HR Administration and Shared Services Workbook PDF
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Saudi Electronic University
2020
IHRCI
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This workbook focuses on HR Administration and Shared Services, specifically for the Professional in Human Resources – International (PHRi) certification, 2020 Edition. It provides a structured approach to learning the topics, featuring pre-test, review-test, and post-test practice exercises with answers to improve conceptual understanding. The workbook is a study aid for the PHRi certification exam, but is not a substitute for official study material.
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1 Functional Area 02 HR Administration and Shared Services Professional in Human Resources – International (PHRi) 2020 Edition International Human Resource Certification Institute IHRCI ® www.ihrci.org Professional in Human Resources – International (PHRi) Workbook Module...
1 Functional Area 02 HR Administration and Shared Services Professional in Human Resources – International (PHRi) 2020 Edition International Human Resource Certification Institute IHRCI ® www.ihrci.org Professional in Human Resources – International (PHRi) Workbook Module Two: HR Administration and Shared Services 2020 Edition Copyright © 2020 by International Human Resource Certification Institute All rights reserved. No part of this book shall be reproduced, stored in a retrieval system, or transmitted by any means – electronic, mechanical, photocopying, recording, or otherwise – without written permission from the International Human Resource Certification Institute (IHRCI). No patent liability is assumed with respect to the use of the information contained herein. Although every precaution has been taken in the preparation of this book, the publisher and author assume no responsibility for errors or omissions. Neither is any liability assumed for damages resulting from the use of the information contained herein. International Human Resource Certification Institute (IHRCI) Flat/Rm, B, 5/F, Gaylord Commercial Building, 114-118, Lockhart Road. Hong Kong www.ihrci.org 3 Introduction As a purchaser of the PHRi certification workbook serials, you have access to the www.ihrci.org learning system. The system contains Glossary that provides a search box and a description of the key terms in HR. Also, the system consists of over 900 practice exam questions and answers with explanations in our database including pre-test, review-test, and post-test: Pre-test: It contains the same percentage of questions from each content area. Participants can take a pre-test of that module to access their conceptual understanding of that specific area of the PHRi Body of Knowledge. When the pre-test is completed, an overall correct percentage is provided along with the number and percentage of questions answered correctly. The answers with explanations to individual questions are also provided. Our system allows users to save the results of the pre-test so that they can improve upon that later. Review-test: Every review test contains questions with explanations which help to understand the concepts of that particular knowledge area for each section of the study workbook. Once you successfully finish reviewing for one section text in the workbook; you naturally get access to the next section. Every new section helps construct on the earlier concepts learnt in the previous knowledge areas. Please do step-wise study for all the knowledge areas. Post-test: Once you complete with all the knowledge areas, have a post-test through the full length simulated practice tests under the same testing conditions as the actual exams. With 170 questions covered during the 3.25 hours test. These tests are designed to help you get the feel of the final PHRi Exam, with similar format and question types. Practice till you are near to 80% correct answers in the post-test. This helped you in understanding areas where you have improved since the last test as well as list down topics for which you needed more revision. Access to the learning system is valid for twelve (12) months from the date of purchase to cover two test windows. Each practice for the pre-test, review-test, and post-test may be taken as many times as you would like within the 12 months. Access to these practice exams is for your individual use; your account is not to be shared with others. Your use of the online practice exams signifies your acknowledgment of an agreement to these terms. This workbook is not a textbook. These materials include workbooks and practice exams are intended for use as an aid to preparation for the PHRi Certification Exam conducted by the HR Certification Institute. By using all of the preparation materials, you will be well-versed in the six key functional areas that make up the HR Certification Institute PHRi body of knowledge. Studying these materials does not guarantee, however, that you will pass the exam. These workbooks are not to be considered legal or professional advice. 4 Table of Content Introduction................................................................................................................................ 3 Table of Content......................................................................................................................... 4 Part One: HR and Organization.................................................................................................. 9 1. Organization................................................................................................................... 9 1.1. Span of Control.................................................................................................... 9 1.2. Chain of Command............................................................................................ 10 1.3. Bureaucracy....................................................................................................... 10 1.4. Type of Structures............................................................................................. 11 1.5. Organizational Charts........................................................................................ 13 1.6. Levels of Management...................................................................................... 13 2. Group Dynamic............................................................................................................. 14 2.1. Forming.............................................................................................................. 15 2.2. Storming............................................................................................................ 15 2.3. Norming............................................................................................................. 16 2.4. Performing......................................................................................................... 16 2.5. Adjourning......................................................................................................... 16 2.6. Group vs. Team.................................................................................................. 16 3. Organization Climate and Culture................................................................................ 18 3.1. Type of Culture.................................................................................................. 18 3.2. Layers of Culture................................................................................................ 19 3.3. Values in Culture................................................................................................ 19 3.4. Culture Analysis................................................................................................. 20 3.5. Culture and Climate........................................................................................... 21 4. Organizational Life Cycle............................................................................................... 22 4.1. Start-Up Stage.................................................................................................... 23 4.2. Growth Stage..................................................................................................... 24 4.3. Maturity Stage................................................................................................... 25 4.4. Revival Stage...................................................................................................... 26 4.5. Decline Stage..................................................................................................... 27 5. Vision, Mission, and Value............................................................................................ 27 5.1. Vision (big picture idea of what you want to achieve)...................................... 27 5.2. Mission (general statement of how you will achieve your vision).................... 27 5.3. Value (how you will behave during the process).............................................. 28 6. Strategy and Organization............................................................................................ 28 6.1. Mission.............................................................................................................. 29 6.2. Strategic Objectives........................................................................................... 29 6.3. Situation Analysis (SWOT Analysis)................................................................... 29 6.4. Strategy Formulation......................................................................................... 30 5 6.5. Strategy Implementation................................................................................... 32 7. HR’s Main Roles............................................................................................................ 32 7.1. Becoming a Partner in Strategy Execution........................................................ 33 7.2. Becoming an Administrative Expert.................................................................. 34 7.3. Becoming an Employee Advocate / Champion................................................. 35 7.4. Becoming a Change Agent................................................................................. 36 8. HR Organization............................................................................................................ 36 8.1. Service Centers.................................................................................................. 37 8.2. Corporate HR..................................................................................................... 38 8.3. Embedded HR.................................................................................................... 38 8.4. Centers of expertise (CoE)................................................................................. 39 8.5. Operational Executors....................................................................................... 39 9. HR Outsourcing............................................................................................................. 41 9.1. Outsourcing....................................................................................................... 