STRATEGIC HUMAN RESOURCE

MANAGEMENT
= Course 6 =

Associate professor PhD. Valentina Mihaela GHINEA

 DIFFERENTIATION
= every successful strategy
(even the low-cost leadership)
is about differentiation

CUSTOMER RELATIONSHIP
= customer loyalty
= customers' willingness for
LOW-COST paying more because of the
LEADERSHIP COMPANY personal connection they
experience while doing business
with these COs

NETWORK EFFECT
= the value of a product increases
as more units are sold

= the WINNER-TAKES-ALL
STRATEGY
 DIFFERENTIATION  characteristics of the product / service that cannot be
easily copied

WARNING: every successful strategy (even the low-cost leadership) is about

differentiation  BUT the differentiation element = the key!

Low-Cost Leadership strategy  differentiation element = the price of the product

Differentiation strategy  differentiation element = some
unique/remarkable/disruptive/amazing characteristics of the product
Customer Relationship Management strategy  differentiation element =
customer’s loyalty
Network Effect strategy  differentiation element = the value of the product
increases as more units are sold
DIFFERENTIATION  characteristics of the product / service that cannot be
easily copied

DIFFERENTIATION matters only if the customers value the difference and:

a) - select your offering over those of others
b) - be willing to pay a premium for what you offer
c) - some combinations of a) & b)
 https://blog.gardeviance.org/2015/03/continuous-and-sustainable-competitive.
html

In Low-Cost Leadership strategy:

strategy
 Industrialization  production of scale  working with commodities
-Known
-Measured
-Stable
-Standard
-Low margin

In Differentiation strategy:
strategy
Pioneers  uncharted fields
-Chaotic
-Uncertain
-Unpredictable
-Different
-Exciting
-Future worth

At the beginning, Thomas Edison's system of electric incandescent lighting vs. local
gas COs was about the DIFFERENTIATION STRATEGY
 DIFFERENTIATION STRATEGY
most frequently met characteristics from the HR perspective

 CO "buys" talents
 whether the CO enjoys it or not short employment period (skilled
employees come and go)  HIGH turnover

SELECTION:
-highly creative (contributory  proactive creativity, it’s up to the object of activity)
-innovative & collaborative workforce
-taking risks & comfortable with uncertainty
Bonus: long term oriented people

TRAINING:
- induction & soft skills (useful even beyond their present job)

MOTIVATION – financial - flexible (including stock ownership)

- non – financial – Maslow (upper levels) & Herzberg (motivators) &
McGregor (Y approach)  creating motivation
 DIFFERENTIATION STRATEGY
most frequently met characteristics from the HR perspective

PERFORMANCE APPRAISAL SYSTEM :

– long-term group achievements (to enhance team work and build commitment)

LEADERSHIP:
– transformational (encourage & inspire & motivate to innovate)

TEAM BUILDING & COMMUNICATION:

– team spirit

CONFLICT MG.:
– forming, storming, norming and performing

ORGANIZATIONAL CULTURE – enhancing creativity

- Handy ‘s Athens (focus on job fulfillment ) or Deal and Kennedy's
Bet-your-company

CAREER MANAGEMENT:
– broad career path (trying to make them loyal)
JOB DESCRIPTION Complex version & explicit vs. Simple version vs. Based on
competence
SELECTION Besides the mandatory entry-level positions, the “purchase” of
talents (“buys" rather than “makes" talent)
Entry level vs. senior level position
TRAINING induction & soft skills training vs. hard skills/technical knowledge
training
MOTIVATION -financial = high salary + other incentives, compensations &
bonuses (including stock ownership)
&
- non – financial  creating motivation
PERFORMANCE short-term vs. long term achievements
APPRAISAL SYSTEM & group achievements vs. process oriented

COMMUNICATION Individual vs. Team communication (ideally)

LEADERSHIP Transactional vs. Transformational

TEAM BUILDING & forming // storming // norming // performing

team work
CONFLICT MG. competing/avoiding/compromising/accommodating/collaborating

ORGANIZATIONAL focus on power vs. function vs. task fulfilment vs. people
CULTURE Process/Work hard-play hard/Bet your comp./Tough
comp guy culture
 CUSTOMER RELATIONSHIP
= customer loyalty

customers' willingness for paying (more) because of the personal connection they
experience while purchasing from these COs

There are women claiming a longer-term relationship with their hairstylists than
with their husbands!
A) - simplifying the customers' life / work
ex: insurance car policy valid even abroad

B) - ongoing benefits
ex: Microsoft  notifying software users of critical updates which customers can
download without charge

C) - personalized service
ex: databases of the hotels 
"Welcome back to X Hotel, Mr. Jones. We have a nonsmoking room for you. Do you still prefer
having the Wall Street Journal delivered with your continental breakfast?“

