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Strategic Staffing Third Edition

Chapter 2

Business and

Staffing

Strategies

Learning Objectives

After studying this chapter, you should be able to:

• Explain how different staffing strategies support different

business strategies.

• Describe the resource-based view of the firm and how

staffing can contribute to a company’s sustainable

competitive advantage.

• Explain when an organization would use talent-oriented

rather than job-oriented staffing.

• Describe human capital advantage and human process

advantage and the differences between them.

• Describe the strategic staffing decisions any organization

must make.

Why Does One Company Succeed

and Another Fail?

• Differences in their strategic, financial, and technological

capabilities.

• Differences in organizational capabilities generated by

attracting, retaining, motivating, and developing talented

employees.

• Staffing therefore plays a central role in creating and

enhancing any organization’s competitive advantage.

Resource-Based View of the Firm (1 of 2)

Proposes that a company’s resources and

competencies (including its talent) can produce a

sustained competitive advantage by creating value for

customers by:

• Lowering costs of products or services

• Providing something of unique value

• Or some combination of the two

Resource-Based View of the Firm (2 of 2)

Focuses attention on the quality of the skills of a

company’s workforce at various levels, and on the

quality of the motivational climate created by

management.

• Human resource management is valued not only for its

role in implementing a given competitive scenario but

also for its role in generating strategic capability.

• Staffing has the potential to create organizations that are

more intelligent and flexible than their competitors, and

that exhibit superior levels of cooperation and operation.

Five Requirements of a Competitive

Advantage

Table 2-1 Requirements a Resource Must Meet to Give a

Firm a Competitive Advantage

1. The resource must be valuable to the firm by exploiting

opportunities and/or neutralizing threats in an organization’s

environment.

2. The resource must be rare among the company’s current and

future competition.

3. The resource must not be easily imitated by other firms.

4. The resource must not be easily substituted or replaced

with another resource.

5. The company must be organized to be able to exploit the

resource.

Business Strategy

Definition: how a company will compete in its

marketplace.

Competitive advantage: anything that gives a firm an

edge over rivals in attracting customers and defending

itself against competition.

• To have a competitive advantage a company must be

able to give customers superior value for their money

(a combination of quality, service, and acceptable price).

Sources of Competitive Advantage

Table 2-2 Sources of a Competitive Advantage

Innovation: develop new products, services, and markets and improving

current ones

Cost: be the lowest-cost provider

Service: provide the best customer support before, during, or after the

sale

Quality: provide the highest-quality product or service

Branding: develop the most positive image

Distribution: dominate distribution channels to block competition

Speed: excel at getting your product or service to consumers quickly

Convenience: be the easiest for customers to do business with

First to market: introduce products and services before competitors

Components of Business Strategy

Business strategy involves the issue of how to

compete, but also encompasses:

• The strategies of different functional areas in the firm.

• How changing industry conditions such as deregulation,

product market maturity, and changing customer

demographics will be addressed.

• How the firm as a whole will address the range of

strategic issues and choices it faces.

Three Types of Business Strategy (1 of 3)

1. Cost leadership strategy: strive to be the lowest

cost producer for a particular level of product quality

(Wal-Mart, Dell, FedEx).

• Competitive advantage based on operational

excellence: maximizing the efficiency of the

manufacturing or product development process to

minimize costs.

Three Types of Business Strategy (2 of 3)

2. Differentiation strategy: developing a product or

service that has unique characteristics valued by

customers (Johnson & Johnson, Nike, 3M).

• Competitive advantage based on product innovation.

Three Types of Business Strategy (3 of 3)

3. Specialization strategy: focus on a narrow market

segment or niche and pursue either a differentiation or

cost leadership strategy within that market segment

(Starbucks, Red Lobster, Seiko).

• Competitive advantage based on customer intimacy:

deliver unique and customizable products or services to

meet their customers’ needs and increase customer

loyalty.

Growth Strategy

• Definition: company expansion organically (happening as the organization expands from within by opening new locations) or through mergers and acquisitions.

• Success depends on the firm’s ability to find and retain the right number and types of employees to sustain its intended growth.

• Organic growth requires an investment in recruiting, selecting, and training the right people to expand the company’s operations.

• Mergers and acquisitions expand an organization’s business and can also be a way to acquire the quality and amount of talent a firm needs to execute its business strategy.

Deriving Staffing Strategy

• An organization’s staffing strategy should be derived from,

and be clearly supportive of, its overall human resource

strategy.

• The strategies developed for each HR functional area

should support the overall human resource strategy.

