including the goals, roles, and expectations for the SMWGs and the salaried coordinator (formerly supervisor).

In addition, each SMWG developed a team mission and set team goals. (4 hours)

Basic team skills: interpersonal communication, interpersonal relations, con�lict management, and problem solving. (16 hours)

Team-building training for each group consisting of both instruction and trainer- facilitated application. After each component of training (e.g., development and assignment of roles), the team would apply the concepts and principles to their team. For example, after presentation of the team procedures material, the team developed an “operating plan,” describing how work would be assigned, how team meetings would be conducted, how coordination between shifts would occur, and so on. (20 hours)

Training in information management, group facilitation, meeting management, and stress management to prepare supervisors for their new roles as salaried coordinators. Time was also provided for them to identify problems in carrying out their new roles and to develop potential solutions. (8 hours)

C. Consultation for SMWGs and salaried coordinators was ongoing for a year after completion of the training.

This applied example demonstrates elements of effective change management at the group and individual levels. However, problems were encountered at the organizational level.

Group Level All SMWGs were informed of why the change was desirable and understood what the change would mean to them personally and how Area B and the plant would bene�it. Their representatives on the steering committee (UAW representatives for the line employees and management for the supervisors) ensured that all voices would be heard. Each work group helped shape the way the change was implemented in that group by developing the team mission statement, goals, operating procedures, and so on.

Individual Level Prior to implementation, each individual could choose to remain in the work group or move to a different work group in the plant. Only a few individuals chose to leave their work groups. Extensive training provided each individual with the KSAs needed to be successful in the SMWG concept.

Organizational Level This effort ran into problems in two areas. First, no changes were made in the performance appraisal system, so salaried coordinators were still evaluated on the criteria used for supervisors. Thus, coordinators began reverting to their old supervisory behaviors, telling SMWGs what to do rather than helping the groups learn what to do. Second, no changes were made in support systems such as engineering and accounting. Accounting would not furnish the SMWGs with cost and operating ef�iciency information in a form they could understand. Without this information, the SMWGs were unable to determine whether they were meeting their goals. Equally troublesome was the relationship with engineering. Engineers were used to coming into an area and telling the employees what was wrong and how to �ix it. The new system required them to work with the SMWG to determine both the problem and the solution. Engineers saw this process as a waste of their time as they already knew what to do. As a consequence, engineers frequently would not show up at team meetings and would implement changes without consulting with the SMWG that was affected by the changes. Because the engineers did not report to the area manager, he had little control over how the engineers interacted with the SMWGs.

These problems could have been prevented if organizational systems had been addressed as a part of the steering committee’s change management plan. The plant manager needed to be a part of the steering committee as he was the only one with the authority to make systemwide changes.

Training and OD Using OD’s principles-of-change management will increase the probability that your organization’s strategic plans will be effectively implemented. But training also focuses on change, so change principles also apply to training efforts. By including an analysis of organizational issues as an integral part of the training needs analysis, the organization ends up not only with programs that address the KSA needs of employees, but also with an increased awareness of what other problems (the nontraining needs) have to be solved by other means. Trainers also use organizational information to better design programs so that problems related to applying the training are addressed in the training rather than becoming surprises after training ends.

Despite the seemingly obvious advantages of collaboration between OD and training professionals, a gulf sometimes seems to separate the two. Consider the following examples: (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_019)

An executive complains that his training and OD people cannot seem to work together.

Training staff complain at length about a manager they consider unreasonable and attribute her faults to her background in OD.

A training staff member objects strongly when told that training needs analysis data could be used to identify performance problem solutions other than training.

Table 2-2 provides some insight as to why con�lict such as in the preceding examples exists. OD practitioners are typically strategic, and executives are usually their clients. Trainers are typically tactical, and their clients are lower in the hierarchy (see Figure 2-1 for differences between strategy and tactics). It is the nature of the OD practice to challenge assumptions underlying organizational practices. Trainers typically take organizational procedures and practices as givens, trying to make people more effective within those practices. For example, suppose that the needs analysis data show that the problems in a work unit are a result of its manager acting inconsistently and arbitrarily. OD professionals more than training professionals would be willing to be guided by the data and confront the manager. Training professionals might be willing to say that no employee training needs were identi�ied, but they are less likely to tell the manager that his or her behavior needs to change. OD professionals,

19

however, are much more likely to get tagged with the “analysis paralysis” label than are trainers, who are seen as “doers.” Yet as Table 2-2 suggests, each would bene�it by working closely with the other because one’s apparent weakness is the other’s strength.

Table 2-2 Differences Between OD Practitioners and Trainers

Issue OD Practitioner Trainer

Role Strategic Tactical

Client Top management Middle-to-lower-level management

Response to problems with organizational politics, structure, etc.

Challenge and Confront

Work around or within the system

Organizational perception Overly analytical Gets things done

Why Trainers Need OD Competencies Trainers can bene�it from using OD, if only because its planning procedures help clarify what is needed in a given organizational situation. We believe that training programs will also bene�it from the application of many other OD concepts and principles. The emphasis OD places on participative approaches to problem solving suggests that training is better when trainees take an active role in selecting their training opportunities and in the training itself. When trainees are involved in the planning stages, they are less likely to demonstrate resistance. This learner- focused orientation opens communication channels and results in higher levels of motivation during the training program. A participative orientation also ties line managers directly to the training process by involving them in assessing their employees’ needs, developing the training, and developing support systems for applying the training back on the job.

In Chapters 4 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i48#ch04) and 5 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i68#ch05) , we emphasize an open systems approach. Chapter 4 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i48#ch04) focuses on understanding training needs in the context of organizational systems. Chapter 5 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i68#ch05) emphasizes connections between the training program and other organizational systems. These connections help ensure transfer of the training to the job. Many trainers have told us of their frustrations when trainees were excited about what they learned, but at the conclusion of training, nothing had changed. The design chapter describes why this can happen and how to avoid this type of training disaster.

