chapter 3

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Human Resource Management

TWELFTH EDITION

G A R Y D E S S L E R

B I J U V A R K K E Y

Copyright © 2011 Dorling Kindersley (India) Pvt. LtdAuthorized adaptation from the United States edition of Human Resource Management, 12/e

The Manager’s Role in Strategic Human Resource Management

Chapter 3

Part 1 | IntroductionPart 1 | Introduction

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After reading this chapter, you should be able to:After reading this chapter, you should be able to:After reading this chapter, you should be able to:After reading this chapter, you should be able to:

1.1. Outline the steps in the strategic management process.Outline the steps in the strategic management process.

2.2. Explain and give examples of each type of Explain and give examples of each type of companywide and competitive strategy.companywide and competitive strategy.

3.3. Explain what a strategy-oriented human resource Explain what a strategy-oriented human resource management system is and why it is important.management system is and why it is important.

4.4. Illustrate and explain each of the eight steps in the HR Illustrate and explain each of the eight steps in the HR Scorecard approach to creating human resource Scorecard approach to creating human resource management systems.management systems.

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The Strategic Management ProcessThe Strategic Management Process

• Strategic ManagementStrategic Management The process of identifying and executing the The process of identifying and executing the

organization’s mission by matching its capabilities organization’s mission by matching its capabilities with the demands of its environment.with the demands of its environment.

• StrategyStrategy A chosen course of action.A chosen course of action.

• Strategic PlanStrategic Plan How an organization intends to balance its internal How an organization intends to balance its internal

strengths and weaknesses with its external strengths and weaknesses with its external opportunities and threats to maintain a competitive opportunities and threats to maintain a competitive advantage over the long-term.advantage over the long-term.

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Business Vision and MissionBusiness Vision and Mission

• VisionVision A general statement of an organization’s intended A general statement of an organization’s intended

direction that evokes emotional feelings in direction that evokes emotional feelings in organization members.organization members.

• MissionMission Spells out who the company is, what it does, and Spells out who the company is, what it does, and

where it’s headed.where it’s headed.

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FIGURE 3–5 The Strategic Management Process

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FIGURE 3–7 A SWOT Chart

Strengths

Example: Market leadership

Weaknesses

Example: Large inventories

Opportunities

Example: New overseas markets

Threats

Example: Market saturation

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FIGURE 3–8 Relationships Among Strategies in Multiple-Business Firms

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Types of StrategiesTypes of Strategies

Diversification Strategy

Geographic Expansion Strategy

Vertical Integration Strategy

Corporate-Level Strategies

ConsolidationStrategy

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Types of Strategies (continued)Types of Strategies (continued)

Cost Leadership Focus/Niche

Business-Level/Competitive Strategies

Differentiation

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Achieving Strategic FitAchieving Strategic Fit

The “Fit” Point of View (Porter) consists of the The “Fit” Point of View (Porter) consists of the idea that each department’s strategy needs to fit idea that each department’s strategy needs to fit the parent business’s competitive aims.the parent business’s competitive aims.

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Strategic Human Resource ManagementStrategic Human Resource Management

• Strategic Human Resource ManagementStrategic Human Resource Management The linking of HRM with strategic goals and The linking of HRM with strategic goals and

objectives in order to improve business performance objectives in order to improve business performance and develop organizational cultures that foster and develop organizational cultures that foster innovation and flexibility.innovation and flexibility. Involves formulating and executing HR systems—HR Involves formulating and executing HR systems—HR

policies and activities—that produce the employee policies and activities—that produce the employee competencies and behaviors that the company needs competencies and behaviors that the company needs to achieve its strategic aims.to achieve its strategic aims.

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FIGURE 3–6 Linking Company-Wide and HR Strategies

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Creating the Strategic Human ResourceCreating the Strategic Human ResourceManagement SystemManagement System

Human Resource Professionals

Employee Behaviors and Competencies

Components of a Strategic HRM System

Human Resource Policies and

Practices

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FIGURE 3–10Strategy Map for Southwest Airlines

Source: Adapted from “Creating a Strategy Map,” Ravi Tangri, [email protected].

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FIGURE 3–12 Three Important Strategic HR Tools

Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance (Boston: Harvard Business School Press, 2001), p. 12.

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Measuring HR’s ContributionMeasuring HR’s Contribution

• The HR ScorecardThe HR Scorecard

Shows the quantitative standards, or Shows the quantitative standards, or “metrics” the firm uses to measure “metrics” the firm uses to measure HR activities.HR activities.

Measures the employee behaviors Measures the employee behaviors resulting from these activities.resulting from these activities.

Measures the strategically relevant Measures the strategically relevant organizational outcomes of those organizational outcomes of those employee behaviors.employee behaviors.

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Creating an HR ScorecardCreating an HR Scorecard

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5

Outline value chain activities

Define the business strategy

Outline a strategy map

Identify strategically required outcomes

Identify required workforce competencies and behaviors

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Choose HR Scorecard measures

Identify required HR policies and activities

Summarize Scorecard measures on digital dashboard and monitor, predict, and evaluate

The 10-Step HR Scorecard Process

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FIGURE 3–14 Simple Value Chain for “The Hotel Paris”

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Five Sample HR MetricsHR Metric* How to Calculate It

Absence rate # of days absent in month× 100

Average # of employees during month × # of workdays

Cost per hire Advertising + agency fees + employee referrals + travel cost ofapplicants and staff + relocation costs + recruiter pay and benefits

Number of hires

HR expense factor

HR expense

Total operating expense

Time to fill Total days elapsed to fill job requisitions

Number hired

Turnover rate Number of separations during month× 100

Average number of employees during monthSources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13–20; Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/BNA 2000 Cost Per Hire and Staffing Metrics Survey; www.shrm.org. See also, SHRM Research “2006 Strategic HR Management Survey Report,” Society for Human Resource Management..

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K E Y T E R M SK E Y T E R M S

strategic planstrategic plan

strategic managementstrategic management

visionvision

missionmission

SWOT analysisSWOT analysis

strategystrategy

strategic controlstrategic control

competitive advantagecompetitive advantage

strategic human resource managementstrategic human resource management

HR ScorecardHR Scorecard

metricsmetrics

value chain analysisvalue chain analysis

chapter 3

Documents

united states

human resource

strategic

authorized

employee behaviors

strategy

metrics

strategies