• The strategy of each functional area of human resources

should complement the strategies of the other areas, as

well as the organization’s higher-level human resource

strategy.

Staffing Implications of Different

Sources of Competitive Advantage (1 of 2)

Table 2-3 Staffing Implications of the Different Sources of Competitive Advantage

Source of Competitive Advantage Description Staffing Implications

Operational Excellence (Low

Cost)

• Focus is on the efficient

production and delivery

of products and/or

services

• Objective is to lead

industry in both price and

convenience

• Efficiency focus

• Adaptable

• Trainable

• Willing to follow

standardized

procedures

Product Leadership (Innovation) • Provide a continuous

stream of new cutting-

edge products and

services

• Objective is the fast

commercialization of new

ideas

• Top research talent

• Entrepreneurial mind-

set

• Creativity

• High tolerance for

ambiguity

• Interested in and

motivated by learning

and discovery

Staffing Implications of Different

Sources of Competitive Advantage (2 of 2)

Table 2-3 Staffing Implications of the Different Sources of Competitive Advantage

Source of Competitive Advantage Description Staffing Implications

Customer Intimacy

(Customization)

• Tailor and shape

products and services to

fit each customer’s

needs

• Objective is long-term

customer loyalty and

long-term customer

profitability

• Adaptable

• Learning oriented

• Networking skills

• Customer relations

skills

• Emotional resilience

Growth • Expand the company to

either increase the firm’s

sales or allow the

company to achieve

economies of scale

• Fit with company

culture

• Future oriented

• Flexible (willing to

assume multiple roles)

• Willing to take

controlled risks

Organizational Life Cycle and Strategy

Choice (1 of 3)

Growth-Maturity-Decline life cycle

Strategy during growth phase:

• New and growing firms often pursue innovation or

differentiation strategies to distinguish themselves from their

competition.

• Because they are less established and thus higher-risk

employers, they often need to invest more money and

resources in staffing to attract the talent they need to grow.

• Because they lack a strong internal talent pool and need to add

new employees as they grow, they frequently need to hire from

outside the organization and tend to have an external talent

focus.

Organizational Life Cycle and Strategy

Choice (2 of 3)

Strategy during maturity phase when products and

services have fully evolved, and the product’s market

share has become established:

• The focus shifts to maintaining or obtaining further market

share through cost leadership, often by streamlining operations

and focusing on efficiency.

• Because mature companies have a larger pool of internal talent

from which to draw, the talent focus becomes more internal.

Organizational Life Cycle and Strategy

Choice (3 of 3)

Strategy choice during decline phase when markets

are shrinking and business performance is weakening:

• Can pursue a cost-leadership strategy and allow the decline to

continue until the business is no longer profitable.

• Focus on reducing labor and other costs.

• Can try to make changes to revive the product or service.

• If it chooses to try to change its product or service, the firm

typically adopts a specialization or differentiation strategy.

• This can change the talent mix needed.

Talent Philosophy

A system of beliefs about how employees should be treated

Table 2-4 Questions Addressed by an Organization’s

Talent Philosophy

1. Do we want people to contribute to the company over long-

term careers or do we want to focus on filling vacancies in the

short term?

2. Do we value the ideas and contributions of people with

diverse ideas and perspectives?

3. Do we see our employees as assets to be managed or

employees as investors who choose where to allocate their

time and efforts?

4. What are our ethical principles when it comes to our

employees?

Sources of Ethical Guidelines (1 of 2)

The American Psychological Association (APA)

• Published a document that describes test takers’ rights and responsibilities.

• Published the Standards for Educational and Psychological Testing (1999).

• Publishes reports to address emerging staffing issues such as the APA’s position on good and ethical Internet testing practice and test user qualifications.

• Published ethical guidelines to help staffing experts The Society for Industrial and Organizational Psychology (Division 14 of the APA)

• Principles for the Validation and Use of Personnel Selection Procedures (2003).

Sources of Ethical Guidelines (2 of 2)

The Uniform Guidelines on Employee Selection Procedures (1978) • Defines discrimination and good conduct for validity

studies, and suggests ways for identifying adverse impact and ensuring the appropriateness of a staffing process.

The Society for Human Resource Management (SHRM) • Represents over 200,000 human resource practitioners

and provides a code of ethics for its members.

Academy of Management

HR and Staffing Strategies

• Human resource strategy: the linkage of the entire

human resource function with the firm’s business

strategy in order to improve business strategy execution.

