Strategy and Human Resources Planning

© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Strategy and HumanResources Planning

The Challenges of Human Resources Management

© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2 of 36© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2 of 36

Strategic Planning and Human Resources

• Strategic Planning Procedures for making decisions about the organization’s

long-term goals and strategies

– Strategy formulation: the process of deciding on a strategic direction by defining an organization’s mission and goals and its SWOTs

• The process of devising structures and allocating resources to enact the strategy a company has choses

– Strategy implementation: plans are enacted and put into place

• Human Resources Planning (HRP) Process of anticipating and making provision for the

movement (flow) of people into, within, and out of an organization.

Why Strategic Planning Is ImportantTo All Managers

• The firm’s strategic plan guides much of what is done by all to accomplish organizational goals.

• Decisions made by managers depend on the goals set at each organizational level in support of higher level goals.

Strategic Planning Process

• Strategic Human Resources Management (SHRM)

The pattern of human resources deployments and activities that enable an organization to achieve its strategic goals

– Strategy formulation —providing input as to what is possible given the types and numbers of people available.

– Strategy implementation —making primary resource allocation decisions about structure, processes, and human resources.

Step One: Mission, Vision, and Values

• Mission The basic purpose of the organization as well as its

scope of operations

• Strategic Vision A statement about where the company is going and

what it can become in the future; clarifies the long-term direction of the company and its strategic intent

• Core Values The strong and enduring beliefs and principles that the

company uses as a foundation for its decisions

Merck & Co.’s Mission and Values

Starbucks’ Corporate Mission Statement

Type of Strategy at Each Company Level

Environmental Analysis

• Environmental Scanning The systematic monitoring of the major external

forces influencing the organization.– Economic factors: general, regional, and global conditions– Industry and competitive trends: new processes, services,

and innovations– Technological changes: robotics and office automation – Government and legislative issues: laws and

administrative rulings – Social concerns: child care and educational priorities – Demographic and labor market trends: age, composition,

literacy, and immigration

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Worksheet for Environmental Scanning

SWOT Matrix, with Generic Examples

Personal SWOT Analysis

• http://homepages.se.edu/cvonbergen/files/2012/11/SWOT-Analysis-for-Individuals_060313.docx

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Types of Corporate Strategies

Concentration

Vertical integration

Diversification

Corporate Strategy Possibilities

Consolidation

Geographic expansion

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Linking Strategic Planning and HRP

• Strategic Analysis What human resources are needed and what are

available?

• Strategic Formulation What is required and necessary in support of human

resources?

• Strategic Implementation How will the human resources be allocated?

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Human Resources Planning

StrategicPlanning

Strategic HR Choices

Comparison of Selected Human Resource Practices in High-Performance and Low- Performance Companies

The Human Resources Planning Process

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10 Things Managers Should Avoid When Supervising Temporary/Contingent Employees

• Treat the temporary employee as if the temp agency is in fact his or her employer

• DO NOT

Quantitative Approach: Trend Analysis

• Forecasting labor demand based on an organizational index such as sales:

Select a business factor that best predicts human resources needs.

Plot the business factor in relation to the number of employees to determine the labor productivity ratio.

Compute the productivity ratio for the past five years. Calculate human resources demand by multiplying

the business factor by the productivity ratio. Project human resources demand out to the

target year(s).

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Forecasting Demand for Employees

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500 Bed Hospital → 1200 BedsSize of Hospital (Number of Beds) Number of Registered Nurses

200 240

300 260

400 470

500 500

600 620

700 660

800 820

900 860

Excel Problem: Beds and Nurses

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Forecasting the Supply of Employees: Internal Labor Supply

• Staffing Tables

• Markov Analysis

• Skill Inventories

• Replacement Charts

• Succession Planning

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Forecasting the Supply of Employees: Internal Labor Supply

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Internal Demand Forecasting Tools

• Skill Inventories Files of personnel education, experience, interests,

skills, etc., that allow managers to quickly match job openings with employee backgrounds.