Force-�ield analysis (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_024) is one among a multitude of OD techniques but can serve as an example of how these techniques can be of substantial bene�it to trainers. The underlying concept is that any situation can be explained by the sets of counterbalancing forces that hold it in place. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_020) Force refers not only to physical forces but also to psychological forces that in�luence individual behavior. For example, if you wanted to understand why a work group is not following the new company procedures, you might examine the forces acting within and outside the group that in�luence the members’ behavior. Tradition, reward systems, and group norms are forces that often exert strong pressure on group members, preventing them from trying new ways of doing things. Other forces that can in�luence group behavior are economic factors; individual KSAs; stereotypes of race, gender, and religion; and group con�lict.

20

To understand a particular situation, �irst you must identify all the factors that exert in�luence on that situation. Then you must determine whether each factor is exerting force toward change (drivers) or against change (restrainers). All the steps for using the force-�ield analysis are listed in Figure 2-5. The arrows show forces that are driving and restraining change. In this �igure, the restraining forces are more numerous and larger than the driving forces, a combination that would create resistance to change in the people operating within the force �ield. The line of interaction, where these forces meet, symbolizes the current state: This line re�lects the array of forces on either side, which have created the current situation you are trying to change. Thus, for change to occur, actions must be developed to shift the force �ields so that the forces for change are larger than the restraining forces.

Figure 2-5 Force Field Assessment

This model helps trainers understand the actions needed to overcome resistance to change. As we detail in Chapter 3 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i32#ch03) , training is often met with resistance, as it is one of the most personal types of change. Research indicates that change occurs more smoothly and quickly if the forces that are restraining change are reduced before or at the same time as driving forces are increased. Simply increasing the driving forces (putting on more pressure) often results in escalated con�lict. This con�lict then becomes another force for resisting change as individuals become more defensive and positions harden.

Why OD Professionals Need Training Competencies Although generally successful, OD has experienced some glaring failures, many of which could have been avoided with more attention to training principles. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_021) Earlier, we identi�ied the types of training required as a prerequisite or supplement to various OD techniques. OD interventions nearly always involve groups of employees in structured activities such as planning, problem solving, and intergroup con�lict management. It is naive to assume that one can bring people together to solve new problems, in new relationships, in new situations, with new processes, and without prior training. These employees need to

have a common KSA base in these areas,

understand group dynamics and be skilled at working in groups, and

understand and be skilled at using a common problem-solving model.

21

If OD practitioners are not skilled in designing and implementing training programs, they must develop collaborative relationships with trainers who are. Such collaboration provides an excellent opportunity for involving internal training resources in change efforts. It is especially helpful when an OD consultant, familiar with good training practices, is retained from outside the organization. When HRD and OD work together in a collaborative fashion, they will go a long way toward defusing any con�lict between external consultants and the HR function.

If OD is to be a long-term effort, the change must be institutionalized into the way the company does business. In one study, only about one-third of the OD efforts examined lasted more than �ive years. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_022) This �inding indicates that training is a critical component to institutionalizing the change. Three situations are identi�ied as key times for training:

1. When the OD process is started, training is needed to provide education about the change process and to provide the necessary KSAs.

2. After the process has been in place for a while, some retraining or upgrading of KSAs is required to sustain the process.

3. As new employees enter the organization, they need an understanding of the process and the KSAs.

Although most organizations provide the initial training, few conduct follow-up training or modify their new- employee training to include the new process and the related KSAs.

22

2.5 Putting It All Together Recall from Figure 2-1 that it is not enough for the organization to develop competitive strategies—these strategies must be followed with action. The strategies are implemented through a tactical action plan consisting of the actions required and the unit(s) responsible for those actions. The process begins with assigning objectives to the different work units of the organization. The units must then develop strategies and implementation tactics to achieve the objectives. Eventually, they are translated into individual employee objectives. The objectives for the HRD unit, as for all functional areas, must be tied directly to organizational strategies. Of course, for HRD, these will be �iltered through the strategies the HR unit developed to achieve its objectives.

HRDs Relationship with Other HR Functions The HRD function is intractably tied to the other HR functions. Recruitment and selection require an orientation and often some job training for new hires. As advancements are made in these areas, recruiters and hiring authorities will need training in the use of the new methods. Anytime a performance appraisal system is modi�ied, an organization will need to train those who will be using and administering the system. For example, pay for performance systems require the setting of objectives jointly between managers and subordinates and then evaluating the achievement of those objectives later on. These processes require managers to have interviewing and feedback skills prior to the implementation of the system. Furthermore, any good performance appraisal system should also have a developmental component. Training needs to be available for those wishing to improve.

If there is any form of incentive pay, training in its proper use will be necessary. The health and safety unit requires HRD to supply necessary training for assuring a safe work environment. If the OD unit uses surveys to assess employee attitudes, then managers will need to be competent in feeding back results to their employees in an effective manner.

A great deal of training is often required for �irst-line supervisors in the most effective methods of supervision to assure a positive labor relations climate. In a unionized environment, they also may require training in effective interactions with union of�icials, as well as having a good understanding of the union contract and the grievance procedure. Some non-union companies also have grievance resolution systems in place. Competency in working these systems is needed.

So as you can see, training is a key aspect of most of the other HR activities. Without an effective HRD unit, much of what HR does would not be very effective.

Developing an HRD Strategy Without a strategic plan, training is likely to be managed in a haphazard manner, its resources underutilized, and its full strategic value not realized. At the most basic level, the training function must make strategic decisions about where it will focus its resources and energies. It also depends in part on the environment in which training operates, the resources available (�inancial, material, and personnel), and the core competencies contained within the training function. Analysis of these areas leads to strategic decisions about the technology that should be used to develop necessary employee competencies. The organization and its HR unit form the bulk of HRD’s environment. Thus, in developing an HRD strategy, these areas must be analyzed. How to conduct this analysis, and sources from which data can be obtained, are detailed in Chapter 4 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i48#ch04) . For now, we will provide some examples of how HR and HRD strategy might be developed based on the competitive strategy of the organization.