42 9.2. Offshoring.......................................................................................................... 42 9.3. HR Outsourcing Services................................................................................... 43 9.4. Cosourcing and Insoucing.................................................................................. 44 9.5. Outsourcing Process.......................................................................................... 44 Part Two: Employee Life Cycle.................................................................................................. 47 1. Employee Life Cycle Model.......................................................................................... 47 1.1. Buying................................................................................................................ 47 1.2. Building.............................................................................................................. 48 1.3. Borrowing.......................................................................................................... 48 1.4. Bounding........................................................................................................... 48 1.5. Bouncing............................................................................................................ 49 1.6. Binding............................................................................................................... 49 2. Onboarding................................................................................................................... 49 2.1. Recruiting.......................................................................................................... 50 2.2. Orientations....................................................................................................... 51 2.3. Support Tools and Processes............................................................................. 51 2.4. Coaching and Support....................................................................................... 52 2.5. Training.............................................................................................................. 52 2.6. Feedback Tools.................................................................................................. 52 3. Transferring................................................................................................................... 53 3.1. Reasons for employee transfers........................................................................ 53 3.2. Drawbacks from employee transfers................................................................. 54 3.3. Types of Transfers.............................................................................................. 54 4.1. Voluntary Turnover............................................................................................ 56 6 4.2. Involuntary Turnover......................................................................................... 57 4.3. Causes of Turnover............................................................................................ 57 4.4. Functional or Dysfunctional Turnover............................................................... 57 4.5. Turnover and “Churn”....................................................................................... 58 4.6. Measuring Employee Turnover......................................................................... 58 5. Termination.................................................................................................................. 59 5.1. Paper Trail.......................................................................................................... 59 5.2. Short, Clear Meeting......................................................................................... 59 5.3. Explaining the Severance................................................................................... 60 5.4. Communicating with Staff................................................................................. 60 5.5. Discharge, Layoff, and Resignation.................................................................... 60 5.6. Termination Tips................................................................................................ 61 6. Exit Interview................................................................................................................ 64 6.1. Who will conduct the interview?...................................................................... 64 6.2. When do you conduct the interview?............................................................... 64 6.3. What’s the purpose of the interview?.............................................................. 65 7. Employee Resignation.................................................................................................. 65 7.1. Whom to Notify................................................................................................. 65 7.2. What to Communicate...................................................................................... 65 7.3. Develop a Transition Plan.................................................................................. 66 7.4. Alert Clients....................................................................................................... 66 8. Outplacement............................................................................................................... 66 8.1. Outplacement Services..................................................................................... 67 8.2. Benefits to the employer................................................................................... 68 8.3. Adjust to Retrenches’ Needs............................................................................. 69 Part Three: Employee Attendance........................................................................................... 71 1. Managing Attendance.................................................................................................. 71 1.1. Understanding absence..................................................................................... 71 1.2. Measuring lost time.......................................................................................... 71 1.3. Creating an absence policy................................................................................ 71 2. Managing Absence....................................................................................................... 71 2.1. Short-term absence........................................................................................... 72 2.2. Long-term absence............................................................................................ 72 2.3. Continuous Period of Leave............................................................................... 72 3. Attendance Policy Template......................................................................................... 73 3.1. Authorized absence........................................................................................... 73 3.2. Unauthorized absence....................................................................................... 73 3.3. Procedure for reporting absence...................................................................... 73 7 3.4. Return to work (RTW)........................................................................................ 74 3.5. Medical appointments...................................................................................... 74 3.6. Support.............................................................................................................. 74 3.7. Time-keeping..................................................................................................... 74 3.8. Record keeping.................................................................................................. 74 3.9. Review............................................................................................................... 75 4. Return-to-work (RTW) Program................................................................................... 75 4.1. Definition of RTW.............................................................................................. 75 4.2. Reasons for RTW............................................................................................... 76 4.3. Develop for RTW............................................................................................... 77 4.4. RTW Arrangement............................................................................................. 78 4.5. Best Practices of RTW........................................................................................ 79 5. Work Time Management.............................................................................................. 80 5.1. General Definition............................................................................................. 80 5.2. Common Types of Leave................................................................................... 80 5.3. Overtime............................................................................................................ 81 5.4. Alternative Work Schedule................................................................................ 82 Part Four: HR Documents and Records.................................................................................... 84 1. Document Development.............................................................................................. 84 1.1. Step 1: Establish need for a policy..................................................................... 84 1.2. Step 2: Develop policy content.......................................................................... 90 1.3. Step 3: Draft the policy...................................................................................... 91 1.4. Step 4: Write the procedure.............................................................................. 92 1.5. Step 5: Review of the policy by key parties....................................................... 93 1.6. Step 6: Approve the policy................................................................................ 94 1.7. Step 7: Implement the policy............................................................................ 94 1.8. Step 8: Policy review and update...................................................................... 97 1.9. Step 9: Communication of changes to the policy.............................................. 98 2. Document Retention.................................................................................................... 98 2.1. Select a point person or create a steering committee...................................... 99 2.2. Assess and prioritize the DRP project scope..................................................... 99 2.3. Consult with data management and IT personnel............................................ 99 2.4. Pinpoint what electronic and physical documents your business produces, and assign ownership...................................................................................................... 99 2.5. Review laws and regulations............................................................................. 