Since its inception in 1995, Human Resource Planning Society’s State of the Art/Practice study has become an important way that the Society seeks to generate and disseminate information critical to effective HR strategy decision making. The study began as an effort to identify the major issues driving organizations and causing transformations in HR (Caimano, Canavan, & Hill, 1998; Ulrich & Eichinger, 1995; 1996; Wright, Dyer, & Takla, 1998). More recently, the SOTA/P has focused on drilling down more deeply to understand HR’s role in critical strategic issues such as e-business (Wright and Dyer, 1999) and using HR to build a customer-focused company (Overholt and Grannell, 2002). The 2004 SOTA/P returns to the original roots, and seeks to describe the competitive landscape, and the implications of these trends for HR

Snell , Scott  A.

Wright, Patrick  M.

English

Since its inception in 1995, Human Resource Planning Society’s State of the Art/Practice study has become an important way that the Society seeks to generate and disseminate information critical to effective HR strategy decision making. The study began as an effort to identify the major issues driving organizations and causing transformations in HR (Caimano, Canavan, & Hill, 1998; Ulrich & Eichinger, 1995; 1996; Wright, Dyer, & Takla, 1998). More recently, the SOTA/P has focused on drilling down more deeply to understand HR’s role in critical strategic issues such as e-business (Wright and Dyer, 1999) and using HR to build a customer-focused company (Overholt and Grannell, 2002). The 2004 SOTA/P returns to the original roots, and seeks to describe the competitive landscape, and the implications of these trends for HR.WP04_08.pdf: 352 downloads, before Oct. 1, 2020

Wright, Patrick M.

Snell, Scott A.

eCommons (Cornell Univ.)

SOTA 2004 Managing for Value(s) in a Commoditized World

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CAHRS Working Paper Series Center for Advanced Human Resource Studies (CAHRS) 
July 2004 
SOTA 2004 Managing for Value(s) in a Commoditized World 
Patrick M. Wright 
Cornell University 
Scott A. Snell 
Cornell University 
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SOTA 2004 Managing for Value(s) in a Commoditized World 
Abstract 
Since its inception in 1995, Human Resource Planning Society’s State of the Art/Practice study has 
become an important way that the Society seeks to generate and disseminate information critical to 
effective HR strategy decision making. The study began as an effort to identify the major issues driving 
organizations and causing transformations in HR (Caimano, Canavan, & Hill, 1998; Ulrich & Eichinger, 
1995; 1996; Wright, Dyer, & Takla, 1998). More recently, the SOTA/P has focused on drilling down more 
deeply to understand HR’s role in critical strategic issues such as e-business (Wright and Dyer, 1999) and 
using HR to build a customer-focused company (Overholt and Grannell, 2002). The 2004 SOTA/P returns 
to the original roots, and seeks to describe the competitive landscape, and the implications of these 
trends for HR. 
Keywords 
HR, organization, value, strategic, decision, work, group, business 
Comments 
Suggested Citation 
Wright, P. M. & Snell, S. A. (2004). SOTA 2004 managing for value(s) in a commoditized world (CAHRS 
Working Paper #04-08). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for 
Advanced Human Resource Studies. 
http://digitalcommons.ilr.cornell.edu/cahrswp/14 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/cahrswp/14 
 
 
 
 
 
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W O R K I N G  P A P E R  S E R I E S   
 
SOTA 2004 
Managing for Value(s) in a 
Commoditized World 
 
Patrick M. Wright 
Scott A. Snell 
 
Working Paper  04 – 08 
      
  
 
 
SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
SOTA 2004 
Managing for Value(s)  
in a Commoditized World 
 
 
 
 
Patrick M. Wright 
Center for Advanced HR Studies 
School of ILR 
Cornell University 
 
Scott A. Snell 
Center for Advanced HR Studies 
School of ILR 
Cornell University 
 
 
July 2004 
 
 
 
 
http://www.ilr.cornell.edu/cahrs
 
This paper has not undergone formal review or approval of the faculty of the ILR 
School.  It is intended to make results of Center research available to others interested 
in preliminary form to encourage discussion and suggestions. 
 