Organizational and HR Strategy

The market leader strategy depends on innovation; therefore, employee knowledge and skills are critically important. Highly skilled and knowledgeable people must be hired and developed. They need to work under a structure that allows them latitude in how they go about their work. Reward and feedback systems must focus on long-term rather than short-term performance. Some amount of failure must be expected as employees try out new ideas. The failure of an experiment can be positive if it brings the organization closer to realizing its objectives through the learning that occurs. If failure is punished, employees will be reluctant to attempt new things. Hewlett- Packard, Raytheon, and PepsiCo illustrate this philosophy by selecting highly trained and skilled employees, being committed to their long-term development, and developing systems that evaluate and reward employees for their contributions to the company’s objectives. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_023) HRD in the market leader organization must adopt a strategy that builds on the already high level of competency brought into the organization.

Cost leader organizations, in contrast, emphasize tight �iscal and management controls. Because their leadership position is dependent on their ability to produce high volumes at low cost, ef�iciency and productivity are critical. Strategies for reducing costs include reducing the number of employees, reducing wages and salaries, using part- time and contract labor, and improving work methods. Conforming to standardized procedures is emphasized in these organizations, and training helps ensure conformance. On-the-job training (OJT) techniques are used more frequently for line employees. Typically, in these organizations it is only at the middle-management levels and higher that more autonomous decision making occurs and that higher-level competencies are emphasized. In these organizations, training is more likely to be focused on management due to the high structure imposed on job tasks at lower levels.

Integrating HRD and OD Activities Most organizations’ competitive strategy calls for some type of performance improvement, both for the organization as a whole and for individuals. Perhaps the most effective way to ensure the seamless implementation of performance improvement plans is to integrate HRD and OD. Trainers and OD professionals have legitimate differences in the nature of the change they are responsible for, but their interests are intimately connected. Each can provide valuable service to the other. Nonetheless, as we noted, they are often at odds with each other. One reason for the division between them is that companies typically organize around their different functional activities, and OD and HRD departments are often separated. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_024) This separation increases the differences in perspective, role, value of service, clients, and so on. An obvious solution is to house them together in something like a performance improvement department within HR. This would be an example of a structural change to align the organization’s internal structure with its strategic direction.

Of course, this type of organizational change effort will require attention to critical change management issues. For example, such a department would need different measures of success than either currently uses. Success could be measured by contribution to business results, rather than by the number of bodies passing through training courses or the number of teams built and facilitated by OD staff. This overarching goal would require trainers to identify system de�iciencies that are likely to interfere with training, and OD staff to identify KSA de�iciencies that are likely to interfere with system changes.

Companies such as Universal Card Service made these changes and improved their business operations. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_025) They found that integrating OD and training activities requires sponsorship from the top HR and other executives. One way toward full-scale integration of these activities is to develop pilot collaborations focusing on a particular business problem. This approach allows staff from each discipline to learn more about how the other operates and where the synergy exists. In addition, the HR executive needs to encourage people in both disciplines to learn as much as possible about the other. Another process that should lead to better integration of training and OD activities is having the staff in both areas work together to identify both barriers to collaboration and ways to remove those barriers. This activity not only creates familiarity but also uses the OD principle of involving those affected by the change in the

23

24

25

change process. By integrating the two activities, the organization also has the potential bene�it of cross-functional training, increasing the KSAs of both groups. At Domtar, Claude Belley is the senior vice president of human resources and organizational development. Do you think he understands the importance of this type of integration? Might this have contributed to Domtar’s success?

Some Strategic Training Alternatives The number of possible strategic choices an HRD unit might make is far too large to cover them all. We will look at one key strategic decision: whether to outsource training, keep it in-house, or some of both. This example will show you how HRD strategy is tied to both the HR and competitive strategies of the business.

Internal Provider Strategy Large organizations in a stable environment, where training needs do not change rapidly, often choose to do most of the training themselves. The “in-house” strategy directs all, or nearly all, training to be developed and provided by the internal HRD unit. The types of training needs that will be addressed, the development of programs to address those needs, and the evaluation of those programs are typically determined by a centralized HRD function in consultation with the HR executive. Because it is most effective in a stable environment where training needs do not change rapidly, it is most appropriate for cost leader companies. The principal advantages of this strategy are the control over the training content, consistency in delivery across the organization, and reduced training costs. In this strategy, a single program is developed to meet a particular training need across many groups of employees. As a result, the content and delivery can be controlled for consistency across the organization. Because in-house specialists develop the content and design of the program, it is tailored to the company’s needs. Because the cost of development can be spread across a large number of employees, the cost per employee is reduced.

This strategy requires a fairly large centralized training staff. Core competencies for HRD departments using this strategy include all those necessary to identify training needs; design, develop, and conduct training programs; evaluate the programs; and manage the training processes and systems. Because of the resource requirements, typically only larger companies adopt it. This is not to say that all large companies adopt this strategy, only that they are more capable of adopting it.

A way to reduce centralization but maintain a low cost is to have training developed by the corporate HRD staff but delivered by other employees or electronically. This system places a higher reliance on train-the-trainer and self-learning methods (e.g., videos and computer-based training). In this approach, after the training programs are developed and handed off to the various business units, the training is completed by the trainee alone or facilitated by a business unit representative (e.g., supervisor or in-house technical expert). Those programs with face-to-face components will need to have facilitators go through a train-the-trainer course to familiarize themselves with the content and methods.

Suppose Hershey identi�ied “listening skills” as a problem area for the sales force in dealing with customers. In response, HRD developed a listening skills training program and decentralized the training so it was conducted by team managers within the division. This type of training includes many experiential exercises and some behavior modeling. These managers would, therefore, need to demonstrate effective listening skills, be familiar with the exercises and skilled at facilitating them, and be skilled at providing constructive feedback. Because there are differences in managers’ training capabilities, different locations would receive different levels of training. For this reason, evaluation would become especially important. Often the strategic KSAs that training is intended to provide are subverted through modi�ications in the training content and design at the work unit level. One solution to this problem is to provide extensive training and develop reward systems that motivate the work unit trainer to be consistent in presenting the material and applying the methods built into the training. However, this level of monitoring can substantially reduce the cost advantage.