99 2.6. Detail instructions on storing, retaining, and preserving data.......................... 99 2.7. Set guidelines on destroying expired or useless data..................................... 100 2.8. Train employees on the plan and communicate the processes...................... 100 8 2.9. Clearly communicate the employee duty to follow protocol......................... 100 2.10. Review your document retention policy and update it periodically............. 101 2.11. Finding solutions for document management.............................................. 101 3. Employee Data Management..................................................................................... 102 3.1. Type of Employee Data.................................................................................... 102 3.2. Recordkeeping Policy....................................................................................... 103 3.3. Maintain accurate records............................................................................... 104 3.4. Other Considerations...................................................................................... 105 Reference........................................................................................................................ 107 9 Part One: HR and Organization 1. Organization A business organization is an individual or group of people that collaborate to achieve certain commercial goals. Some business organizations are formed to earn income for owners. Other business organizations, called nonprofits (Non-profit Organization, NPO), are formed for public purposes. These businesses often raise money and utilize other resources to provide or support public programs. Structure is not simply an organization chart. Structure is all the people, positions, procedures, processes, culture, technology and related elements that comprise the organization. It defines how all the pieces, parts and processes work together (or don’t in some cases). This structure must be totally aligned with strategy for the organization to achieve its mission and goals. Structure supports strategy. If an organization changes its strategy, it must change its structure to support the new strategy. When it doesn’t, the structure acts like a bungee cord and pulls the organization back to its old strategy. Strategy follows structure. What the organization does defines the strategy. Changing strategy means changing what everyone in the organization does. When an organization changes its structure and not its strategy, the strategy will change to fit the new structure. Strategy follows structure. Suddenly management realizes the organization’s strategy has shifted in an undesirable way. It appears to have done it on its own. In reality, an organization’s structure is a powerful force. You can’t direct it to do something for any length of time unless the structure is capable of supporting that strategy. Global organizations in the 21st century must compete with a much wider array of companies than their domestic counterparts do, and have therefore evolved several strategies to become as efficient and cost-effective as possible. The choice of organizational structure reflects where decisions are made, how work gets completed, and ultimately how quickly and cheaply the firm’s products can be made. Organizational structure determines how the roles, power and responsibilities are assigned, controlled, and coordinated, and how information flows between the different levels of management. 1.1. Span of Control Span of control (span of management or span of authority) is an upper limit to the number of subordinates who can be effectively supervised by one person. Beyond a certain number of subordinates, the effectiveness and efficiency of supervision decreases. Flat organizational structures have relatively few levels from top to bottom. Thus, they have wide spans of control. Flat structures provide fast information flow from top to bottom of the organization and increased employee satisfaction. Tall organizational structures have many levels between top and bottom. Hence, they have relatively 10 narrow spans of control. Tall structures are faster and more effective at problem resolution than flat structures because of increased frequency of interaction between superior and subordinate and the greater order imposed by the hierarchical structure. 1.2. Chain of Command The delegation of authority creates a chain of command, the formal channel that defines the lines of authority from the top to the bottom of an organization. Chain of command specifies a clear reporting relationship for each person in the organization and should be followed in both downward and upward communication. Centralization is the retention of decision-making authority by a high-level manager. Centralization concerns the concentration of authority in an organization and the degree and levels at which it occurs. Decentralization is the process of distributing authority throughout an organization. In a decentralized organization, an organization member has the right to make a decision without obtaining approval from a higher- level manager. Decentralization in the same way as delegation, that is, as a good way to improve motivation and morale of lower-level employees. Neither centralization nor decentralization is good or bad in itself. The degree to which either is stressed depends upon the requirements of a given situation. Decisions cannot be decentralized to those who do not have necessary information, e.g., knowledge of job objectives or measures for evaluation of job performance. Decisions cannot be decentralized to people who do not have the training, experience, knowledge, or ability to make them. Decisions requiring a quick response should be decentralized to those near the action. Decentralization should not occur below the organizational level at which coordination must be maintained (e.g., each supervisor on an assembly line cannot be allowed to decide the reporting time for employees). Decisions that are of critical importance to the survival of the organization should not be decentralized. Decentralization has a positive influence on morale. 1.3. Bureaucracy Bureaucracy is a term applied by German sociologist Max Weber (writing in the 1900s) to a type of organizational hierarchy characterized by clear rules, sharply defined lines of authority, and a high degree of specialization. It represents authority and responsibility within the organization. Authority is the right or power assigned to a job holder in order to achieve certain organizational objectives. It indicates the right and power of making decisions, giving orders and instructions to subordinates. Authority is delegated from above but must be 11 accepted from below i.e. by the subordinates. Responsibility indicates the duty assigned to a position. The person holding the position has to perform the duty assigned. It is his responsibility. The term responsibility is often referred to as an obligation to perform a particular task assigned to a subordinate. In an organization, responsibility is the duty as per the guidelines issued. Accountability is the liability created for the use of authority. Accountability is the obligation of an individual to report formally to his superior about the work he has done to discharge the responsibility. Responsibility may be bestowed, but accountability must be taken. In other words, responsibility can be given or received, even assumed, but that doesn’t automatically guarantee that personal accountability will be taken. Which means that it’s possible to bear responsibility for something or someone but still lack accountability. 1.4. Type of Structures Developing an organizational structure involves defining the framework around which the business operates and provides guidance to all employees by laying out the official reporting relationships that govern the workflow of the company. It is therefore important for every organization to have a well-structured organization chart indicative of how an organization functions, how it is managed, how information flows and is processed within an organization, and how flexible or responsive the organization is. Source: Daft, R.L. (2012). Organization Theory and Design. Cengage Learning. 12 1.4.1. Functional Structure Functional structure is set up so that each portion of the organization is grouped according to its purpose. In this type of organization, for example, there may be a marketing department, a sales department and a production department. The functional structure works very well for small businesses in which each department can rely on the talent and knowledge of its workers and support itself. However, one of the drawbacks to a functional structure is that the coordination and communication between departments can be restricted by the organizational boundaries of having the various departments working separately. 1.4.2. Divisional Structure Divisional structure typically is used in larger companies that operate in a wide geographic area or that have separate smaller organizations within the umbrella group to cover different types of products or market areas. For example, the now-defunct Tecumseh Products Company was organized divisionally--with a small engine division, a compressor division, a parts division and divisions for each geographic area to handle specific needs. The benefit of this structure is that needs can be met more rapidly and more specifically; however, communication is inhibited because employees in different divisions are not working together. Divisional structure is costly because of its size and scope. Small businesses can use a divisional structure on a smaller scale, having different offices in different parts of the city, for example, or assigning different sales teams to handle different geographic areas. 1.4.3. Process Structure The process structure divides up the organization around processes, such as research, manufacturing and sales. Unlike a purely functional structure, a process-based organization considers how the different processes relate to each other and the customer. The sales process doesn't begin until the manufacturing process produces something to sell; manufacturing, in turn, waits on research and development to create the product. Process-based structures are geared to satisfying the customer -- the end result of all the processes -- but they only work if managers understand how the different processes interact. 1.4.4. Matrix Structure The third main type of organizational structure, called the matrix structure, is a hybrid of divisional and functional structure. Typically used in large multinational companies, the matrix structure allows for the benefits of functional and divisional structures to exist in one organization. This can create power struggles because most areas of the company will have a dual management--a functional manager and a product or divisional manager working at the same level and covering some of the same managerial territory. A matrix structure is a blend of functional and project based organizations that maximize the strength of each structure. There are three types of matrix organizations: 13 weak, strong and balanced. Weak organizations are characterized by projects that have part-time members, limited control over authority, budget and decisions and multiple lines of responsibility. Strong matrices have dedicated resources, internal control of budget, and moderate levels of control over assets, resources and decision making authority. Balanced matrix organizations represent shared leadership between functional managers and project managers. In this structure, decision making is decentralized and an employee participating in a project may have two bosses: one from the product side and one from the geographic side. The matrix structure requires a great deal of communication and coordination among managers because lines of authority are not always clear. 