• Staffing strategy: the constellation of priorities, policies,

and behaviors used to manage the flow of talent into,

through, and out of an organization over time.

Strategies (1 of 2)

Table 2-5 How a Firm’s Talent Philosophy Affects Its Human Resource Strategy and

Staffing Strategy

Talent Philosophy Human Resource Strategy Staffing Strategy

Wants employees to

contribute to the firm

over long-term careers

Acquires, develops, and

retains talent able to

contribute to the firm over

time

Hiring: Recruits and hires talent able

to perform now and in future jobs

Deploying: Uses succession

planning, career planning, and career

development to take advantage of

employees’ potential over time

Retaining: Retains top performers and

high-potential employees

Values the ideas and

contributions of people

with diverse ideas and

perspectives

Acquires and retains a

diverse workforce; creates

and maintains a culture of

inclusion and respect to

leverage diversity

Hiring: Recruits and hires diverse

people

Deploying: Creates mentoring

programs

Retaining: Rewards and promotes

diversity “champions”

Strategies (2 of 2)

Table 2-5 How a Firm’s Talent Philosophy Affects Its Human Resource Strategy and

Staffing Strategy

Talent Philosophy Human Resource Strategy Staffing Strategy

Views applicants and

employees as

investors of their time

and effort

Develops mutually beneficial

relationships with its

employees; respects

applicants and employees

Hiring: Attracts and hires employees

who fit the firm’s culture and values;

responds quickly to applicant inquiries

Deploying: Puts employees in jobs

that match their interests and abilities

Retaining: Allows flexible work

arrangements to meet employees’

needs

Has high ethical

standards regarding

the treatment of its

applicants and

employees

Treats applicants and

employees with fairness,

honesty, and integrity

Hiring: Explains the hiring decision-

making process and the

uses of all assessment methods;

hires based on merit; complies

with laws

Deploying: Gives honest performance

feedback

Retaining: Promotes based on merit

Nine Elements of Staffing Strategy

Table 2-6 Nine Elements of the Staffing Strategy

1. Do we want a core or flexible workforce?

2. Do we prefer to hire internally or externally?

3. Do we want to hire for or train and develop needed skills?

4. Do we want to replace or retain our talent?

5. What levels of which skills do we need where?

6. Will we staff proactively or reactively?

7. Which jobs should we focus on?

8. Is staffing treated as an investment or a cost?

9. Will staffing be centralized or decentralized?

Competitive Talent Advantage

Human capital advantage: acquiring a stock of

quality talent that creates a competitive advantage.

• Hiring and retaining outstanding people produces a

stock of exceptional talent.

Human process advantage: superior work

processes that create a competitive advantage.

Discussion Questions (1 of 4)

1. What are the three most important ethical principles

that you feel organizations should adhere to in terms

of their staffing philosophies? Why?

Discussion Questions (2 of 4)

2. What is the difference between treating employees

as assets and as investors? When is it appropriate

for an organization to treat employees as investors?

When is it appropriate for an organization to treat job

applicants and employees as assets?

Discussion Questions (3 of 4)

3. Suppose you were in charge of recruiting and

staffing the software engineers who work for

Google. Do you think that a company like Google

should hire software engineers with the skills it needs

or train them to develop those skills? Why?

Discussion Questions (4 of 4)

4. In what situations would position-oriented staffing be

preferable to talent-oriented staffing?

5. List the costs and benefits of having an internal

staffing focus. Then list the cost and benefits of

having an external staffing focus. What are the trade-

offs between the two approaches?

Strategy Exercise

In small groups of 4-5, identify a business that you

could start:

• What type of business would you propose?

• What business strategy would you follow?

• What staffing strategies would you use and why?

• How does the resource-based view inform your

thinking?

Opening Vignette Exercise

Working individually or in a small group, reread the Starbucks chapter vignette and address the following questions. Be prepared to share your answers with the class after 20 minutes.

• What staffing issues would create the biggest obstacles to Starbucks’ ability to execute its growth and specialization strategies?

• What would you recommend Starbucks do to overcome the obstacles you identified?

Develop Your Skills Exercise

• Think of an organization that you currently work for or

have worked for in the past as you complete the

“Measuring Your Firm’s Climate for Diversity”

assessment in the Develop Your Skills feature.

• How well do you think the organization’s climate-for-

diversity score reflects its talent philosophy?

Chern’s Case Assignment

a. Develop a formal talent philosophy, HR strategy, and

specific staffing strategy.

b. Address each of the nine strategic staffing decisions.

c. Explain each of your recommendations for the nine

decisions.

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