Outsourcing Strategy

This strategy employs outside training vendors for all, or almost all, training activities. The HRD unit’s role is to select and manage training suppliers. Suppliers may be training �irms, consultants, professional seminars, college/university courses, and the like. A full commitment to this strategy would use outside vendors to conduct all aspects of the training process from the training needs analysis through evaluation.

The outsource strategy is appropriate for larger organizations whose training needs vary dramatically over short periods of time and for small businesses and organizations with a small or nonexistent training function. Large market leader �irms, for example, will �ind many advantages in this strategy. Small businesses adopt outsourcing primarily for budgetary reasons. This strategy provides a �lexible way of meeting changing and diverse training needs with professionally developed and administered programs. It also �its well with a decentralized HRD structure. A small central HRD staff is involved in the budgeting process, monitoring of training-related policies, and providing consultation and support to the various units. For example, compilation of lists of approved vendors, payment of vendors, and mandated training are decisions that might be made by the central HRD group. In a decentralized organization, the different operating units of the organization (business units, divisions, geographical units, and the like) are then free to select from the list of approved vendors and programs those best suited to their needs and within their training budget. In a more centralized structure, the HRD unit would select and manage the vendors for each location. Program selection would derive from mutual agreement between the central HRD unit and the operating unit.

The core competencies required of the HRD unit in this strategy include a thorough understanding of the training process, skills in evaluation and selection of appropriate training providers, and general management KSAs. As a large number of �irms and individuals offer training services, the manager must carefully screen potential providers. Obviously, cost is one factor to consider. Typically, the low-cost providers are those who recently entered the �ield. However, the fact that a provider is more expensive or experienced does not mean that its quality is higher. Within your budgetary limits, the primary criterion should be the ability to provide the desired KSAs to your employees. Some key questions for making this determination are listed in Table 2-3. Of course, this list is not suf�icient to evaluate the provider fully, but it provides a good start for making comparisons. These issues will be discussed more completely in Chapter 8 (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i113#ch08) .

Managing the training providers requires typical management competencies. The provider must be given clear direction—that is, the goals and expectations must be clearly spelled out. The various training providers and their programs need to be organized in a logical �low with minimal disruption to the activities of the company. The providers’ activities need to be monitored to ensure that they are acting to plan and that goals are met. An open communication system must be established between the training function and the training providers so that both parties can access the needed information.

Even though �lexibility is a key advantage, the outsourcing strategy can also reduce costs. It can translate into substantial savings on HRD staff salaries, bene�its, and taxes. The cost per training session is usually higher because the cost for training vendors is almost always higher than the comparable cost of internal training staff (even including bene�its and taxes). However, the vendor is paid only for the contract period. With this strategy, no layoffs or staff relocations are required when the need for training slacks off. Also, because vendors can spread program development costs across clients, the company typically pays less for program development.

Table 2-3 Questions to Assess Training Provider Capabilities

What is the trainer’s background (education, experience, etc.)?

Has the trainer ever provided these particular training programs or services before?

Has the training been evaluated? If so, what levels of outcomes were evaluated, and what have been the results?

Can the trainer give you the names of people in these companies who could speak knowledgeably about the trainer’s products and services?

Can the trainer give you names of and permission to contact the following people?

Trainees who received the training

The person who was the trainer’s primary contact in the client organization

The person who monitored or coordinated the training

How does the trainer go about developing a program, delivering training, or providing a training service? Can the trainer provide examples or an outline of his approach or process? Will this �it your organization’s culture and budget?

If the training is already developed, can the trainer show you materials, such as handouts, exercises, and videos?

If these materials are not speci�ic to your organization, how will the trainer alter them to make them appropriate for your situation?

To reduce costs further, a train-the-trainer approach can be used with the outsourcing strategy. In this case, a training vendor (rather than HRD staff ) trains one or more employees to use the vendor-developed program. For example, it might be too costly and disruptive for a small business (of, say, 15 employees) to send all its employees to a customer service seminar and workshop. Instead, the company might send the general manager to the workshop and then to a train-the-trainer session conducted by the workshop provider. When the general manager returns to the company, she can train the rest of the employees as time allows and for little additional cost (such as paying a fee for using the materials, etc.). The general manager can also modify the training, customizing it for the speci�ic needs of the organization.

The Mixed Strategy Most �irms use some combination of the two preceding strategies, providing some training internally and contracting some to external providers. Decision making is centralized for some training activities and decentralized for others. Different philosophies suggest where centralization should take place and what training should be developed or conducted internally. One approach is to conduct ongoing training internally and contract to external providers all new training. New training is usually required when some aspect of the environment changes. This strategy allows the �irm to be adaptable to changing aspects of the environment while focusing its internal efforts on ongoing training. If uncertainty surrounds the training that is required or how quickly the need will change, this strategy puts the company in a more �lexible position to respond. In addition, less of the development costs of new training are borne by the company. A negative aspect, however, is that training developed by outside vendors can be less directly relevant to the employees, and additional resources might have to be allocated to tailor the training to the organization. Also, if the training need becomes ongoing, plans should be developed to provide it internally, an

action that will require agreement from the external provider. Another approach is to develop all new training internally and contract out ongoing training.