1.5. Organizational Charts An organizational chart is the most common visual depiction of how an organization is structured. It outlines the roles, responsibilities and relationships between individuals within an organization. An organizational chart can be used to depict the structure of an organization as a whole, or broken down by department or unit. Organizational charts can be used to represent the organizational structure diagram showing reporting relationships a graphic representation of how authority and responsibility is distributed within a company; includes all work processes of the company. 1.6. Levels of Management In organizations, there are generally three different levels of managers: first-level managers, middle-level managers, and top-level managers. These levels of managers are classified in a hierarchy of importance and authority, and are also arranged by the different types of management tasks that each role does. In many organizations, the number of managers in every level resembles a pyramid, in which the first-level has many more managers than middle-level and top-level managers, respectively. Each management level is explained below in specifications of their different responsibilities and likely job titles. 1.6.1. Top-level managers Typically consist of board of directors, president, vice-president, chief executive officers, etc. These individuals are mainly responsible for controlling and overseeing all the departments in the organization. They develop goals, strategic plans, and policies for the company, as well as make many decisions on the direction of the business. In addition, top-level managers play a significant role in the mobilization of outside resources and are for the most part responsible for the shareholders and general public. 1.6.2. Middle-level managers These personnel typically consist of general managers, branch managers, department 14 managers. These individuals are mainly responsible to the top management for the functioning of their department. They devote more time to organizational and directional functions. Their roles can be emphasized as executing plans of the organization in conformance with the company's policies and the objectives of the top management, they define and discuss information and policies from top management to lower management, and most importantly they inspire and provide guidance to lower level managers towards better performance. Some of their functions are as follows: Designing and implementing effective group and intergroup work and information systems. Defining and monitoring group-level performance indicators. Diagnosing and resolving problems within and among work groups. Designing and implementing reward systems that support cooperative behaviors. 1.6.3. First-level managers Typically consist of supervisors, section officers, foreman, etc. These individuals focus more on the controlling and direction of management functions. For instance, they assign tasks and jobs to employees, guide and supervise employees on day-to-day activities, look after the quantity and quality of the production of the company, make recommendations, suggestions, and communicate employee problems to the higher level above, etc. In this level, managers are the "image builders" of the company considering they are the only ones who have direct contact with employees. Basic supervision Motivation Career planning Performance feedback 2. Group Dynamic In organizations, most work is done within groups. A group can be defined as several individuals who come together to accomplish a particular task or goal. In organizations, you may encounter different types of groups. Informal work groups are made up of two or more individuals who are associated with one another in ways not prescribed by the formal organization. For example, a few people in the company who get together to play tennis on the weekend would be considered an informal group. A formal work group is made up of managers, subordinates, or both with close associations among group members that influence the behavior of individuals in the group. Forming a group takes time, and members often go through recognizable stages as they change from being collections of strangers to united groups with common goals. American organizational psychologist Bruce Tuckman first came up with the memorable phrase 15 "forming, storming, norming, and performing" in his 1965 article, "Developmental Sequence in Small Groups." He used it to describe the path that most groups follow on their way to high performance. Later, he added a fifth stage, "adjourning" (which is sometimes known as "mourning"). Adjourning Performing The group Norming The group conducts an People feel assessment of Storming works in an part of the the year and Forming Members start to open and implements a Group communicate team and trusting realize that plan for acquaints and their feelings but atmosphere still view they can transitioning establishes where ground rules. themselves as achieve work roles and flexibility is recognizing Formalities are individuals rather if they accept than part of the the key and members’ preserved and other members are team. They resist viewpoints. hierarchy is contributions. treated as control by group of little strangers. leaders and show importance. hostility. Source: mindtools.com 2.1. Forming In this stage, most group members are positive and polite. Some are anxious, as they haven't fully understood what work the team will do. Others are simply excited about the task ahead. As leader, you play a dominant role at this stage, because group members' roles and responsibilities aren't clear. This stage can last for some time, as people start to work together, and as they make an effort to get to know their new colleagues. 2.2. Storming Next, the group moves into the storming phase, where people start to push against the boundaries established in the forming stage. This is the stage where many groups fail. Storming often starts where there is a conflict between team members' natural working styles. People may work in different ways for all sorts of reasons, but if differing working styles cause unforeseen problems, they may become frustrated. Storming can also happen in other situations. For example, group members may challenge your authority, or jockey for position as their roles are clarified. Or, if you haven't defined clearly how the group will work, people may feel overwhelmed by their workload, or they could be uncomfortable with the approach you're using. Some may question the worth of the group's goal, and they may resist taking on tasks. Group members who stick with the task at hand may experience stress, particularly as they don't have the support of established processes, or strong relationships with their colleagues. 16 2.3. Norming Gradually, the group moves into the norming stage. This is when people start to resolve their differences, appreciate colleagues' strengths, and respect your authority as a leader. Now that the group members know one-another better, they may socialize together, and they are able to ask each other for help and provide constructive feedback. People develop a stronger commitment to the team goal, and you start to see good progress towards it. There is often a prolonged overlap between storming and norming, because, as new tasks come up, the group may lapse back into behavior from the storming stage. 2.4. Performing The group reaches the performing stage when hard work leads, without friction, to the achievement of the team's goal. The structures and processes that you have set up support this well. As leader, you can delegate much of your work, and you can concentrate on developing team members. It feels easy to be part of the group at this stage, and people who join or leave won't disrupt performance. 2.5. Adjourning Many groups will reach this stage eventually. For example, project teams exist for only a fixed period, and even permanent teams may be disbanded through organizational restructuring. Team members who like routine, or who have developed close working relationships with other team members, may find this stage difficult, particularly if their future now looks uncertain. As a team leader, your aim is to help your people perform well, as quickly as possible. To do this, you'll need to change your approach at each stage. 2.6. Group vs. Team The words 'group' and 'team' are, for the most part, interchangeable - at least most people use them that way. While all teams are groups of individuals, not all groups are teams. The key properties of a true team include collaborative action in which, along with a common goal, teams have collaborative tasks. Conversely, in a group, individuals are responsible only for their own area. The use of teams began to increase because advances in technology have resulted in more complex systems that require contributions from multiple people across the organization. Overall, team-based organizations have more motivation and involvement, and teams can often accomplish more than individuals. Groups differ from teams in several ways: 2.6.1. Task orientation Teams require coordination of tasks and activities to achieve a shared aim. Groups do not need to focus on specific outcomes or a common purpose. 2.6.2. Degree of interdependence 17 Team members are interdependent since they bring to bear a set of resources to produce a common outcome. Individuals in a group can be entirely disconnected from one another and not rely on fellow members at all. 2.6.3. Purpose Teams are formed for a particular reason and can be short- or long-lived. Groups can exist as a matter of fact; for example, a group can be comprised of people of the same race or ethnic background. 2.6.4. Degree of formal structure Team members' individual roles and duties are specified and their ways of working together are defined. Groups are generally much more informal; roles do not need to be assigned and norms of behavior do not need to develop. 