The Strategic Importance of HRM

Understanding the strategic potential of human resource manage­ment in organizations is relatively recent phenomenon. In fact, the role of such management in organizations, as it is known today, has evolved through three main stages. From early in this century until the mid-1960s, HRM activities comprised a file maintenance stage, in which much of the emphasis was on screening applicants, orienting new em­ployees, recording employee-related data for personnel purposes, and planning company social functions (such as the company picnic).

The second stage, government accountability, began with pas­sage of the Civil Rights ACT of 1964 (which forbids employment dis­crimination based on race, color, religion, sex, or national origin) and continued as additional laws, court rulings, and federal regulatory guidelines increasingly impacted various aspects of employment, such as hiring and promotion decisions, pension plans, and health and safety issues. Of course, some laws, particularly those governing rela­tions with unions, existed 1964; but the mid-1960s ushered in an era of accelerated governmental regulation of employment issues. As organizations attempted to gain greater control over activities that could result in legal difficulties and large financial settlements, the HRM function gained in importance. Indicative of the expense that can be involved, under a 1973 consent decree (a court-sanctioned agreement in which the accused party does not admit wrongdoing but agrees to discontinue a practice). AT&T agreed to raise the starting pay of women promoted to managerial positions so that their pay level would be equal to those of similarly promoted men, at a cost of more that $30 million.

The third stage, which began in the late 1970s and early 1980s, can be termed the competitive advantage stage. In this stage, human resource management is, increasingly viewed as important for both strategy formulation and implementation. Thus, under some circum­stances, human resources can comprise a source of distinct compe­tence that forms a basis for strategy formulation. For example, 3M's notes scientists enable the company to pursue a differentiation strategy based on innovative product. Under other circumstances, HRM activi­ties may be used to support strategy implementation. For instance, at Honda of America's Marysville, Ohio, plant, an emphasis on differ­entiation through quality is supported by such HRM activities as train­ing programs, developmental performance appraisal processes, and promises of job security. Human resource management often is an important ingredient in the success of such strategy-related activities as downsizing, mergers, and acquisitions. At the competitive advan­tage stage, then, human resources are considered explicitly in conjunc­tion with strategic management, particularly through the mechanism of human resource planning.

TEXT 7: HOW LEADERS INFLUENCE OTHERS

Why do people accept the influence of a leader? One major rea­son is that leaders have power. In this section, we examine the major sources of power and the ways that leaders can effectively use the power they potentially have available.

Sources of Leader Power

Power is the capacity to affect the behavior of others. Leaders in organizations typically rely on some or all of six major types of power: legitimate, reward, coercive, expert, information, and referent.

Legitimate Power. Legitimate power stems from a position's placement in the managerial hierarchy and the authority vested in the position. When we accept a job with an organization, we usually are aware that we will be receiving directions related to our work from our immediate boss and other in the hierarchy. Normally, we accept such directions as legitimate because these persons hold positions of authority. Hence legitimate power relates to the position, rather than to the person per se.

Reward Power. Reward power is based on the capacity to con­trol and provide valued rewards to other. Most organizations offer an array of rewards, including pay raises, bonuses, interesting projects, promotion recommendations, a better office, support for training pro­grams, assignments with high visibility in the organization, recogni­tion, positive feedback, and time off. The greater a manager's control over valued rewards, the greater that manager's reward power.

Coercive Power. Coercive power depends on the ability to pun­ish other when they do not engage in desired behaviors. Form of coer­cion or punishment include criticisms, terminations, reprimands, sus­pensions, warning letters that go into an individual's personnel file, negative performance appraisals, demotions, and withheld pay raises.

The greater the freedom to punish others, the greater a manager's co­ercive power.

Expert Power. Expert power is based on the possession of ex­pertise that is valued by others. Managers often have considerable knowledge, technical skills, and experience that can be critical to sub­ordinates' success. To the extent that a leader possesses expertise and information that is needed or desired by other, the leader has expert power.

Information Power. Information power results from access to and control over the distribution of important information about or­ganizational operations and future plans. Managers usually have better access to such information than do subordinates and have some discre­tion over how much is disseminated to work-unit members. The greater the control over important information, the greater the infor­mation power.

Referent Power. Referent power results from being admired, personally identified with, or liked be others. When we admire people, want to be like them, or liked by others. When we admire people, want to be like them, or feel friendship toward them. Some observers argue that Lee lacocca's initial success in turning around the Chrysler Corporation was based partially on the fact that he possessed referent power in relation to the work force. The more that a leader is able to cultivate the liking, identification, and admiration of others, the greater the referent power.