The mixed strategy reduces the size of the organization’s training staff somewhat. Typically, trainers are individual consultants who are willing to work as contract employees for the �irm. This strategy ensures the �it between the training and the training needs, but the organization must shoulder all the development costs. These costs may be offset by the reduced staf�ing needs. A careful break-even analysis would determine whether reduced staf�ing would adequately compensate for increased development costs. Many companies �ind they do, as the use of vendors for training has been increasing. For example, General Motors doesn’t provide “Mr. Goodwrench” training, an outside vendor does. Firms such as Avaya, Cisco, Nokia, and Hewlett-Packard all have outsourced signi�icant amounts of their training. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_026)

The mixed strategy might be appropriate for organizations with training needs that are extremely diverse from one sector of the organization to another. MASCO Corp., a home improvement and building products company, is a good example. MASCO consists of an assortment of divisions producing different products and services. The corporation has adopted elements of both the market leader and cost leader strategies. The training needs of the different divisions are unique for the most part. It would be expensive for MASCO to hire a centralized HRD staff to handle all the training needs for its divisions. It makes more sense for the HRD function to be decentralized to the divisions. On the other hand, when MASCO was in the process of rede�ining its culture after a period of strong growth, the company instituted an executive development program that was centralized in its corporate headquarters. This centralized program, in which key executives and high-potential managers are given the opportunity to earn an MBA, is provided by an outside vendor (Eastern Michigan University [EMU]). The company’s HR executives and training staff worked closely with EMU to ensure that course materials met MASCO’s strategic KSA needs while re�lecting the breadth and rigor of a traditional MBA program. Materials were customized to re�lect problems and issues MASCO faced. It wasn’t the only training that the company centralized. As part of its strategy to realize synergies among its divisions, it instituted a training program in logistics in which the content was customized by a different outside vendor (Michigan State University) to meet MASCO’s strategic needs. Again, sets of employees from all divisions take part in the program. Thus, MASCO’s mixed training strategy takes advantage of centralized programming for some of its strategic training while decentralizing the rest.

We have looked at just one of the myriad HR and HRD strategy implications. The most important point is for you to understand that the organization’s competitive strategy and the supporting HR strategies determine HRD’s strategic direction.

One �inal note. The role of HR should not end with the selection of an outside vendor. Someone should be assigned to work closely with the vendor for the following reasons. Someone inside the organization has a thorough understanding of the organizational culture and how things work. This person can be a valuable asset to the outside vendor through their knowledge of the inner workings of the organization; thus providing direction, cutting through red tape, and generally providing the vendor with insight into how best to get things done. She would be able to provide important insights into the employees to be trained and how the customized training should look. She would also be able to provide information as to the value of performance reviews in needs assessment, as well as assist in the design of such an assessment. Assisting in the development of the training objectives would assure that the training was on track. In the development of any role-plays or cases for use in the training, the HR person would be able to provide guidance to assure these exercises are relevant to the trainees. Finally, by having someone working closely with the vendor throughout the process, two outcomes are likely. First, the �inal product will be what was expected; no surprises. Second, working closely with the vendor at all levels of the training (needs assessment, design, development, etc.) will require a great deal of communication between the HR person and the vendor. Evidence suggests that those organizations that are communicating on an ongoing basis with their vendor typically enjoyed better results than those that do not. These organizations reported better training designs and higher overall satisfaction with their vendors than those that did not communicate in that manner. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_027)

26

27

2.6 Focus on Small Business Is it necessary for small businesses to get involved in strategic planning to be successful? The answer is yes. There is evidence that those that do not do strategic planning have a higher incidence of failure than those that do. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_028) Furthermore, strategic planning is positively related to small business performance. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_028) In spite of this bene�it, many small business owners and managers do not engage in strategic planning. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_030) Some of the reasons are outlined in Table 2-4. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_031)

Table 2-4 Small Business Owners’ Reasons for Not Planning Strategically

Not enough time

Too busy with day-to-day operations and concern about tomorrow are the excuses for not planning for next year.

Unfamiliarity Lack of awareness of strategic planning or failure to see its value. See it as limiting �lexibility.

Lack of skills Do not have the skills or time to learn them. Do not wish to spend money to bring in consultants.

Lack of trust Want to keep key information con�idential. Do not wish to share this information with other employees or outsiders.

What can be done to encourage small businesses to become more involved in such planning? First, education about the advantages of such efforts would be useful. Even large organizations use the excuse that they are too busy �ighting �ires to �ind time for planning. However, if they spent time planning, they might see fewer �ires. Bringing small business owners and managers in touch with those who use strategic planning successfully in their small businesses is a good start for this education.

The skills issue can be addressed by using a less formal and rigorous process. Evidence indicates that small businesses that use a more informal strategic planning process can be more effective than those using more formal processes. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_032) Additional evidence suggests that, at the very least, a formalized process produces no better results. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_033) The emphasis on structured written plans in strategic planning might be dysfunctional for the small business. A less formal way to approach strategic planning for the small business is provided in Table 2-5. By researching and answering these questions, the small business owner will be well on the way to a strategic plan.

Table 2-5 Strategy Questions for Small Business

28

29

30

31

32

33

1. Why are we in business?

2. What are the key things we are trying to achieve?

3. Who is our competition, and how can we beat them?

4. What sort of ground rules should we be following to get the job done right?

5. How should we organize ourselves to reach our goals and beat the competition?

6. How much detail do we need to provide so that everyone knows what to do? How do we make sure that everyone gets the information?

7. What are the few key things that will determine whether we make it? How do we address and keep track of them?

What about the issue of lack of trust? Research suggests that when faced with threats, small �irms bene�it by going outside the organization for help. Unlike large organizations, they are unlikely to have the necessary internal resources to address these threats. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_034) Without a source that they trust, they simply will not obtain the necessary information or assistance. Small businesses need to seek out possible resources and establish appropriate relationships in “good times” so that they can be drawn on for help in “bad times.” (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_035) The small business owner can evaluate the relationship during times when threats are not creating a crisis.

Will an increase in strategic planning result in a corresponding increase in the attention that small businesses give to training? Perhaps not, but we believe that it will focus attention on the “right” training. Training is often ignored as a strategic initiative because owners and managers do not have a clear model for making decisions about whether training activities will lead to a competitive advantage. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_036) Involvement in strategic planning will provide such direction. As we discussed earlier, when the need for training emerges from the strategic planning process, it is clearly tied to the mission and objectives of the small business. For example, in companies that include International Organization for Standardization (ISO) certi�ication in their strategy, training is clearly value added because certi�ication will not be granted without it.

