Value Chain analysis

Value chain is more than just a tool for identifying how you do things now. It prompts questions such as: How do our costs for this activity compare with our competitors? Is there some way we can gain a competitive advantage with this activity? Is there a more efficient way for us to deliver these services? And do we have to perform these services in house?

Outlining and analyzing the company’s value chain can help the HR manager formulate policies and practices that make sense in terms of the firm’s strategy. Consider an example. At Dell Computer, phone technicians competently and courteously assisting Dell customers with problems is a crucial (or core) value chain activity indeed it is a big part of what Dell built its reputation on. The critical nature of this activity would be apparent from any outlining of Dell’s value chain. Given this, Dell’s human resources team might decide that one way for HR to add value is by improving phone technicians’ performance by installing special computerized job aids that show technicians what series of questions to ask when customers call with problems.

Outline a Strategy map: A strategy map is a diagram that summarizes the thus shows the big picture of how each department’s or team’s performance contributes to achieving the company’s overall strategic goals.

Southwest pursues a low cost leader competitive strategy. It therefore tailors all its activities to delivering low cost convenient service. The strategy map for Southwest succinctly lays out the hierarchy of big activities required for Southwest Airlines to succeed. At the top is achieving company wide strategic financial goals. To boost revenues profitability, southwest needs to fly fewer planes (to keep costs down) attract and keep customers, maintain low prices, and maintain on time flights. In turn on-time flights and low prices require fast turn around. And fast turn around requires motivated committed ground and flight crews. This in turn has implications for what human resource policies and practices southwest requires.

Identify the strategically required organizational outcomes: Every company must produce strategically relevant outcomes if it is achieve its strategic goals. At Einstein Medical new services delivered was one such required organizational outcome. At Dell, receiving quick, competent, and courteous technical advice by phone is one such outcome. The strategy map helps the manager recognize these core outcomes. Based on his or her understanding of how the company operates, and perhaps an analysis of the firm’s value chain, the manager in this step identifies and specifies the firm’s strategically relevant organizational outcomes.

Identify the Required workforce competencies and behaviors:

Here ask, what competencies and behaviors must our employees exhibit of our company is to produce the strategically relevant organizational outcomes, and thereby achieve its strategic goals? At Einstein medical employees had to take personal accountability for their results and be willing to work proactively (be generative) to find new and novel solutions. Again, a strategy map can help the manager recognize what these competencies and behavior are.

Identify the required HR system policies and activities:

Once the Human Resources manager knows what the required employee competencies and behaviors are, he or she can turn to identifying the HR activities and policies that will help to produce them. For example, at Einstein medical these included new training and pay plans.

In this step, one should be specific. It is not enough to say, we need new training programs, or disciplinary processes. Instead the manager must now ask, exactly what sorts of new training programs do we need, to produce the sorts of employee competencies and behaviors that we seek?