• Replacement Charts Listings of current jobholders and persons who are

potential replacements if an opening occurs.

• Succession Planning The process of identifying, developing, and tracking

key individuals for executive positions.

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Skills inventory and HRIS

Internal Demand Forecasting Tools

• Skill Inventories Files of personnel education, experience, interests,

skills, etc., that allow managers to quickly match job openings with employee backgrounds.

• Replacement Charts Listings of current jobholders and persons who are

potential replacements if an opening occurs.

• Succession Planning The process of identifying, developing, and tracking

key individuals for executive positions.

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Calculating employee Turnover

and Absenteeism

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Employee Turnover Rates

• Computing Turnover Rates (for a month): The U.S. Department of Labor suggests the following

formula for computing turnover rates:

Thus, if there were 25 separations during a month and the total number of employees at mid month was 500, the turnover rate would be:

25/500 X 100 = 5%

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How would you determine annualized turnover?

Key Terms

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Balanced Scorecard (BSC)benchmarkingcore capabilitiescore valuescultural auditsenvironmental scanninghuman capital readinesshuman resources planning (HRP)management forecastsMarkov analysismissionorganizational capability

replacement chartsskill inventoriesstaffing tablesstrategic human resources management (SHRM)strategic planningstrategic visionsuccession planningSWOT analysistrend analysisvalue creation

Chapter 2 - Learning Outcomes

Learning Outcome Statements Related Outcomes from Body of the Text

1 Identify the advantages of integrating human resources planning and strategic planning.

Why is HR planning integral to a firm’s strategic planning? As an HR professional, what do you think you could do to tie the two functions together?

2Understand how an organization’s competitive environment influences its strategic planning.

What external factors in the environment do you think firms are most likely to overlook when formulating their business strategies? How can an HR manager help its executive team get a fuller picture of the competitive environment in which it operates?

3Understand why it is important for an organization to do an internal resource analysis.

Think back to the discussion in Chapter 1 about the auto-parts makers that had to look for new business lines when GM, Ford, ad Chrysler sales plummeted in the last recession. How do you think the auto-parts makers assessed their ability to enter their new markets? Do you think they looked first at new markets and then the capabilities of their employees and external partners or vice versa?

4 Describe the basic tools used for human resources forecasting.

If you are currently employed, ask your manager how your firm goes about forecasting

5 Explain the linkages between competitive strategies and HR.

Think about a firm you enjoy doing business with or one you don’t. What competitive strategy does it pursue? Do you think its employees have the right skills given the strategy? Do you detect any mismatches?

6 Understand what is required for a firm to successfully implement a strategy.

Why is it difficult to translate a firm’s strategy into HR deliverables that actually get the job done? What part of this endeavor do you think HR managers struggle with the most?

7 Recognize the methods for assessing and measuring the effectiveness of a firm’s strategy.

Why do some organizations rely more on some HR metrics than others? Think about the businesses on or near your campus. Which metrics do you think they are most likely to track?

Employee Turnover Rates (cont’d)

• Computing Turnover Rates (cont’d): Another method of computing the turnover rate is one that

reflects only the avoidable separations (S). This rate is computed by subtracting unavoidable separations (US) from all separations. The formula for this method is as follows:

where M represents the total number of employees at mid month. For example, if there were 25 separations during a month, 5 of which were US, and the total number of employees at mid month (M) was 500, the turnover rate would be:

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Employee Absenteeism Rates

• Computing Absenteeism Rates

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Chapter ObjectivesAfter studying this chapter, you should be able to

Identify the advantages of integrating human resources planning and strategic planning.

Understand how an organization’s competitive environment influences its strategic planning.

Understand why it is important for an organization to do an internal resource analysis.

Describe the basic tools used for human resources forecasting.

Explain the linkages between competitive strategies and HR.

Understand what is required for a firm to successfully implement a strategy.

Recognize the methods for assessing and measuring the effectiveness of a firm’s strategy.