One �inal point should be made about small businesses. Because they are small, communicating a strategic direction and implementing the plan should be considerably easier than with a large �irm. The evidence indicates that in implementing strategic plans, small companies needed to anticipate and prevent fewer problems than larger �irms. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_037) Some problems still do exist, however. For example, the small business that seeks to become a preferred supplier to a company doing business must receive ISO certi�ication. Metro Tool & Die, a small manufacturer in Ontario, for example, became ISO certi�ied in 1999, in order to be able to supply parts to the auto industry. (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_038) Many small companies used the strategic planning process to determine whether becoming certi�ied is worthwhile. The planning process allows them to see how certi�ication �its their overall competitive strategy. Training in Action 2-3 shows how different companies used the strategic planning process to make the decision.

2-3 Training in Action Stories Along the Road to ISO (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i176#ch02biblio_039)

34

35

36

37

38

39

Rivait Machine Tools, which provides electrical discharge machining of steel, employs 14 people. The president, James Rivait, made an important strategic decision to diversify into the aerospace industry. To even be considered as a supplier in this industry, a company must be ISO 9000 certi�ied. Eighteen months later and $100,000 poorer, Rivait achieved certi�ication.

Early in 1993, Grace Specialty Polymers set out in a new strategic direction that required ISO 9000 certi�ication. The strategic plan set a target of achieving certi�ication for four separate locations by the end of 1994. To accomplish this goal, an executive steering committee was assembled, consisting of the general manager and employees who reported directly to him. The committee was to provide the direction, commitment, and resources needed. Next, an ISO implementation team was set up. Department managers made up most of this cross-functional team. Although successful, the members of the team indicated the process was not easy. Their assessment was that a company must be committed to getting it done. You can’t have less than a full effort.

Reelcraft Industries embarked on an ISO certi�ication program to improve processes. It took the company two years to achieve certi�ication, and the paperwork it produced was awesome. The main difference is that Reelcraft now “builds quality in rather than inspects errors out.” Among the chief bene�its are increased knowledge, skills, and communication.

Cavalier Tool & Manufacturing examined the ISO process and determined that it did not make strategic sense for them at that time. Sometimes a customer faces a short-run emergency and needs a “down and dirty mold.” “If we were ISO 9000 certi�ied, we would not be allowed to take on that business. All your work must follow the ISO process, and so I would have to turn down this customer. I am not ready to do that,” President Rick Jannisse said. Furthermore, he is not disposed toward the discipline required to be ISO certi�ied. Examining the external environment, he realizes that he may be forced to become certi�ied eventually, but not now. At least he is aware of the implications of the decision he is making.

Summary Training activities need to be aligned with the organization’s strategy to be effective. Part of the alignment process is the development of training unit strategies in support of the organizational strategies. So it is important for training professionals to understand the basics of the strategic planning process. Two examples of competitive strategy— market leader and cost leader—were presented to illustrate how differences in strategy in�luence the internal operations and lead to different training needs. The organization’s strategic choice will depend, in part, on key factors in the external environment and on the general level of environmental uncertainty. The organization’s core technology in�luences not only external strategy, but also the alignment of internal operations with those strategies. Organizations must develop internal strategies to align their operations with the external strategies. For example, whether a company adopts a market or a cost leader strategy will have different implications for how HR and HRD go about their business. The HR department needs to be involved in the strategic planning process to provide information about workforce readiness to implement various alternative strategies being considered. HR also provides input in relation to managing change arising from new strategic directions. From this and other information, a sound strategic choice can be made.

The choice of strategic direction will also help determine the way HRD is structured. Cost leader organizations operate in a stable environment, and more training can be centralized. Market leaders, conversely, operate in an uncertain environment, and the HRD department needs to be more decentralized. Competitive strategy will also in�luence the degree to which HRD will outsource training.

OD focuses on improving the effectiveness of the organization through planned change. Strategic planning and training can bene�it from the concepts, principles, and techniques used in OD. While training is focused on improving employee capabilities, OD is focused on managing performance. Improved capabilities do not translate into improved performance unless the performance management system is aligned to support those capabilities. Conversely, no matter how good the performance management system, employees will not perform if they don’t have the capabilities. For this reason alone, the HRD and OD units need to work closely together. While there are differences in the focus of these two units that often create friction, their ultimate objectives are the same.

Key Terms Competitive strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term01)

Core technology (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term02)

Cost leader (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term03)

Decision autonomy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term04)

Division of labor (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term05)

Environmental complexity (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term06)

Environmental stability (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term07)

Environmental uncertainty (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term08)

Force-�ield analysis (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i24#ch02term09)

HR strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term10)

HRD strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term11)

Internal strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term12)

Market leader (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term13)

Mechanistic design (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term14)

Nonroutine technology (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term15)

Organic design (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term16)

Organizational design (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term17)

Organizational development (OD) (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i24#ch02term18)

Organizational mission (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i29#ch02term19)

Organizational strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term20)

Organizational structure (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term21)

Proactive strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term22)

Reactive strategy (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term23)

Routine technology (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term24)

Strategic planning (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i23#ch02term25)

Case Analysis CASE: Strategic Planning at Multistate Health Corporation As you read this case, think about the relationship among competitive strategy and both the HR and HRD functions at Multistate Health Corporation (MHC). The case was written in 1994 and is real, but the corporation asked that its name not be used. The federal and insurance environment for health care has changed substantially since that time; however, the strategic planning issues faced by MHC remain relevant today. The information provided here re�lects the organization in 1993 as it was completing its strategic planning process.

The Organization MHC is a health care provider owned and operated by a religious order. MHC owns 30 hospitals and four subsidiary corporations employing more than 10,000 people. Its headquarters are in Michigan, with hospitals located in 17 states across the country. The overall organizational structure and the corporate HR structure are depicted in Exhibits 2-1 and 2-2.

Exhibit 2-1 MHC Organization

*Each hospital has a CEO reporting to the regional executive vice president (EVP). Hospital are referred to as divisions within MHC and have a CEO as well as a functional staff (including HR) for conducting divisional operations. Corporate HR is included as part of corporate staff, as desicribed in Exhibit 2-2.