Most (if not all) of the CAHRS Working Papers are available for reading at the 
Catherwood Library.  For information on what’s available link to the Cornell Library 
Catalog: http://catalog.library.cornell.edu if you wish. 
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SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
SOTA 2004 
Managing for Value(s) in a Commoditized World 
 
Since its inception in 1995, Human Resource Planning Society’s State of the Art/Practice 
study has become an important way that the Society seeks to generate and disseminate 
information critical to effective HR strategy decision making. The study began as an effort to 
identify the major issues driving organizations and causing transformations in HR (Caimano, 
Canavan, & Hill, 1998; Ulrich & Eichinger, 1995; 1996; Wright, Dyer, & Takla, 1998). More 
recently, the SOTA/P has focused on drilling down  more deeply to understand HR’s role in 
critical strategic issues such as e-business (Wright and Dyer, 1999) and using HR to build a 
customer-focused company (Overholt and Grannell, 2002). The 2004 SOTA/P returns to the 
original roots, and seeks to describe the competitive landscape, and the implications of these 
trends for HR. 
In conducting the 2004 SOTA/P, we utilized a global network of HR and line thought 
leaders.  We created working groups in New York, London, Paris, Tokyo, and Buenos Aires in 
order to prevent the study from merely reflecting the realities of North America, or the US.  In 
addition, we used a multi-stage approach where the working groups met multiple times in order 
to feed back information from the previous round of discussions as the basis for expanding into 
the next phase of discussion. Finally, we took a business driven approach to the study, with 
each working group’s first meeting devoted entirely to discussing the issues and challenges 
faced by their business, with the ground rule that HR could not be discussed. The subsequent 
rounds of discussions focused on organizational capabilities/people issues and the required 
transformation of HR and its role in the organization. 
We summarize the results of the 2004 around the following three challenges: Creating 
Value in a commoditized marketplace, the tensions inherent in addressing how to create value 
and for whom, and the need for balancing different values in strategic decision making.  
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SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
Creating Value in a Commoditized Marketplace 
Almost every study that focuses on future trends impacting organizations notes the 
same basic issues: Globalization, increased competition, and technological change. In our 
discussion we also heard issues about the increase legislation, the requirements for uniform 
standards, and increased consumerism.  What is often not delved into deeply is the synergistic 
result of these forces, which is to commoditize the marketplace for products and services. 
Consider: Toys R’ Us faces Wal-Mart; IBM faces Dell, Delta Airlines faces Southwest, Jet Blue, 
and ATA. Over the past few years, the low price competitors have tended to dominate every 
industry, making price the most significant criteria in the buying choice. Note that this does not 
mean that all industries have become completely commoditized, but it illustrates that just about 
every industry increasing faces pressure toward commoditization creating a tremendous 
challenge for how they will create value in a commoditized world. This is illustrated in Figure 1. 
Globalization
- Competitors
- Customers
Technology
- Transparency
- Change
Environment Product Market Strategies Capabilities
Overcapacity
Trend towards 
Commoditization 
of Markets
(Higher Consumer 
Expectations, 
Loss of Brand Power,
Explosion of
Alternatives)
Stay and 
Differentiate
Stay and
Commoditize
Move to Higher
Value 
Industries
Speed
Innovation
Quality
Customer Service
Drive Low Costs
New Capabilities
(e.g., services)
Tensions:
Shareholder v. Stakeholder Global v. Local Run Lean v. Build for Future
Complexity v. Simplicity Quality v. Speed Centralization v. Decentralization
Control v. Empowerment Creativity v. Uniformity Workforce Flexibility v. EE Commitment
Specialization v. Generalization
Legislation/standards/ 
Consumerism
Long term trends: Environmentalism, Societal Values, Demographics, Values/Ethics
Move to 
Developing 
World
New Standards,
Longer time 
Horizon
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SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
This commoditization pressure has led all competitors toward exploring all the avenues for cost 
reduction. For instance, the offshore outsourcing of some of the information technology services 
exemplifies one way in which companies have sought to reduce their costs.  At the same time, 
the dynamics of competition remain, and firms are choosing a mix of alternative strategies for 
fighting this process, and we use IBM as an example to illustrate the first three.  
First, companies can fight the commoditization process by differentiating their products 
or services in ways that command price premiums. IBM continues to provide a set of integrated 
information technology solutions in order to differentiate itself from competitors. Second, 
companies can stay in the market and commoditize. For instance, even facing low cost 
competition from Dell and Gateway, IBM remains in the PC business, but drives down its costs 
to maintain price competitiveness. Third, firms can shift to higher value industries as a way to 
escape the commoditized ones. IBM’s purchase of PriceWaterhouseCoopers’ consulting 
business illustrates their shifting more resources into services where the commoditization 
pressures have not yet emerged.  
Finally, firms can move to the third world as a long term strategy.  The increasing 
emphasis on Sustainable Development and the focus on creating Sustainable Strategies often 
lead companies to explore how they can create low-cost business models in developing 
countries. The usual expectation is not that they will make huge profits in the short term, but that 
only by establishing a presence now can they hope to reap profits in the long term. 
The Increasing Tensions in How to Create Value and for Whom? 
While this pressure toward commoditization increases, firms also face a number of other 
long term trends such as environmentalism, changing societal values, demographic changes, 
and an increased emphasis on values and ethics (in direct response to the global corporate 
scandals observed over the past few years.  The intersection of these societal trends and the 
economic competitive realities has created a number of tensions that organizations must 
Page 5 
SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
address.  These are illustrated at the bottom of Figure 1, but due to space limitation, we will 
discuss only one.  
What became patently obvious as we worked across the globe was that firms must 
address the tension between a pure shareholder orientation (“the goal of a company is only to 
increase shareholder wealth”) and a stakeholder orientation (“organizations must answer to a 
number of stakeholders besides shareholders”).  The former focuses on financial value creation 
for the shareholder, while the latter recognizes a broader definition of value and a wider scope 
of value recipients. The course of our study saw both a different set of perspectives, and a shift 
in perspectives. At the beginning of the study, the US based group clearly communicated a pure 
shareholder orientation that was quite distinct from that of the other groups around the world.  
However, by the end of the study, the US group increasingly identified issues regarding social 
responsibility and ethics as important ones that firms must address. On the other hand, the 
European participants often criticized the “US shareholder orientation” as needing to move 
toward a stakeholder approach, but also noted that the European business community’s 
“stakeholder approach” could benefit by emphasizing shareholders more. This tension illustrates 
the kind of issue that does not lend itself to an either/or answer, but requires balancing 
competing interests. It also highlights the emerging recognition of the importance of values in 
organizational decision making. 
The Need to Recognize and Balance Values in Strategic Decision Making 
Finally, this year’s SOTA/P revealed an increasing emphasis on understanding how 
value systems impact strategic decision making. While talking about values is usually limited to 
organizational value statements, our study noted the tendency for decisions to reveal conflicting 
values. For instance, in the course of our study we heard SVP’s of HR frequently describing 
dilemmas that their organizations faced. These situations exemplified the ways in which HR 
executives can and should impact strategy formulation. For instance, one company had reams 
of data showing that the most senior sales people produced the highest customer satisfaction 
Page 6 
SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
and sales, yet in the name of cost reduction, senior managers sought to target these individuals 
for workforce reductions. Another company described the need to impose higher costs on 
employees for health care, but refused to do so for the senior managers with their top-hat 
coverage.  Stories such as these illustrated the different criteria that firms must address in the 
strategic decision making process.  
From this we developed what we refer to as the SELF Model, shown in Figure 2. This 
model specifically recognizes that no organization decisions exist in a value vacuum. It suggests 
that decisions can have strategic, ethical, legal, and financial impacts, yet often only one of 
these criteria plays a role in decision making. For instance, in the first example above, the 
financial values were the driving force behind a decision that would accrue a substantial cost to 
the strategic capability of the organization. In the second instance, the financial criteria drive 
decision making with little concern for the ethical or strategic impact of the decision.  We find 
that the SELF model, when properly applied, provides both a useful tool for HR executives to 
analyze the long term impact of decisions, and a platform to engage a discussion among 
decision makers in a non-threatening way. 
Strategic
Financial
Ethical
Legal
Tension/
Conflict
 
