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Chapter 2Chapter 2Chapter 2Chapter 2

Strategic HR Management & Planning

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Human Resources as a Core CompetencyHuman Resources as a Core CompetencyHuman Resources as a Core CompetencyHuman Resources as a Core Competency

• Strategic Human Resources ManagementThe use of employees to gain or keep a competitive

advantage, resulting in greater organizational effectiveness.

• Core CompetenciesThe unique capabilities of employees in an

organization that create high value and that differentiate the organization from its competition

The source of an organization’s sustainable competitive advantage.

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Strategic HR Management ProcessStrategic HR Management ProcessStrategic HR Management ProcessStrategic HR Management Process

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Global FactorsGlobal FactorsGlobal FactorsGlobal Factors

• Types of organizations Import/exportMultinational Enterprises (MNEs)Global organizations

• Legal, Political & Economic FactorsUnstable environments, unions, compliance issues

• Cultural FactorsHofstede’s five dimensions

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Organizational Effectiveness and Organizational Effectiveness and Strategic HR ManagementStrategic HR Management

Organizational Effectiveness and Organizational Effectiveness and Strategic HR ManagementStrategic HR Management

• EffectivenessThe extent to which goals have been met.

• EfficiencyThe degree to which operations are done in an

economical manner.

• Dimensions of Organizational EffectivenessOrganizational productivityFinancial contributionsService and qualityOrganizational culture

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Organizational Productivity and HR EffortsOrganizational Productivity and HR EffortsOrganizational Productivity and HR EffortsOrganizational Productivity and HR Efforts

• ProductivityA measure of the quantity and quality of work done,

considering the cost of the resources used.A ratio of the inputs and outputs that indicates the

value added by an organization. Unit labor cost: computed by dividing the average cost of

workers by their average levels of output.

• Improving Organizational ProductivityOrganizational restructuringRe-designing workAligning HR ActivitiesOutsourcing analyses and assistance

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Approaches to Improving Organizational ProductivityApproaches to Improving Organizational ProductivityApproaches to Improving Organizational ProductivityApproaches to Improving Organizational Productivity

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Organizational Effectiveness and FinancialOrganizational Effectiveness and FinancialContributions of HRContributions of HR

Organizational Effectiveness and FinancialOrganizational Effectiveness and FinancialContributions of HRContributions of HR

• Return on Investment (ROI)Difficult to determine returns for

HR contributions which affect many facets of the business

Former view of HR as a “cost center”

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Customer Service and Quality Products Customer Service and Quality Products Linked to HR StrategiesLinked to HR Strategies

Customer Service and Quality Products Customer Service and Quality Products Linked to HR StrategiesLinked to HR Strategies

• High quality products and services are the results of HR-enhancements to organizational performance.StaffingCustomer service

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Organizational Culture and Organizational Culture and Organizational EffectivenessOrganizational EffectivenessOrganizational Culture and Organizational Culture and Organizational EffectivenessOrganizational Effectiveness

• Organizational CultureThe shared values and beliefs in an organizationStrategy and culture must be compatible and aligned

for the organization to be effective.Culture affects recruitment and retention of

employees.Culture can enhance or constrain organizational

performance.Culture is the “climate” of an organization.

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HR PlanningHR PlanningHR PlanningHR Planning

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HR Planning ProcessHR Planning ProcessHR Planning ProcessHR Planning Process

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Human Resource Planning (cont’d)Human Resource Planning (cont’d)Human Resource Planning (cont’d)Human Resource Planning (cont’d)

• Small Business and HR Planning IssuesAttracting and retaining qualified outsidersManagement succession between generations of

ownersEvolution of HR activities as business growsFamily relationships and HR policies

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HR Planning ProcessHR Planning ProcessHR Planning ProcessHR Planning Process

• HR StrategiesThe means used to anticipate and manage the supply

of and demand for human resources. Provide overall direction for the way in which HR activities

will be developed and managed.

Overall Overall Strategic PlanStrategic Plan

Human Resources Human Resources Strategic PlanStrategic Plan

HR ActivitiesHR Activities

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Benefits of HR PlanningBenefits of HR PlanningBenefits of HR PlanningBenefits of HR Planning

• Better view of the HR dimensions of business decisions

• Lower HR costs through better HR management.

• More timely recruitment for anticipate HR needs• More inclusion of protected groups through

planned increases in workforce diversity.• Better development of managerial talent

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Scanning the External EnvironmentScanning the External EnvironmentScanning the External EnvironmentScanning the External Environment

• Environmental ScanningThe process of studying the environment of the

organization to pinpoint opportunities and threats.

• Environmental Changes Impacting HRGovernmental InfluencesEconomic conditionsGeographic and competitive concernsWorkforce composition

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Assessing the Internal WorkforceAssessing the Internal WorkforceAssessing the Internal WorkforceAssessing the Internal Workforce

• Jobs and Skills Audit What jobs exist now?How many individuals are performing each job?What are the reporting relationships of jobs?How essential is each job?What jobs will be needed to implement future

organizational strategies?What are the characteristics of anticipated jobs?

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Assessing the Internal Workforce (cont’d)Assessing the Internal Workforce (cont’d)Assessing the Internal Workforce (cont’d)Assessing the Internal Workforce (cont’d)

• Organizational Capabilities InventoryHRIS databases—sources of information about

employees’ knowledge, skills, and abilities (KSAs)Components of an organizational capabilities

inventory Individual employee demographics Individual employee career progression Individual job performance data

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Forecasting HR Supply and DemandForecasting HR Supply and DemandForecasting HR Supply and DemandForecasting HR Supply and Demand

• ForecastingThe use of information from the past and present to

identify expected future conditions.