Exhibit 2-2 MHC’s HR Organization

Competitive Strategy In line with its mission, which is rooted in the tenets of the order’s religion, MHC focused on providing care to the indigent and less able members of the community. It was reasonably successful until 1989, when the health care

industry began to experience considerable change in governmental regulations and insurance procedures. At the time of their strategic planning, hospitals were reimbursed on the basis of a preset, standardized price for treatment rather than the “cost-plus” method used previously. The federal and state governments were putting increasing pressure on health care institutions to reduce costs. In addition, new medical technologies and procedures being developed were expensive to acquire and implement. MHC recently acquired subsidiary corporations to develop or acquire new procedures and technologies. The subsidiaries were to work in partnership with the regions to implement new procedures and technologies.

MHC has lost money every year since 1987. Currently, it is experiencing an oversupply of bed space in most of the communities with MHC hospitals. Projections indicate that the need for inpatient services will decline while the need for outpatient services will increase. Nontraditional health-related services are also projected to increase (e.g., services in which patients and their relatives are trained in self-care or care of relatives). In short, the market is becoming much more competitive while products and services are rapidly changing.

MHC just �inished its corporate strategic planning process and planned to develop a two-pronged market strategy to deal with its changing business environment. One major area of focus is technology. The strategic planners departed from the previous strategy, opting to become a leader in the development of new health care technologies and procedures. They felt that the new developments would allow quicker recovery times, thus reducing the hospitals’ costs. In addition, the technology could be marketed to other health care providers, generating more revenue. The drawback was that new technologies and procedures were expensive to develop and were often subject to long waiting periods before being approved by the insurers and government agencies.

The second prong of the strategy was directed toward the hospitals and was focused on improving ef�iciencies in basic health care and outpatient services. This would allow them to continue to provide for the basic health care needs of the less fortunate. The substantial governmental fees, grants, and other revenues tied to this population would provide a pro�it only if ef�iciencies could be developed throughout the corporation.

Implementation Issues Carrie Brown, hired six months earlier as corporate vice president of human resources, listened to several days of strategy discussion, without participating much. She now felt that it was time to address the HR implications of these strategies.

“While I agree that these are good strategies,” Carrie said, “I don’t know if we have the right people in the right places to carry them out. A few of our regional and divisional executives are already doing some of the things you’re talking about, but most of them have grown up in the old system and don’t know how to go about cost cutting in a way that doesn’t diminish the quality of our service. Many of our divisions are in rural areas and haven’t kept up with technology. We do have some middle- to upper-level managers who are up to date in cost cutting and technology implementation, but they are scattered throughout the organization.”

Mitchell Fields, president and chief executive of�icer (CEO), suggested, “Why don’t we just move those people who can implement our strategies into positions where they have the power to make it happen?”

“Unfortunately,” Carrie said, “we have no accurate data about which of our people have the capabilities. It would be a mistake to move forward unless we’re sure that we have the knowledge and skills on board to be successful. What I’ve discovered in the short time I’ve been here is that we have grown too large for our human resource information system (HRIS). We’re still doing most of the data collection on paper, and the forms used are different in each of the divisions, so we can’t consolidate information across divisions, and even if we could it would take forever to do it by hand. We have different pay scales in different divisions, and you can’t get a VP in Boston to take a CEO position in Iowa because he’d have to take a cut in pay. Basically, what I’m saying is that we don’t have a coherent HR system in place to give us the information we need to put the right people in the right places.

“Another issue is that our current structure isn’t conducive to setting up partnerships between the subsidiary corporations and the regions. The corporations developing the technology are seen as pretty distant from the

regions and divisions. While the subsidiary corporations will bear the developmental or acquisition costs, they are going to want to pass those along to the regions and divisions. The divisions will then have to bear the costs of implementing the new technology and working out the bugs. Once all the kinks are worked out, the subsidiaries will be selling the technology to our competitors at lower prices (due to volume) than they charged the divisions. The corporation and subsidiaries are likely to pro�it from this arrangement, but the divisions are likely to show losses. As you know, our compensation of division executives is based on pro�itability. They are likely to resist cooperation with the subsidiaries. Our current systems don’t let all of our businesses come out winners.”

“I understand what you’re saying,” Mitchell said. “Our competitive strategy is for the big picture and the long term. If these HR issues are going to be a problem, we have to �ix them right away. We are going to have to work out some way for both the subsidiaries and the divisions to come out winners in moving new medical technology forward. Assuming we are able to put our HR house in order . . . get the right systems and people in place. . . . Are there any other concerns about adopting our strategies?” Hearing no additional objections, he said, “Okay, then, let’s get to work on putting an implementation plan together, and �irst on the list is our HR system.”

HR Follow-Up to Strategic Planning at MHC MHC determined that it needed to address the HR implications of the new climate in health care and that some type of planning system was in order, so it hired an outside consulting �irm. The consultants agreed that some type of system would likely be appropriate, but they were not ready to stipulate what that system would look like. They conducted some initial diagnostic interviews, lasting one to two hours, with all of the divisional CEOs, the regional executive vice presidents (EVPs), the corporate CEO, and the corporate VPs, including the VP of HR and the VP of OD. The interview format is shown in Exhibit 2-3. The following information was obtained from the interviews.

Exhibit 2-3 Agenda and Clari�ication of Issues for Human Resource Planning System

1. What is the purpose of this meeting? To enhance and develop the objectives of the human resource planning system (HRPS).

2. What is HRPS? HRPS is a business planning system designed to provide quality data to enhance individual and organizational decision making in all aspects of human resource management.

3. Why was I asked to participate in this meeting? Because you are a key decision maker, we want to ensure that HRPS �its the needs of your organization.

4. What speci�ic information should I provide? We want your input regarding the following:

A. Should administrative access to the data in HRPS be local, regional, or only at the corporate level?

B. Who in your organization would use and bene�it most from this system?

C. What, if any, problems are there with current information used in human resource management decisions (i.e., recruiting, training, appraising, etc.)? For example, do you lack information as to which people are capable successors for certain jobs, and

do you know what recruiting sources produce the best employees?

D. What values of the corporation should be incorporated into HRPS? How might these values be incorporated?

E. As you see it, ideally, what job responsibilities will change in your organization as a result of HRPS?

The current HR activities conducted at the corporate level are as follows:

1. To collect and store résumé-type information for all employees. This information includes demographic data, employment history, and performance evaluations.

