April 17th, 2008
Markets and HR
Good strategic thinking in HR understands that we compete for Capital, Customers and Labor simultanteously. Good strategic action optimizes our position in those markets simultaneously.
So what do Markets have to do with HR? My basic model for understanding most strategic decisions in an organization posits that there are “multiple markets” in which we compete simultaneously. Optimizing your position in those multiple markets is the essense of strategic thinking and planning. Everyday we compete for capital, for customers and for labor. Within labor there is an important distinction – we compete in an external labor market but also in an an internal one. Strategic action is at the intersection of these markets.
Organizations compete for Capital. Shareholders, donors, investors, even entreprenuers all have choices as to where to put their investment resources. Why do stock prices go up and down? Because people but and sell stock. Why? Because they have choices as to where to invest their money.
Organizations compete for Customers. This is pretty obvious I hope. You may be in more or less of a competitive business – your customers may or may not have alternatives for your services. For most organizations there are alternatives. Customers judge us on quality, service, functional and economic value. We live in a competitive world.
Labor market competition is perhaps the most obvious market in which HR competes. Employees have choices – people move jobs everyday – sometimes for the craziest reasons. Every HR manager knows that you compete for labor. However, let’s take just a bit of a deeper dive on understanding labor markets. There is an external and internal labor market.
External Labor Markets are pretty easy to get – you hire people who have jobs elsewhere or who are “in the market looking”. The total rewards package that you offer – pay, benefits, career, environment, work, is more or less attractive than what others offer to the person. Also, your employees are market actors – they have choices with other employers.
Internal Labor Markets – To me, this is the least obvious one and clearly the most important market in which you compete. Every minute of every day you are competing with the other interests of your employees. When your employees are working are they focused on your work? Are they passionate and engaged or are they thinking about baseball, those new shoes, Iraq or even Britney Spears? You are competing for your employee’s attention at work.
Many commentators talk about employee engagement. All too frequently the conversation focuses on cause and effect however. “Do this and they will do that.” The better concept is too see the market dynamic at work here. Employee attention, passion and engagement are all scarce resources. They will give you some of it in exchange for your scare resources – real total rewards. Scarecity traded for scarecity – market dynamics.
Optimize your position in all these markets simultaneously and you win the HR prize.
© HumanMarkets.Com 2008