LEARNING OUTCOME 1

LEARNING OUTCOME 2

LEARNING OUTCOME 3

LEARNING OUTCOME 4

LEARNING OUTCOME 5

LEARNING OUTCOME 6

LEARNING OUTCOME 7

Measuring a Firm’s Strategic Alignment

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Ensuring Strategic Flexibility for the Future

• Organizational Capability Capacity of the organization to act and change in

pursuit of sustainable competitive advantage.

Coordination flexibility– The ability to rapidly reallocate resources to new or

changing needs.

Resource flexibility– Having human resources who can do many different

things in different ways.

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• Strategy Mapping and the Balanced Scorecard Balanced Scorecard (BSC)

– A measurement framework that helps managers translate strategic goals into operational objectives

• financial• customer• processes• learning

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Step Four: Formulating Strategy

• Strategy Formulation Moving from simple analysis to devising a coherent

course of action.

• SWOT analysis A comparison of strengths, weaknesses, opportunities,

and threats for strategy formulation purposes. Use the strengths of the organization to capitalize on

opportunities, counteract threats, and alleviate internal weaknesses.

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Strategic Alliances and Joint Ventures

Growth and Diversification

Mergers and Acquisitions

Corporate Strategy

Business Strategy

• Value Creation What the firm adds to a product or service by virtue of

making it; the amount of benefits provided by the product or service once the costs of making it are subtracted (value = benefits - costs).

Low-cost strategy: competing on productivity and efficiency

– Keeping costs low to offer an attractive price to customers (relative to competitors).

Differentiation strategy: compete on added value– Involves providing something unique and distinctive to

customers that they value.

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Business Strategy (cont’d)

• Functional Strategy: Ensuring Alignment External Fit/Alignment

– Focuses on the connection between the business objectives and the major initiatives in HR.

Internal Fit/Alignment– Aligning HR practices with one another to establish

a configuration that is mutually reinforcing.

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Step Five: Strategy Implementation

• Taking Action: Reconciling Supply and Demand Balancing demand and supply considerations

– Forecasting business activities (trends)– Locating applicants

Organizational downsizing, outsourcing, offshoring– Reducing “headcount”

Making layoff decisions– Seniority or performance?– Labor agreements

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Step Five: Strategy Implementation (Cont.)

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Step Six: Evaluation and Assessment

• Evaluation and Assessment Issues Benchmarking: The process of comparing the

organization’s processes and practices with those of other companies

Human capital metrics– Assess aspects of the workforce

HR metrics– Assess the performance of the HR function itself

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Step Two: Environmental Analysis (Cont.)

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CultureCulture

CompositionComposition

CapabilitiesCapabilities

Internal Analysis

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Corporate Culture: Values, Assumptions, Beliefs, and Expectations (VABEs)

• Cultural Audits Audits of the culture and quality of work life

in an organization.– How do employees spend their time? – How do they interact with each other? – Are employees empowered?– What is the predominant leadership style

of managers?– How do employees advance within

the organization?

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Forecasting: A Critical Element of Planning

• Forecasting involves: forecasting the demand for labor forecasting the supply of labor balancing supply and demand considerations.

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Step Six: Evaluation and Assessment

1–60

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CultureCulture

CompositionComposition

CapabilitiesCapabilities

Internal Analysis

1–63

Corporate Culture: Values, Assumptions, Beliefs, and Expectations (VABEs)

• Cultural Audits Audits of the culture and quality of work life

in an organization.– How do employees spend their time? – How do they interact with each other? – Are employees empowered?– What is the predominant leadership style

of managers?– How do employees advance within

the organization?

1–64

Forecasting: A Critical Element of Planning

• Forecasting involves: forecasting the demand for labor forecasting the supply of labor balancing supply and demand considerations.

1–65

Forecasting Demand for Employees

1–66

Quantitative MethodsQuantitative Methods

Qualitative MethodsQualitative Methods

Forecasting DemandForecasting Demand

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