2. To select divisional CEOs, regional EVPs, corporate of�icers, and staff professionals, and to assist at the regional and divisional levels in the selection of management-level employees, primarily through posting the position and through word-of-mouth about who is competent and available.

3. To sponsor occasional management development programs at the corporate level, although no system is in place to determine whether these are perceived as valuable or necessary. Most management development is done externally with tuition reimbursement, and some is done by individual divisions.

The interviewees expressed varying degrees of dissatisfaction with the following:

1. No system for comparing internal candidates for positions. Performance evaluation is decentralized.

2. No system for making known the criteria for positions. People do not respond to posted openings because rejection is a block to future promotion. Recommendation from a higher-up is known to be necessary. A related complaint was that many CEOs will not recommend their best people either because the CEOs rely on them heavily or because the bright young people might eventually be competition.

3. No system for evaluating the KSA required of a CEO in one part of the corporation compared with that of another. For example, the CEO in Grand Rapids has different responsibilities compared with a CEO in Detroit, but no one at the corporate level knows what the differences are.

4. No corporate HR philosophy or strategy guides the organization in its HR activities.

Individuals at the corporate, regional, and divisional levels reported slightly different perceptions of the priority of needs for an HRPS. See Exhibit 2-4.

Exhibit 2-4 Rank Order of Top HRPS Objectives by Organizational Level

Organizational Level

Improve Selection/ Search Process

Develop a Succession Plan

Forecast Critical Hr Skills

Develop Critical Hr Skills

Create and Utilize Career Development

Corporate 2 4 3 5 1

Regional 1 3 4 5 2

Divisional 1 5 4 3 2

Although monitoring equal employment and af�irmative action is in the company’s mission statement, it was considered important by only one respondent. The various levels disagreed on what job classi�ications should be in the HRPS: Corporate and regional personnel preferred to include only executive-level personnel, and divisional personnel wanted to include data down to the �irst-level supervisor. As an interviewee stated, “The MHC value statement says that we respect the dignity of all individuals. To exclude people below the executive level tells them they are worth less.” On the issue of control and administration of the HRPS, corporate and regional executives preferred corporate- or regional-level administration, while divisional executives had a strong preference for direct access. Some expressed concern that corporate administration would reduce divisional autonomy in human resource decision making. The degree of centralization had been a sore point for several years. The divisions previously operated individually as pro�it centers, but corporate headquarters was discussing the need for a more integrated approach.

After reviewing the consultants’ report and meeting with the consultants, the executive committee (representing the three levels of management) arrived at a consensus on the following HRPS objectives:

1. Improve the selection/search process for �illing vacant positions.

2. Develop a succession plan.

3. Forecast critical skill/knowledge and ability needs.

4. Identify critical skill/knowledge and ability de�iciencies.

5. Identify equal employment and af�irmative action concerns.

6. Create a career development system that re�lects the organizational mission (http://content.thuzelearning.com/books/AUBUS680.16.1/sections/i177#glossch02_025) .

The following HR philosophy was developed and approved by the MHC board of directors:

As an employer committed to the value of human life and the dignity of each individual, we seek to foster justice, understanding, and a unity of purpose created by people and organizations working together to achieve a common goal. Therefore, we commit ourselves to the following beliefs:

1. People are our most important resource.

2. The human resource needs of the organization are best met through the development of employees to their maximum potential.

3. Justice in the workplace is embodied in honest, fair, and equitable employment and personnel practices with priority given to the correction of past social injustices.

Case Questions 1. Describe MHC’s strategy in terms of market position. Also, identify the type of external environment MHC is

operating in and the degree to which the strategy matches the environment.

2. Identify the type of structure MHC currently uses in its primary businesses. Describe the �it between the structure and the competitive strategy. Describe any structural adjustments MHC should make to maximize the effectiveness of the strategy.

3. Identify any areas where current management KSAs are not aligned with effective implementation of the competitive strategy.

4. Describe how MHC should go about addressing the KSA de�iciencies you have identi�ied in the previous question. Your answer should be consistent with the mission and values of MHC.

5. Assume that you are the HRD manager and the competitive strategy was given to you prior to its adoption. Using principles and concepts from the chapter, what recommendations would you give to the strategic planning team?

6. Given the strategy, what tactical activities can the HR unit in general, and HRD speci�ically, develop to support the strategy (be sure to include the implementation of the HRIS)? Identify sources of support and sources of resistance to these tactical activities and point out any areas in which collaborating with the OD unit would be advisable.

Exercises 1. Conduct an analysis of HRD’s environment at the company you work for (if you’re going to school and don’t

work, use the school’s environment). What are the opportunities and threats to HRD in that environment? What demands does the environment make on the HRD department?

2. Form groups of three to �ive people, one of them having been provided with training by their employer within the last two years. Have this person explain the company’s mission to the rest of the group. Then have the person describe the type of training that was received. The group’s task is to determine the linkage between the training and the mission.

3. Identify two organizations with different environments and core technologies. Describe these differences. Indicate how the HRD strategies of these companies might be similar or different. Provide a rationale for your conclusions using relevant concepts from the chapter.

4. Examine the mission at the institution you are attending. Examine the one for your area of study (if it has one). Do the two relate? On the basis of the mission and objectives, do a SWOT analysis through interviews with administration or using your own expertise. What major changes are indicated? How will they affect the way courses will be taught? What training might be necessary to meet these changes?

5. Identify (through personal knowledge or research) an organization that uses HRD as a part of its competitive strategy. What role does HRD play in that strategy, and how is HRD involved in implementing the strategy?

Questions for Review 1. What factors might inhibit HRD managers from developing a strategic planning approach to training? How

might these factors be overcome?

2. Think of possible strategic training alternatives other than those described in the text. Under what conditions would these be important in developing a training strategy?

3. Why do training professionals need OD competencies, and why do OD professionals need trainer competencies?

4. What is the relationship between competitive strategy, external environment, and internal strategies?