2.6.5. Familiarity among members Team members are aware of the set of people they collaborate with, since they interact to complete tasks and activities. Members of a group may have personal relationships or they may have little knowledge of each other and no interactions whatsoever. There are several types of temporary teams. An example of a temporary team is a task force that is asked to address a specific issue or problem until it is resolved. Other team may be temporary or ongoing, such as product development teams. In addition, matrix organizations have cross-functional teams in which individuals from different parts of the organization staff the team, which may be temporary or longstanding in nature. Virtual teams are teams in which members are not located in the same physical place. They may be in different cities, states, or even different countries. Often, virtual teams are formed to take advantage of distributed expertise or time— the needed experts may be living in different cities. Top management teams are appointed by the chief executive officer (CEO) and, ideally, reflect the skills and areas that the CEO considers vital for the company. There are no formal rules about top management team design or structure. The top team often includes representatives from functional areas, such as finance, human resources, and marketing, or key geographic areas, such as Europe, Asia, and North America. Depending on the company, other areas may be represented, such as legal counsel or the company’s chief technologist. Self-managed teams are a new form of team that rose in popularity with the Total Quality Movement in the 1980s. Self-managed teams are empowered teams. The team manages itself but it still has a team leader. Research has shown that employees in self- managed teams have higher job satisfaction, increased self-esteem, and grow more on the job. However, self-managed teams may be at a higher risk of suffering from negative outcomes due to conflict, so it is important that they are supported with training to help them deal with conflict effectively. Special forms of self-managed 18 teams are self-directed teams. The team makes all decisions internally about leadership and how work is done. Designing an effective team means making decisions about team composition (who should be on the team), team size (the optimal number of people on the team), and team diversity (should team members be of similar background, such as all engineers, or of different backgrounds). Answering these questions will depend, to a large extent, on the type of task that the team will be performing. Teams can be charged with a variety of tasks, from problem solving to generating creative and innovative ideas to managing the daily operations of a manufacturing plant. A key consideration when forming a team is to ensure that all the team members are qualified for the roles they will fill for the team. This process often entails understanding the knowledge, skills, and abilities (KSAs) of team members as well as the personality traits needed before starting the selection process. When deciding team size, a good rule of thumb is a size of two to twenty members. Research shows that groups with more than 20 members have less cooperation. The majority of teams have 10 members or less, because the larger the team, the harder it is to coordinate and interact as a team. With fewer individuals, team members are more able to work through differences and agree on a common plan of action. They have a clearer understanding of others’ roles and greater accountability to fulfill their roles. Some tasks, however, require larger team sizes because of the need for diverse skills or because of the complexity of the task. In those cases, the best solution is to create sub-teams in which one member from each sub-team is a member of a larger coordinating team. Team composition and team diversity often go hand in hand. Teams whose members have complementary skills are often more successful, because members can see each other’s blind spots. One team member’s strengths can compensate for another’s weaknesses. Diversity in team composition can help teams come up with more creative and effective solutions. The more diverse a team is in terms of expertise, gender, age, and background, the more ability the group has to avoid the problems of groupthink. 3. Organization Climate and Culture Culture has a pervasive impact on the management of human resources. Culture influences how blue- and white-collar workers respond to pay and non- pay incentives, how international firms are organized, the success of multinational work teams, and even how executives compose and implement business strategies. Culture may be defined as a shared system of values, beliefs, and attitudes. It affects our own actions and the way we perceive the actions of others. 3.1. Type of Culture 3.1.1. National Cultures 19 National cultures comes a host of differences in assumptions, outlook, and rules that can challenge communication and comprehension. 3.1.2. Subcultures There can be significant distances between subcultures within the same national culture. Subcultures may be defined by ethnicity, geographic region, race, religion, or class. 3.1.3. Organizational/Corporate Cultures Organizational culture is defined by all of the life experiences, strengths, weaknesses, education, upbringing, and so forth of the employees. While executive leaders play a large role in defining organizational culture by their actions and leadership, all employees contribute to the organizational culture. 3.1.4. Industry Cultures Industry cultures have shared assumptions based on technological and social histories of the industry. 3.1.5. Professional or Functional Cultures Professional and functional cultures have shared assumptions based on specifics as they relate to a special function or occupation. 3.2. Layers of Culture 3.2.1. Level 1-Artefacts: Described as being the ‘easiest’ level to observe, called explicit culture. 3.2.2. Level 2-Espoused Values: To better understand and to help decipher why the initial observations in Level 1 are taking place, one needs to ask ‘insiders’ of the organization to try and explain. 3.2.3. Level 3-Shared Tacit Assumptions: To help understand this ‘deeper’ level of culture, one needs to investigate the history of an organization. 3.3. Values in Culture The word "value" means worth. It also refers to an ethical precept on which we base our behavior. Values are basic convictions that people have regarding what is right and wrong, good and bad, important or unimportant. Values are shaped by the culture in which we live and by our experiences. However, there are values that are held high by most cultures. These include fairness and justice, compassion and charity, duties and rights, human species survival and human well-being. 20 Organizational culture and values are closely related because organizations are generally founded with certain values in mind. These values tend to influence the organizational structure, but they may change over time as different people take on different roles in the organization and the overall culture changes. Organizational culture and values, then, both affect each other over time and tend to change if a conflict exists between them. 3.4. Culture Analysis Three important levels of cultural analysis in organizations are: observable culture, shared values, and common assumptions. These levels may be envisioned as layers. The deeper one gets, the more difficult it is to discover the culture. External Organizational Climate OBSERVABLE CULTURE SHARED VALUES COMMON ASSUMPTIONS Internal Source: Schemerhorn, J., Hunt, J., & Osbom, R. (2008). Organizational Behavior. Hoboken, NJ: John Wiley & Sons. 3.4.1. Observable Culture The first level concerns observable culture, or “the way we do things around here.” These are the methods the group has developed and teaches to new members. The observable culture includes the unique stories, ceremonies, and corporate rituals that make up the history of a successful work group. 3.4.2. Shared Values The second level of analysis recognizes that shared values can play a critical part in linking people together and can provide a powerful motivational mechanism for members of the culture. Many consultants suggest that organizations should develop a “dominant and coherent set of shared values.” The term shared in cultural analysis implies that the group is a whole. Every member may not agree with the shared values, but they have all been exposed to them and have often been told they are important. At Hewlett-Packard, for 21 example, “quality” is part of everyone’s vocabulary. The firm was founded on the belief that everyone could make a creative contribution to developing quality products. 3.4.3. Common Assumptions At the deepest level of cultural analysis are common assumptions, or the taken-for- granted truths that collections of corporate members share as a result of their joint experience. It is often extremely difficult to isolate these patterns, but doing so helps explain why culture invades every aspect of organizational life. 3.5. Culture and Climate Organizational Culture is a system of shared meaning. Just as tribal cultures have rules and taboos that dictate how members will act toward each other and outsiders, organizations have cultures that govern how its members should behave. A strong organizational culture usually provides a sense of identity for employees and a commonality of values and goals that leads to effective change management and problem solving. Organizational climate, on the other hand, is often defined as the recurring patterns of behavior, attitudes and feelings that characterize life in the organization, while an organization culture tends to be deep and stable. Although culture and climate are related, climate often proves easier to assess and change. In other words, climate consists of the day to day feelings of the members of the organization and is highly susceptible to changes within the organization. The climate will be very good for a time if the staff receives raises or if the company is furnished with new equipment. Conversely, if budget cuts occur or the number of staff reduced the climate will suffer. These conditions are all temporary, whereas culture is more permanent and lasting. Culture can and does change, but at a much slower rate than climate. It is a powerful force that can encourage and support an individual effort or thwart them before they are started. Organizational culture can be used to both explain and create end results. All companies have an organizational culture, which represents the intangible force that centers on a company’s values and beliefs. Individuals typically work at a company with which their values match the most. One result of organizational culture is to develop a climate by which a company can measure successes attached to this intangible force. This starts the relationship between the organizational culture and climate. While organizational culture is often a naturally occurring phenomenon in organizations, the organizational climate often takes more work to implement. A company’s organizational culture and climate are not always static. As a company evolves, so does its culture. This often leads to changes in the organizational climate as managers and employees change, along with the values and beliefs in the business. The organizational climate must adjust as necessary to ensure the company measures the correct factors. 