D) - customized solutions
ex: not selling one-size-fits-all products / services

E) - personal contact
ex: - to give every customer an account representative (outsourcing companies, life
insurance companies, etc.)
“La Doi Pasi” = the franchise launched by the retailer Metro Cash & Carry (2012) & the
brand brings together local shops, owned by small independent merchants

F) - continuous learning
ex: learning more about the customers' needs
 CUSTOMER RELATIONSHIP
most frequently met characteristics from the HR perspective
- between LOW-COST LEADERSHIP & DIFFERENTIATION -

 low/regular positions  internal development of talents (" makes")

 higher-level positions  talented outsiders (" buys")

Sensitive point = balancing promotion opportunities between lower & higher level
positions
TRAINING:
- It’s up to each level apart  induction & soft & hard skills training

MOTIVATION:
- financial = salary (low fix amount) + commissions (typically, a life insurance
agent receives anywhere from 30%-90% of the amount paid for a policy -known as the
premium-, by the client in the first year. In later years, the agent may receive  3-10%
of each year's premium, also known as "renewals" or "trailing commissions”.)
vs.
- non – financial = recognition & self – fulfillment
 CUSTOMER RELATIONSHIP
most frequently met characteristics from the HR perspective

PERFORMANCE APPRAISAL SYST. :

-focused on processes (how you do it?) rather than quantifiable results
In a funny note, it is not about how many flowers you offer, their colour or type, neither their
price, but more about the way you offer them.
COMMUNICATION:
-individual

LEADERSHIP:
-it frequently is transactional (although it should be more transformational)

CONFLICT MG.:
-it frequently is competing (although it should be more collaboration)

ORGANISATIONAL CULTURE:
-it frequently is focus on function or Work hard-play hard (although it could be more on
people)

CAREER MANAGEMENT:
- expensive career paths within the organization
 NETWORK EFFECT
= the value of a product increases as more units are sold

highly exponential in terms of value creation

first mover’s advantage ≈ the WINNER-TAKES-ALL STRATEGY

Ex.: the late XIXth century  first telephones were sold -- they
were not particularly useful  the more people who use them,
the more valuable they are to each other
(fax machines, Web, etc.)

 Ex.: eBay (the online auction CO) began as a hobby business  then, the network
effect = the phenomenon in which as more people or users join the platform, the
more the value of the service offered improves for those joining afterward
 Microsoft's Windows (Bill Gates)
(hardware = IBM operating system)
Apple’s Macintosh
(Steve Jobs)

Windows dominates the industry because of the most widely installed base
– early + it is pre-loaded in majority of the new personal computers.
A Windows PC is compatible with most software programs in the market +
it supports software like games and other programs (especially those
developed specifically for Windows).

gaining a competitive advantage (as the CO controls more of the total

shares of a market)  network effect  enormous INERTIA FOR
CHANGE that makes it very hard for a new player to get started,
even if it’s much, much better
 Positive (reinforcing) & negative (balancing)
feedback loops

System dynamics (SD) = an approach to understanding the nonlinear behaviour of complex

systems over time (by
( using stocks, flows, internal feedback loops, table functions and time delays).

An increase in the state variable leads to further increases in the same variable  positive feedback
(S causal loop type)
An increase in the state variable leads to further decrease in the causative variable  negative
feedback (O causal loop type)
Produces CO2

Reinforcing
feedback loop
SUNLIGHT
S (+)

Photosynthesis Feeding

Plant growth S Plant biomass O2 S

Fish biomass
O Balancing O Balancing
feedback loop feedback loop
(-) (-)

Blocks sunlight Consumes plants

 Positive (reinforcing) feedback loops 
network effect

BASE OF USERS
S

Reinforcing
Gets a larger
feedback loop S
(+) Strengthening the
share of new
market image
purchases
S

Attracts new users

 NETWORK EFFECT

HR perspective = workforce dominated by managers

- employees who excels at getting as many customers as possible

- SELECTION – “fitting in” people

-TRAINING – focus on technical skills

- MOTIVATION – selecting motivation

- PERFORMANCE APPRAISAL – performance metrics related to quality of service

and speed of sales
- COMPENSATION SYSTEM – bonuses for sales
- LEADERSHIP- strong leadership
- COMMUNICATION – excellent communication skills
- CONFLICT MG. – conflict is not allowed
 Overall business analysis and HR implications

Business matter Human resource implications

What business are we in? What sort of people do we need in the

business?

Where are we going? What sort of organization do we

need to get there?
What are our To what extent are these strengths and
strengths, weaknesses related to our HR
capability?
weaknesses,
What opportunities have we got to
opportunities and
threats? develop and engage our people?
What are the threats with regard to skills
shortages and retention of key people?

What are the main strategic To what extent do these issues involve
issues facing the business? HR considerations?
What are the drivers of What contribution should our people
performance in the business? make to drive performance?