• Forecasting MethodsJudgmental

Estimates—asking managers’ opinions, top-down or bottom-up

Rules of thumb—using general guidelines Delphi technique—asking a group of experts Nominal groups—reaching a group consensus in open

discussion

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Forecasting HR Supply and Demand Forecasting HR Supply and Demand (cont’d)(cont’d)

Forecasting HR Supply and Demand Forecasting HR Supply and Demand (cont’d)(cont’d)

• Forecasting Methods (cont’d)Mathematical

Statistical regression analysis Simulation models Productivity ratios—units produced per employee Staffing ratios—estimates of indirect labor needs

• Forecasting PeriodsShort-term—less than one year Intermediate—up to five yearsLong-range—more than five years

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Forecasting HR Supply and Demand Forecasting HR Supply and Demand (cont’d)(cont’d)

Forecasting HR Supply and Demand Forecasting HR Supply and Demand (cont’d)(cont’d)

• Forecasting the Demand for Human ResourcesOrganization-wide estimate for total demandUnit breakdown for specific skill needs by number and

type of employee Develop decision rules (“fill rates”) for positions to be filled

internally and externally. Develop additional decision rules for positions impacted by

the chain effects of internal promotions and transfers.

• Forecasting the Supply for Human ResourcesExternal Supply Internal Supply

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Forecasting HR Supply (cont’d)Forecasting HR Supply (cont’d)Forecasting HR Supply (cont’d)Forecasting HR Supply (cont’d)

• Forecasting External HR SupplyFactors affecting external

Net migration for an area Individuals entering and leaving the workforce Individuals graduating from schools and colleges Changing workforce composition and patterns Economic forecasts Technological developments and shifts Actions of competing employers Government regulations and pressures Other circumstances affecting the workforce

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Forecasting HR SupplyForecasting HR SupplyForecasting HR SupplyForecasting HR Supply

• Forecasting Internal HR SupplyEffects of promotions, lateral moves, and terminations

• Succession analysisReplacement chartsSuccession planning

The process of identifying a longer-term plan for the orderly replacement of key employees.

Source: U.S. Office of Personnel Management, www.opm.gov.

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Estimating Internal Labor Supply for a Given UnitEstimating Internal Labor Supply for a Given UnitEstimating Internal Labor Supply for a Given UnitEstimating Internal Labor Supply for a Given Unit

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Developing and Using a Strategic HR PlanDeveloping and Using a Strategic HR PlanDeveloping and Using a Strategic HR PlanDeveloping and Using a Strategic HR Plan

• Issues in Matching the Supply of Labor with the Demand for LaborSuccession PlanningManaging a Human Resources SurplusOutplacement ServicesHR Planning in Mergers and Acquisitions

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Making Downsizing More EffectiveMaking Downsizing More EffectiveMaking Downsizing More EffectiveMaking Downsizing More Effective

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HR Planning in Mergers and AcquisitionsHR Planning in Mergers and AcquisitionsHR Planning in Mergers and AcquisitionsHR Planning in Mergers and Acquisitions

• Cultural CompatibilityThe extent to which such factors as decision-making

styles, levels of teamwork, information-sharing philosophies, and the formality of the two organizations are similar.

• HR’s Role in Mergers and AcquisitionsCommunicating decisionsRevising the organization structureMerging HR activities

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Measuring HR Effectiveness Measuring HR Effectiveness Using HR MetricsUsing HR Metrics

Measuring HR Effectiveness Measuring HR Effectiveness Using HR MetricsUsing HR Metrics

• HR MetricsSpecific measures tied to HR performance indicators.

Development and use of metrics that can better demonstrate HR’s value and track its performance.

Characteristics of good HR metrics: Accurate data can be collected. Measures are linked to strategic and operational objectives. Calculations can be clearly understood. Measures provide information expected by executives. Results can be compared both externally and internally. Measurement data drives HR management efforts.

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Examples of Strategic and Operational Examples of Strategic and Operational HR MetricsHR Metrics

Examples of Strategic and Operational Examples of Strategic and Operational HR MetricsHR Metrics

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Measures of Strategic HR EffectivenessMeasures of Strategic HR Effectiveness

• Return on Investment (ROI)Calculation showing the value of expenditures for HR

activities.

A = Operating costs for a new or enhance system for the time periodA = Operating costs for a new or enhance system for the time period

B = One-time cost of acquisition and implementationB = One-time cost of acquisition and implementation

C = Value of gains from productivity improvements for the time periodC = Value of gains from productivity improvements for the time period

B A

C

ROI

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Measures of Strategic HR Effectiveness (cont’d)

Measures of Strategic HR Effectiveness (cont’d)

• Economic Value Added (EVA)A firm’s net operating profit after the cost of capital

(required return) is deducted.Cost of capital is the benchmark for returns for all HR

activities.

• HR and the Balanced ScorecardFinancial Internal business processesCustomerLearning and growth

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HR Measurement and BenchmarkingHR Measurement and BenchmarkingHR Measurement and BenchmarkingHR Measurement and Benchmarking

• BenchmarkingComparing specific measures of performance against

data on those measures in other “best practice” organizations

• Common BenchmarksTotal compensation as a percentage of net income

before taxesPercent of management positions filled internallyDollar sales per employeeBenefits as a percentage of payroll cost

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Assessing HR EffectivenessAssessing HR EffectivenessAssessing HR EffectivenessAssessing HR Effectiveness

• HR AuditA formal research effort that evaluates the current

state of HR management in an organizationAudit areas:

Legal compliance (e.g., EEO, OSHA, ERISA, and FMLA) Current job specifications and descriptions Valid recruiting and selection process Formal wage and salary system Benefits Employee handbook Absenteeism and turnover control Grievance resolution process Orientation program Training and development Performance management system