Now that you learned about the strategic value and uniqueness of groups of employees, we can turn to the employment modes. Lepak and Snell (1999) developed four different approaches to HR investments based on discussed types of employment groups (core employees, job-based employees, contract workers, and alliance/partners ).
Based on the four types of employment groups, four different approaches to HR investments emerge:
- Core employees – commitment-based HR system
- Job-based employees – productivity-based HR system
- Contract workers – compliance HR system
- Alliance partners – collaboration-based HR system
- Core Employees: For core employees firms tend to use a commitment-based HR system. Because core employees add most value to companies these employees are most likely to be internally employed and treated as core workers. The commitment-based HR system means that firms invest heavily in developing employees’ competences through training programs, empower them to use these skills, and give them a large amount of autonomy in their jobs.
If we take employees in the healthcare sector as an example: nurses are crucial for the elderly care organization to achieve competitive advantage – therefore their strategic value is high. At the same time, the contributions nurses make, and the necessary knowledge and skills to realize these contributions, are not readily available in the open labour market, especially with the current labour market shortages of medical personnel. Hence, nurses can be categorized as core employees for these care organizations, which make the commitment-based HR system the most appropriate option to achieve competitive advantage. Examples show that healthcare organizations in The Netherlands go to great length to attract and empower nurses .
Job-based employees: tend to be managed by productivity-based HR systems, standardizing jobs and selecting people from the external labour market. Hence, although these workers are employed by the firm and they add strategic value, they do not contribute in a very unique way or their competences are widely available. Investments in these employees tend to be lower than in core employees.
Alliance/partners: the most suitable HR system is a collaborative one, which is based on group incentives and interdisciplinary teams. These workers do not offer core strategic value, but have unique skills. However, because they do not directly affect the core competences of the firm, companies look externally for these employees.
Contract workers: are managed by a compliance-based HR system. These employees perform tasks that are not that important for the firm’s strategy and these types of workers are more readily available in the labour market. Oftentimes, these workers are managed through strict rules and procedures with limited training and performance management.
By viewing the workforce through the lens of the employment portfolio a company can make better decisions about where to invest to achieve and sustain a competitive advantage. At the same time, the employment mode framework can also be used to decide which HRM activities to outsource and which one to develop in-house (see Part HRM Function).
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