When you think of purchasing something, do you go to the store with the lowest cost products or the one with the most unique ones? Or perhaps something in between? Looking for value and quality.
Each of the stores you chose has its own competitive edge. They have developed a strategy based on their competitive advantage and the market they want to serve. To succeed, these businesses must be clear on their strategy and hire people with the right skills to support their strategy.
Graph explaining the four generic strategies that Michael Porter* put forth.
Business and strategy guru Michael Porter categorized organizational strategies into groups. These strategies work for all businesses irrespective of their size and nature of the operation: differentiation, cost, differentiation focus, and cost focus. Those competing in a broader market are leadership and those with a niche market are focused. They each serve very different customers and have different processes. To support this, they must hire and train the right skills to drive their success.
Differentiation is about offering a unique product. A business that has a different product or service as its competitive edge develops a differentiation strategy. This business provides a product that is either not available in the market or has more to offer than what is available.
Such an organization has a culture of creativity and innovation. To be successful, this culture should be reflected in its people. Its people require a range of skill sets. They should be pro-active, self-driven, and empowered to work on their own.
The hiring strategy will focus on recruiting for diverse skill sets. They practice a flexible approach to talent recruitment and job definition, so they hire and nurture talented and creative people, empowering them to be innovative at work. The focus is more on skill sets such as creativity, innovation, being proactive, self-motivation, and risk-taking. With autonomy comes accountability. These organizations reward new ideas and provide support for the employees to implement their ideas. The individual contributions support the organizational differentiation strategy.
For organizations focused on cost leadership, their competitive edge is providing the products at the lowest cost. Customers buy their product or service knowing they are paying as little as possible. Here, the success mantra is to increase profits by reducing input costs and charging lower prices while betting on volumes. Such businesses need people with general skills, with the ability to work efficiently and follow instructions well.
To ensure efficiency and low cost, such organizations must build detailed processes and have specific job descriptions aligned with such processes. There is little room for creativity and deviation from the well-defined efficient processes. Investing in a strong recruitment process will reduce the overall cost and ensure a higher retention rate. Similar to other operational processes, HR processes are well defined and efficient in such organizations as well. Automation and technology-driven selection process would be a popular practice in such organizations. The job descriptions are very clear, and candidates are hired based on exact specifications. This recruitment process is geared to speed up the hiring process, where people can be replaced quickly and easily while keeping the cost low. The focus on selection is process efficiency and productivity rather than creativity.
Focus strategy is applicable when an organization is focused on a niche market. This could be differentiations focus or cost focus.
An organization that uses focus strategy pursues a particular ‘niche’ market, by offering niche products and services. It could develop a differentiation focus strategy by offering exclusive products serving a market that values such exclusive products. Or it could develop a cost focus strategy by focusing on a niche customer base with low-cost products. They build good brand loyalty because they are focused on specific markets, serving specific customers.
These organizations must hire people who are observant of the market trends, industry, and matters that drive the business.
The recruitment practices will focus on a great understanding of the niche market they are concentrating on and must be flexible enough to get the right talent but robust enough to be able to manage the turnaround quickly, to keep high-quality customer service. The talent pool may be smaller for these organizations as understanding the market is more essential than an organization with a broad audience.
The recruitment process for a cost focus business will focus on getting people with a research bent of mind, who are budget-conscious who understand the value customers in the niche market are looking for. The focus is to increase loyalty and trust while working towards lowering the cost of supplies and operations.
People in a differentiated focus organization require skills to understand the needs of customers and be creative to meet their needs. The recruitment process will focus on getting people with excellent analysis and customer service skills, as well as those who are proactive and inventive to meet the niche market requirements.
There is no one-size-fits-all when it comes to recruitment and selection for different organizations. The strategy will impact the practices. However, most organizations do develop their talent and provide them with the right tools and knowledge through their customized training. To develop high-performing employees, it is essential for organizations to provide the right training to their employees enabling them to support the organization’s needs.
Employees are at the core of each organization, and they should be equipped to perform based on the business strategy for it to succeed. People can be aligned seamlessly when they have the right skills and competencies to work in alignment with the strategy.