22 4. Organizational Life Cycle Organizations are not static, they change. Like children, organizations typically go through different phases. Discover the five phases of the organizational life cycle, from start-up to decline. The Organizational Life Cycle (OLC) goes through specific stages as a result of the company’s success (or possibly lack of) in the market. Publications on this topic set the number of stages organizations go through anywhere from three to ten, with most settling on a basic set of four or five. Not surprisingly, the major stages are Start-up (or Birth), Growth, Maturity and Decline. A fifth stage, called Revival (or Diversification), can also occur between the Maturity or Decline stages. Sales Curve Organizational Life Cycle Revival Maturity Decline Growth Start-up Source: Lester, D., Parnell, J. & Carraher, S. (2003). Organizational life cycle: A five-stage empirical scale. International Journal of Organizational Analysis, 11(4), 339-354. The stages are considered developmental in the life of the firm, much like a biological model, and are sequential, cumulative, imminent, not easily reversed, and involve a broad range of activities and structures. Once at maturity, the stages can become more circular from Maturity to Revival and possibly to Decline. This evolution is the result of three influences in an organization’s life. First, administration of the organization becomes more complex as the size increases and more stakeholders become involved. Second, this increased complexity dictates the increased usage of more sophisticated organizational structures, information processing capabilities, and decision-making styles. Lastly, companies alternate between innovative phases and conservative ones - between stages that establish or renew organizational competences and those that exploit them through efficiencies. The driver behind the OLC is that needs, opportunities and threats, both inside and outside the business, will predictably vary depending on the stage of development. For example, threats in the Start-up stage differ from those in the Maturity stage and changes in the environment exert pressure for change on the business. Organizations move from one stage to another because the firm and the needs of the environment are so misaligned that the company needs to adapt for basic efficiency or possibly even survival. Thus, different stages of the company's life cycle require changes in the firm's objectives, strategies, managerial processes, technology, culture and decision-making. 23 High tech companies present a unique situation because they can progress through the stages at a fairly rapid rate – from Start-up to Maturity in only a few years. An interesting side note is that firms tend to develop to a structure that mirrors the stage of the market they are in – for example, firms in a mature market will tend to be in a Maturity stage of development. A complementary view of this model is that each stage represents a stable period of growth for the company - an evolutionary phase - but will reach a point where change is required, leading to a revolutionary or crisis period. It’s the firm’s ability to handle these crisis periods appropriately that will dictate the future direction and possibly survival of the organization. The five stages of OLC illustrate changes in organizational structure and managerial processes as the business proceeds through developmental stages. Each stage is discussed, with specific emphasis on the product creation and delivery aspects of the stage. 4.1. Start-Up Stage At Start-up, firms exhibit a very simple organizational structure with authority centralized at the top of the hierarchy. The main purpose during this stage is for the firm to establish its distinctive competences and generate some initial product-market success. This is achieved mainly by trial and error as efforts are made to change products and services in a manner that generates distinctive competences and creates a viable business model. This generally involves major and frequent product or service innovations and the pursuit of a niche strategy. Since the firm is small and has no established reputation, it must avoid direct confrontation with its more powerful competitors. It does this by finding gaps or niches in the market which are not being filled, and defends these niches by making extensive innovations. Start-up firms cater essentially to one type of customer and sell one type of product and thus they face a (relatively) simple administrative task. An intuitive, rather than an analytical, mode of decision-making prevails. For example the owner-manager(s) makes almost all the key decisions, based in large part upon his/her intuitions about the situation. The product development and delivery organization during the Start-up stage often involves staff wearing many hats. It is not uncommon in a high-tech start-up for at least one founder to be technical, and often multiple founders are. The leaders are involved at both a strategic and tactical levels in crafting and delivering the solution to initial customers. Key attributes of the environment are flexibility and lean management of resources and assets for continued existence. The organization will initially be very heavily weighted towards development staff and over time begins to fill in sparsely in marketing, sales, administration, and operations with an informal and overlapping structure. 24 Success in the Start-up stage is in finding a sustainable product/market niche that produces enough profit for the company to continue as a viable entity (either directly or with external financing). The Start-up stage, which involves growth through creativity and vision, eventually leads to leadership and organizational problems. More sophisticated and more formalized management practices must be adopted. If the founder(s) do not have the skills or desire to make this transition, then they often need to bring in an outsider and delegate authority to he/she to be able to continue to grow. 4.2. Growth Stage The emphasis in the Growth stage is on sales growth and early product diversification. Product lines are broadened, but this generally results in a more complete array of products for a given market rather than new positions in widely varying markets. Efforts are also devoted to incrementally tailoring products to new markets, while less stress is placed on major or dramatic product innovations. Market segmentation begins to play a role, with managers trying to identify specific subgroups of customers and to make small product or service modifications in order to better serve them. In other words, the niche strategy is often abandoned as broader markets are addressed. The company may attain profitability during this phase, or the need for additional funding to meet the growth opportunity is often achieved with an IPO. Typically, a functionally-based structure is established, some authority is delegated to middle-managers, and procedures are formalized. Decisions are now more influenced by customers as major stakeholders, and the goal becomes to fulfill a customer-facing function effectively rather than simply to cater to the wishes of the owner(s). A departmentalized, functionally-based structure is adopted where managers are appointed to head marketing, production, and perhaps accounting or development departments. The owner-manager plays a less central role in routine administration. In the Start-up stage the owner-manager(s) could take all the risks he/she wanted, but in the Growth stage the delegated leaders cannot. Strategy is still focused at the top of the hierarchy, with input from within the organization. Also, the product innovation emphasis becomes incremental rather than dramatic as the market pull makes extremely dramatic moves less necessary. From a product development and delivery perspective, roles within the organization become more differentiated, and there is a relative increase in the sizes of the marketing, sales and operations organizations versus development to generate and fulfill demand. Due to the diversification of the product line and customer base, specialization is beginning to occur in responsibilities. In order to maintain control and direction of the firm, more formalized methods of information sharing are required as are cross-functional coordination activities. The formal emergence of project, program, and product managers will likely occur if they have not already appeared. As indicated, drastic product innovation takes a back seat to incremental innovation. This is primarily the result of the growth of the existing product line being sufficient to drive the organizational success without taking significant risks. In addition, the existing 25 customer base begins to influence the product evolution and resource allocation through smaller feature enhancements and product improvements. One problem that can occur during the Growth stage is the crisis of autonomy. The limited decentralization of power coupled with less emphasis on major innovation activities makes the organization increasingly less responsive to market changes. The crisis that develops is driven by top-level managers' reluctance to delegate authority and creates the associated frustration at lower levels. The Growth stage officially begins to end as sales start to slow. 4.3. Maturity Stage At Maturity, sales levels stabilize due to a high level of competitive activity and possibly due to market saturation. The company may be highly profitable and have a cash-cow product. The goal then becomes smooth and efficient functioning to maximize profits in the wake of declining sales growth. Firms demonstrate more concern for internal efficiency and install more control mechanisms and processes. Structures are in some ways similar to those found in the growth phase. Departmental, functionally-based structures prevail since they continue to suit the focused product-market scope. By now, firms are usually run by professional managers who are somewhat more in favor of a participative management approach. Nonetheless, firms do remain fairly centralized. There is less delegation of power than in the growth phase, perhaps because the simplicity and stability of operations make it easier for only a few key managers to dominate. Firms in the Maturity stage are conservative with the level of innovation falling and a more bureaucratic organization structure established. Information processing activity changes in several key ways - there is more emphasis upon formal cost controls, budgets and performance measures. Companies also implement systems of coordination to enable their various business units and departments to work together. These efforts, however, tend to cause an influx of red tape. Coordination techniques such as product groups, formal planning processes, and corporate staff become, over time, a bureaucratic system that causes delays in decision making. The Maturity stage shows a style of decision making which is less innovative, less proactive, and more risk averse than in any other phase. The aim is to not rock the boat and to focus upon efficiency rather than novelty. The tendency, more than in any other stage, is to follow the competition - to wait for competitors to lead the way in innovating and then to imitate the innovations if it proves to be necessary. The Maturity stage can persist for some period of time depending on the industry. As long as sales and profits are stable, there is not a huge incentive to change the status quo, even if industry threats loom on the horizon. The product development and delivery structure is highly focused on analysis and cost control. In essence, the finance organization is running the product-based company. Development is primarily in a product sustaining or me-too development mode and justification of major activities is strongly tied to business case analysis. The marketing 26 organization will be more focused on monitoring competition and on pricing and promotion strategies in a highly competitive and defined market versus finding innovative new offerings or markets. There may be some projects looking at potential future technologies and products, but they will tend to be underfunded and not prioritized as major initiatives. Ultimately, the crisis that strikes the firm in the Maturity stage is the envisioned or actual progression to the Decline stage. While the realization may occur, the firm and its managers are paralyzed by a combination of bureaucratic processes and lack of innovation capabilities. 