Page 7 
SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
Conclusion 
SOTA/P 2004 highlights how the increasingly competitive marketplace causes firms to 
seek unique strategic approaches to creating value.  The constant downward cost pressures 
produce a number of organizational tensions, particularly with regard to people. Given the 
importance of human capital to long term competitive advantage, HR executives are 
increasingly called to influence strategic decision making, often focusing decision makers on 
long term consequences of short term decisions.  This requires making implicit value systems 
explicit in order to fully examine the impact of potential decisions and recognizing that true 
strategic partners are not simply order takers for the line organization. Rather, the emerging role 
for senior HR executives requires managing the process of strategic decision making to ensure 
that the right decisions get made. 
Page 8 
SOTA 2004 Managing for Value(s) CAHRS WP 04-08 
   
 
 
References 
 
Caimano, V., Canavan, P., & Hill, L. (1998). 1998 State-of-the-Art & Practice (SOTA/P) Report. 
New York: HRPS. 
 
Overholt, M. & Granell, E. (2002). 2002 State-of-the-Art & Practice (SOTA/P) Report. New York: 
HRPS. 
 
Ulrich, D. & Eichinger, R. (1995) 1995 State-of-the-Art & Practice (SOTA/P) Report. New York: 
HRPS. 
 
Ulrich, D. & Eichinger, R. (1996) 1996 State-of-the-Art & Practice (SOTA/P) Report: It’s De-Ja 
Future All over Again: Are you Ready?. New York: HRPS. 
 
Wright, P., Dyer, L., & Takla, M. (1998). 1998 State-of-the-Art & Practice (SOTA/P) Report. New 
York: HRPS. 
 
Wright, P., & Dyer, L. (1999) 1999 State-of-the-Art & Practice (SOTA/P) Report: People in the 
E-Business. New York: HRPS 
 
Page 9 


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