Human Resources

and Culture
Chapter 3
Learning Objectives
 Define and explain the importance of human
resources to an organization
 Explain the purpose of a human resource audit
 Explain what a human resource audit contains
 Understand HR benchmarking
 Understand CSF’s and how human resources can
be CSF’s
 Define culture and understand its sources and
types
Importance of Human Resources
 Human resources are an important part of
the value chain
 They can be unique, and thus a source of
core competence in an organization
 If a core competence is related to HR, then
HR can contribute to competitive advantage
Strategic Analysis of HR: Purpose
 People related strategies may be important to
new strategy (for example, a change in the way
the organization does business)
 In today’s technologically complex business
world, analysis of existing human resources is
important in order to determine what options are
available
 The network of people within an organization and
their relationships with people can be an
important part of strategy
HR and Sustainable Competitive
Advantage
 In some industries, people are the most important factor in
success
- advertising and creative development
- leisure and tourism
- management consulting
- hospitals and medical professions
 The adaptability of people to changing environments is an
important skill
 “The ability to learn faster than your competitors may be the
only sustainable advantage” – Arie De Geus, former head of
planning at Royal Dutch Shell
How is Human Resource Analysis
Done?
 Human Resource Audit
 Purpose: (1) To identify the size, skills and
structure surrounding current employees and (2)
to identify future human resource needs of the
organization
 Question Answered:
Are the human resources a strength or a
weakness?
The Audit: Principles
 Obtain some basic information on the
people and policies involved in the
organization
 Explore in detail the role and contribution of
the human resources management function
in the development of strategy
The Audit: Contents
 People in the  Role and Contribution
Organization of HR strategy
HR Audit: People in the Organization
Employee numbers and turnover

Organization structure
Selection, training and development
Structures for controlling the
organization Staffing levels

Use of special teams, e.g. for Capital investment/employee

Innovation
Role of quality and personal service
Level of skills and capabilities in delivering the products or services
required of the organization

Morale and rewards Role of professional advice in

delivering the product or service
Employee and industrial
relations
Role and Contribution of HR Strategy

Relationship with strategy

Key characteristics of HR strategy

Consistency of strategy across different levels

Responsiveness of HR strategy in leading change in the organization

Role of HR strategy in leading change in the organization

Monitoring and review of HR strategy

Time horizon for operation of HR strategy

What the Audit Achieves
 Provides information that is useful in deciding how
feasible a strategy is
 Identifies any human resource “gaps” (human
resources necessary for a proposed strategy
minus the current state of human resources)
 Allows the organization to “benchmark” their
performance against other organizations
(benchmark is a process of comparison)
Human Resources as a CSF
 Critical Success Factor (CSF) = a reason
why one organization is superior to another
 HR can be a CSF if employees are have
unique skills
Organizational Culture
Why is organizational culture
important?
 Culture can influence every part of an
organization, including the strategy process
 Thus, culture is important in both the
strategic analysis and “doing” the
strategy stages
The culture of any group of people is that set of beliefs,
customs, practices and ways of thinking that they have come
to share with each other through being and working together.

- Stacey
Determinants of Culture
 Philosophy of the founders
 Nature of the business and industry
 Management style
 National or regional characteristics
 Power distance
 Organizational structure
 Level of dependency on technology
What is Power Distance?
 Power distance (Hickson and Pugh) - how
far employees feel from their bosses
 In organizations with high power distance,
inequality is accepted
 In organizations with low power distance,
employees feel closer to their bosses and
are often consulted to share in decision-
making
Analysing organisational culture-1
Environment
Cultural factors
specific to organisation
Identification of cultural style
of the organisation
Analysis of the strategic
implications
People, corporate cultures,
labour policies, international
issues.
History? Size?
Products and technology?
Leadership? Cultural Web?
Power? Role?
Task? Personal?
Prescriptive or emergent?
Competitive advantage?
Core competence? Miles and
Snow Culture types
Analysing organisational culture-2
Organisational culture: “Beliefs, values and learned ways of
managing”
 Important to distinguish between organisational and
national/international culture
 Analyse organisational culture through these main
elements:
 History and ownership
 Size
 Technology
 Leadership and mission
 Cultural Web - developed by Johnson
 Cultural Typologies – Handy
 Culture types – Miles and Snow
Cultural Typologies (Handy)
 Handy classified organizational cultures
into 4 types:
- Power Cultures
- Role Cultures
- Task Cultures
- Person Cultures
Cultural Typologies (Handy)
 Power culture – dominated by one very
powerful person or small group and
decisions are very centralized
 Role culture – Found in established
organizations in stable environments, with
hierarchical structures, i.e. very
bureaucratic
Cultural Typologies (Handy)
 Task culture – Found in organizations
involved in non-repetitive activities
 Person culture – Found in organizations
that exist primarily for the benefit of the
members of the organization
Miles and Snow Typology
Reactor
Little consideration of
environment; drift
with little concern for
strategy

Prospector Analyzer Defender

Stress maintenance of Stress stability,
Stress innovation
status quo with conservatism, and
and growth; seek
moderate innovation maintenance of
new opportunities
and growth status quo

Dynamic, growing Moderately stable Very stable

environment environment with environment with
characterized some uncertainty little uncertainty
by high uncertainty and risk and risk
and risk
Four strategic types and their approaches to
strategy (Miles and Snow)
 Defender:
 protect market share
 hold current position
 Analyser:
 seek market opportunities but protect existing areas
 hold market share but with some innovation
 Prospector:
 find new opportunities
 exploit and take risks
 Reactor:
 respond only to others
 often late and inadequate
Miles and Snow Typology
Examples
 Defender:
 McDonald’s
 Prospector:
 Reebok International, Mrs. Fields
 Analyzer:
 Procter & Gamble (Crest), Starbucks

 Reactor:
 W.T. Grant
Analysis/Testing For Strategic Fit
 The analysis of culture should be more than just a
list of factors describing culture
 The analysis process should be done with
reference to possible areas of strategic interest
 I.e., the analysis should include testing for
whether the culture is a strategic fit with the
current strategy
Ten Guidelines for Analyzing culture
and its meaning for strategy
 How old is the organization? Does it exist in a stable or fast-
changing environment?
 Who owns it and what is the structure?
 How is it organized?
 How are results judged?
 How are decisions made?
 What qualities make a good boss? A good employee?
 How are people rewarded?
 How are groups and individuals controlled?
 Do people work in teams or as individuals?