4.4. Revival Stage The Revival stage is optional and can occur during a Mature or Decline stage for a firm who recognizes and initiates drastic changes to alter their current trajectory. This is typically a phase of diversification and expansion of product-market scope. Firms pursue rapid growth through innovation, acquisition, and diversification and this involves a good deal of risk taking. New top-level leadership is often required to initiate or effectively implement this stage and it is also a period of necessarily increased investment. It also encourages a focus on innovation rather than imitation of the strategies of competitors as in the Maturity stage. Risk is mitigated and informed by an analytical, reflective and participative approach to decision making. It is common for task forces and project teams to be formed to analyze major capital expenditures, innovations or acquisitions. Groups of experts come together to analyze problems and to generate and evaluate different solution alternatives in a systematic and scientific way. Some firms begin adopting divisional and matrix structures for the first time in order to cope with the more complex and heterogeneous markets. Decision-making needs to be accelerated, and thus typically pushed down lower in the organization and with fewer formal hurdles at an executive level. Information processing also becomes much more diverse and expanded. Instead of a focus on financial controls and performance reporting, the need for information to inform about market and customer opportunities is required. Reorganizing data around markets and sub-segments is required, in addition to potential research into new trends and opportunities. In order to support an innovation mindset across the organization, information availability and sharing must be enabled. Significant changes begin to take place in the product-market strategies being followed. For example, there are more major and minor product-line and service innovations than in any other period. Also, new markets are entered for the first time as firms seek to become more diversified. For the product development and delivery organizations, this can be a very exciting time and also very chaotic. The drivers and expectations are on rapid growth and opportunities are high, but analysis and internal coordination across a number of different functions is demanded. Acquisitions require due diligence activities in addition to post agreement product and system integration. Collaboration is key, both through formal structures and processes, and through informal networks 27 and partnerships. The crisis that results from the Revival stage can follow one of two paths: the revival itself was not successful and sales growth does not occur; or the revival was successful and maintaining continued high growth is challenging for such a diverse and large firm. 4.5. Decline Stage The Decline stage is market by declining sales and profitability. It is often preceded by market stagnation and firms begin to decline with them. Profitability drops because of the external challenges and because of the lack of innovation. Firms in the decline stage react to adversity in their markets by becoming stagnant. Decision making is characterized by extreme conservatism. There is little innovation, an abhorrence of risk taking, and a reluctance even to imitate competitors' innovations, let alone lead the way. Firms tend to conserve resources depleted by poor performance by abstaining from product or service innovation. Their sales are poor because their product lines are unappealing versus alternatives, such as new technology solutions. The market scope of declining firms is quite narrow as they begin to sell-off non-core or underperforming divisions, laying somewhere between that of firms in the Start-up and Growth stages. One of the most notable structural features of firms in the Decline stage is the absence of any well-developed information processing mechanisms. Finally, communications between hierarchical levels and across departments are poor. The product development and delivery functions are likely minimal or non-existent. It’s possible that a Revival stage will be initiated, but the reality may be that the company can no longer afford to invest due to the decline of the entire market. The cash cow is already ground beef. 5. Vision, Mission, and Value A mission statement is a guiding light for a business and the individuals who run the business. It is usually made up of three parts: 5.1. Vision (big picture idea of what you want to achieve) Your vision communicates what your organization believes are the ideal conditions for your organization – how things would look if the issue important to you were perfectly addressed. This utopian dream is generally described by one or more phrases or vision statements, which are brief proclamations that convey the organization's dreams for the future. By developing a vision statement, your organization makes the beliefs and governing principles of your organization clear to the greater community (as well as to your own staff, participants, and volunteers). 5.2. Mission (general statement of how you will achieve your vision) Developing mission statements are the next step in the action planning process. An organization's mission statement describes what the group is going to do, and why it's 28 going to do that. Mission statements are similar to vision statements, but they're more concrete, and they are definitely more "action-oriented" than vision statements. The mission might refer to a problem without going into a lot of detail. They start to hint - very broadly - at how your organization might go about fixing the problems it has noted. While vision and mission statements themselves should be short, it often makes sense for an organization to include its deeply held beliefs or philosophy, which may in fact define both its work and the organization itself. One way to do this without sacrificing the directness of the vision and mission statements is to include guiding principles as an addition to the statements. These can lay out the beliefs of the organization while keeping its vision and mission statements short and to the point. 5.3. Value (how you will behave during the process) Whether written to be effective or ineffective, Mission Statements and Vision Statements are relatively common in this sector. But that is where most organizations stop. Vision and Mission Statements of where we are headed, and what we will do to get there. It is the rare organization that takes the time to then define HOW they will do that work - the talk they want to walk. The only way we can create an amazing future for our communities is if we do our work in a way that reflects universally shared values. This ensures we do not squander our time and resources rationalizing our actions. It helps to ensure we are not potentially squandering our community's goodwill. Further, if your goal is to create the future of your organization - the lofty goals of your vision statement - then you will want to ensure your work reflects the values you want to see in your organization. A Values Statement provides the tools for the organization to accomplish that. First, the Values Statement will look outside the organization, to the visionary outcomes you want to create for your community, such as “what values will need to be present in the community for your vision to come to pass?”, “what values would the community need to emphasize?”, and “what values would have to be the norm?” From there, the Values Statement will look inside, to see how your own work will model those values, to teach those values by example: How will your work reflect those values? How will you ensure you are modeling those values to the community? When you have a tough decision to make, will you always err on the side of those values? 6. Strategy and Organization Strategy is about positioning an organization to have a competitive advantage by making choices about: 1).which countries/industries to participate in; 2).what products/services to offer; 3).how to allocate corporate resources. The primary goal of strategy is creating value for shareholders and the other stakeholders 29 by providing customer value. In a global organization, this may be a challenge, since stakeholder expectations may differ from one society to the next. Strategic planning is a function of strategic management, which is the continuing process of pursuing a favorable competitive fit between the firm and its dynamic environment. A strategic plan is a document used to communicate with the organization the organizations goals, the actions needed to achieve those goals and all of the other critical elements developed during the planning exercise. Many organizations adopted a formalized top-down strategic planning model. Under this model, strategic planning became a deliberate process in which top executives periodically would formulate the firm's strategy, and then communicate it down the organization for implementation. 6.1. Mission A company's mission is its reason for being as discussed early. The mission often is expressed in the form of a mission statement, which conveys a sense of purpose to employees and projects a company image to customers. In the strategy formulation process, the mission statement sets the mood of where the company should go. 6.2. Strategic Objectives Strategic objectives are concrete goals that the organization seeks to reach, for example, an earnings growth target. The objectives should be challenging but achievable. They also should be measurable so that the company can monitor its progress and make corrections as needed. 6.3. Situation Analysis (SWOT Analysis) Once the firm has specified its objectives, it begins with its current situation to devise a strategic plan to reach those objectives. SWOT Analysis is a useful technique for understanding your situation including your Strengths and Weaknesses, and both the Opportunities open to you and the Threats you face. The aim of any SWOT Analysis is to identify the key internal and external factors that are important to achieving the objective. These come from within the company’s unique value chain. 6.3.1. Internal Analysis (Strength and Weakness) Internal analysis examines the capabilities of the organization (or of the strategy, if the group has already developed and prioritized strategies). This is done by identifying the strengths and weaknesses. 6.3.2. External Analysis (Opportunity and Threat) External analysis examines the context or environment in which the organization operates, such as partner agencies, authorizing environment, stakeholders, and the influence of economic or other demographic trends. The purpose of this analysis is to identify external factors that could in the future create opportunities for the 30 organization (or the proposed strategy) and those that pose threats or obstacles to performance. Source: Mintzberg, H., Lampel, J.B., Quinn, J., Ghoshal, S. (2014). The Strategy Process: Concepts, Contexts, Cases, 5/E. London: Pearson. 6.4. Strategy Formulation Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can be developed. While different firms have different alternatives depending on their situation, there also exist generic strategies that can be applied across a wide range of firms. Michael Porter identified cost leadership, differentiation, and focus as three generic strategies that may be considered when defining strategic alternatives. Porter advised against implementing a combination of these strategies for a given product; rather, he argued that only one of the generic strategy alternatives should be pursued. 6.4.1. Cost leadership Strategy Cost leadership is to drive cost down through all the elements of the production of the product from sourcing, to labor costs. This strategy involves the organization aiming to be the lowest cost producer and/or distributor within their industry. The organization aims to drive cost down for all production elements from the sourcing of materials, to labor costs. To achieve cost leadership a business will usually need large scale production so that they can benefit from "economies of scale". Large scale production means that the business will need to appeal to a broad part of the market. For this reason a cost leadership strategy is a broad scope strategy. A cost leadership business can create a competitive advantage: by reducing production costs and therefore increasing the amount of profit made on each sale as the business believes that its brand can command a premium price or by reducing production costs and passing on the cost saving to customers in the hope that it will increase sales and market share 31 6.4.2. Differentiation Strategy Differentiation is to focus its effort on particular segments and charge for the added differentiated value. To be different, is what organization striving for; companies and product ranges that appeal to customers and "stand out from the crowd" have a competitive advantage. Porter asserts that businesses can stand out from their competitors by developing a differentiation strategy. With a differentiation strategy the business develops product or service features which are different from competitors and appeal to customers including functionality, customer support and product quality. New concepts which allow for differentiation can be protected through patents and other intellectual property rights; however patents have a certain life span and organization always face the danger that their idea which gives them a competitive advantage will be copied in one form or another. 6.4.3. Focus (Niche) Strategy Focus or Niche is to form a competitive advantage for this niche market and either succeeds by being a low cost producer or differentiator within that particular segment. Under a focus strategy a business focuses its effort on one particular segment of the market and aims to become well known for providing products/services for that segment. They form a competitive advantage by catering for the specific needs and wants of their niche market. A focus strategy is known as a narrow scope strategy because the business is focusing on a narrow (specific) segment of the market. 6.4.4. Corporate Social Responsibility (CSR) Business sustainability requires organizations to adhere to the principles of sustainable development - Corporate Social Responsibility (CSR). CSR is an organization’s obligation to consider the interests of their customers, employees, shareholders, communities, and the ecology and to consider the social and environmental consequences of their business activities. By integrating CSR into core business processes and stakeholder management, organizations can achieve the ultimate goal of creating both social value and corporate value. It is thought that CSR can have an important role in how a business is positioned in its environment. Just as a number of strategic analysis tools can describe how a company is strategically positioned, the ethical reputation that a business has is also thought to be important in its overall strategic positioning. So why CSR? Satisfied employees: Employees want to feel proud of the organization they work for. An employee with a positive attitude towards the company, is less likely to look for a job elsewhere. It is also likely that you will receive more job applications because people want to work for you. Satisfied customers: Research shows that a strong record of CSR improves customers’ attitude towards the company. If a customer likes the company, he or she will buy more products or services and will be less willing to change to another brand. 32 Positive Public Relations and Image: CSR provides the opportunity to share positive stories online and through traditional media. Companies no longer have to waste money on expensive advertising campaigns. Instead, they generate free publicity and benefit from worth of mouth marketing. More business opportunities: A CSR program requires an open, outside oriented approach. The business must be in a constant dialogue with customers, suppliers and other parties that affect the organization. Because of continuous interaction with other parties, your business will be the first to know about new business opportunities. 6.5. Strategy Implementation The strategy likely will be expressed in high-level conceptual terms and priorities. For effective implementation, it needs to be translated into more detailed policies that can be understood at the functional level of the organization. The expression of the strategy in terms of functional policies also serves to highlight any practical issues that might not have been visible at a higher level. In addition to developing functional policies, the implementation phase involves identifying the required resources and putting into place the necessary organizational changes. 7. HR’s Main Roles In the new economy, winning will spring from organizational capabilities such as speed, responsiveness, agility, learning capacity, and employee competence. Successful organizations will be those that are able to quickly turn strategy into action; to manage processes intelligently and efficiently; to maximize employee contribution and commitment; and to create the conditions for seamless change. The need to develop those capabilities brings us back to the mandate for HR set forth at the beginning of this article. Let’s take a closer look at each HR imperative in turn. Future / Strategic Focus Strategic Partner Change Agent Management of Strategic Management of Transformation Human Resources and Change Processes People Administrative Partner Employee Champion Management of Firm Management of Employee Infrastructure Contribution Day-to-Day / Operational Focus Source: Ulrich, D. (1998). A new mandate for human resources. Harvard Business 33 Review, Jan-Feb, 76(1):124-134. 7.1. Becoming a Partner in Strategy Execution We’re not going to argue that HR should make strategy. Strategy is the responsibility of a company’s executive team—of which HR is a member. To be full-fledged strategic partners with senior management, however, HR executives should impel and guide serious discussion of how the company should be organized to carry out its strategy. Creating the conditions for this discussion involves four steps. First, HR should be held responsible for defining an organizational architecture. In other words, it should identify the underlying model of the company’s way of doing business. Several well-established frameworks can be used in this process. Jay Galbraith’s star model, for example, identifies five essential organizational components: strategy, structure, rewards, processes, and people. The well-known 7-S framework created by McKinsey & Company distinguishes seven components in a company’s architecture: strategy, structure, systems, staff, style, skills, and shared values. It’s relatively unimportant which framework the HR staff uses to define the company’s architecture, as long as it’s robust. What matters more is that an architecture be articulated explicitly. Without such clarity, managers can become myopic about how the company runs—and thus about what drives strategy implementation and what stands in its way. They might think only of structure as the driving force behind actions and decisions, and neglect systems or skills. Or they might understand the company primarily in terms of its values and pay inadequate attention to the influence of systems on how work—that is, strategy execution—actually gets accomplished. Senior management should ask HR to play the role of an architect called into an already-constructed building to draw up its plans. The architect makes measurements; calculates dimensions; notes windows, doors, and staircases; and examines the plumbing and heating infrastructures. The result is a comprehensive set of blueprints that contains all the building’s parts and shows how they work together. Next, HR must be accountable for conducting an organizational audit. Blueprints can illuminate the places in a house that require immediate improvement; organizational- architecture plans can be similarly useful. They are critical in helping managers identify which components of the company must change in order to facilitate strategy execution. Again, HR’s role is to shepherd the dialogue about the company’s blueprints. Consider a company in which HR defined the organization’s architecture in terms of its culture, competencies, rewards, governance, work processes, and leadership. The HR staff was able to use that model to guide management through a rigorous discussion of “fit”—did the company’s culture fit its strategic goals, did its competencies, and so forth. When the answer was no, HR was able to guide a discussion of how to obtain or develop what was missing. The third role for HR as a strategic partner is to identify methods for renovating the parts of the organizational architecture that need it. In other words, HR managers 34 should be assigned to take the lead in proposing, creating, and debating best practices in culture change programs, for example, or in appraisal and reward systems. Similarly, if strategy implementation requires, say, a team-based organizational structure, HR would be responsible for bringing state-of-the-art approaches for creating this structure to senior management’s attention. Fourth and finally, HR must take stock of its own work and set clear priorities. At any given moment, the HR staff might have a dozen initiatives in its sights, such as pay-for- performance, global team-work, and action-learning development experiences. But to be truly tied to business outcomes, HR needs to join forces with operating managers to systematically assess the impact and