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Module 1: Strategic Management

12% PHR (27 questions)29% SPHR (65 questions)

Instructor: Charles Craig, SPHR, GPHR Cathy Martin, SPHR

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Evolving Role of the HR Professional

• Human resource management (HRM) is the design of formal systems in an organization that ensure the effective and efficient use of human capital to accomplish organizational goals.

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Human Resources Roles

Historical roles are still important, but roles have broadened into today’s more strategic focus.

Historical:• Advice• Service• Control

Current: • Strategic• Operational• Administrative

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Advice, Service, and Control

• Advice - Advising and assisting line managers in managing human resources. Gathering facts, diagnosing problems, providing solutions.

• Service - Answering employee questions; benefit packages.

• Control - Reviewing and measuring employee performance.– Designing a new performance appraisal system

is an example of HR’s control function.

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Strategic, Operational and Administrative Roles

Strategic - Requires a global, long-term and forward thinking focus. Also referred to as transformational activities because they move the organization toward new outcomes in the future. HR is involved in strategy formulation/development. HR remains key to strategy implementation, which requires alignment of activities to support the organization’s strategic objectives.

Operational - Involves day-to-day tasks necessary to run the organization. These activities are critical to execution of the strategic plan. (Ex. Recruiting new employees and resolving employee complaints)

Administrative – Low strategic activities also referred to as transactional activities. Focuses on compliance issues and record keeping issues via HRIS.

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HR as a Profession

• National Organization

• Code of Ethics

• Research

• Body of Knowledge

• Credentialing

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HR is constantly evolving in response to changes that are both internal and external.

• Workforce/workforce changes• Globalization• Emphasis on ethics• Flexible organizational boundaries• Requires:

– Clarification of HR’s contribution to business outcomes. Increasing use of metrics.

– Alignment of human capital and corporate strategy– Technology

Changes in the HR Profession

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Key Trend: Offshoring

• Domestic HR challenges– Displaced workers

– Changes in work requirements

– Decline in employee morale

– Impacts on available skills in domestic job pool

SPHR only

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• International HR challenges– Recruiting, managing, and

motivating the new workforce

– Ensuring communication and coordination across time zones

− Acculturation of new workforce

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Key Trend: Mergers, Acquisitions, and Divestiture

1. Identify issues, form and train teams, and prepare for change.

2. Investigate structural, technological, financial, legal, and cultural risks.

3. Develop plans to address key issues.

4. Measure activity of new organization against benchmarks.

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SPHR only

HR in the M&A Process

Perform due diligence

Planintegration

Prepare for M&A

Implement and measure

1 2 3 4

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Prepare HR Staff for M&A Activity

• Issue identification

• Team formation and training

• Preparation for change

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Performing Due Diligence Issues to Consider

• Structural – Everything about the form through which the organizations conduct business such as reporting relationships, titles, and/or the design of how the companies interact with customers.

• Technological – The level, extent of use, and ability for integration of technology.

• Financial – Compensation structure, union contracts, incentive plans.

• Legal – ERISA compliance, I-9’s, visa regulations, FMLA, Warn Act.

• Cultural – Include the explicit policies of each company and the subtle attitudes, opinions, and related behaviors that make up the work environment.

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Plan Integration

Successful integration of the acquired organization requires developing plans to address issues with M&A as well as those uncovered during due diligence.

Including:• A new strategic plan.• Organizational objectives to support the strategic plan.• A plan for integration of existing or new technology.• A change management process to create widespread

understanding of the need for change.• Employee communication strategies to support change

management, maintain existing strengths in the organizational culture, and create optimal blending of cultures for reaching the firm’s objectives.

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Implement, Monitor, and Measure

• One of the most serious mistakes an organization can make after a merger or acquisition is to assume that once the entities have been fully integrated, the process is then concluded.

• One of HR’s most critical tasks is to measure the activity of the new organization against the benchmarks identified earlier.

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Divestitures

• Communication is KEY.

• Change is more acceptable in an organization when people first recognize and accept that there is a need for change.

• Divestitures require the same type of planning, implementation, and monitoring as do M&A’s.

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Effects of Change on HR

• Clarifying HR’s contribution to business outcomes. Development of HR as a partner in strategic management. Develop a big-picture view of how all departments are interrelated and affect each other.

• HR must understand the financial aspects of their business.

• HR must prove their department’s contribution in quantifiable business terms.

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Effects of Change on HR

• Aligning the development of human capital and corporate strategy. HR must work toward retaining and developing current employees.

• HR must appreciate the implications of the organization’s strategic plan for employees’ skill, knowledge, and attitude.

– Example: In an competitive environment, HR must emphasize that the creation of value will require all employees to focus on the customer.

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Effects of Change on HR

• Utilizing new technology.

• HR is in best position to anticipate the impact of new technology on the organization’s workforce and structure.

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Management Functions

ForecastSet goals

DesignAssist

ScheduleImplement

Measure

Planning Organizing Directing Controlling

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Critical Management Skills for HR Professionals

• Managing projects

• Managing change

• Managing third-party contractors

• Managing technology

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Project Management StepsThe 1st critical skill

Roles of a Project ManagerInformational• Communicator• Information disseminator

Decisional• Conflict resolver• Resource allocator

Interpersonal• Leader• Liaison

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Conceptionand support

1 2 4 5

Selection of manager and team

CompletionCommunicating details and specifying accountability

3

Evaluation

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Conception and Support

• It is vital to acquire senior management support at this phase.

• A project sponsor is an individual from senior management whose role is to support the project efforts in order to ensure success and report to senior management on the progress of the project.

• The project champion is considered the “cheerleader” of the project. Their main function is to communicate the benefits of the project to the organization.

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Project Planning Tool: Gantt Chart

• Also known as horizontal bar chart, milestone chart, or activity chart.• Plots the sequential steps of a project against time.• Project steps, anticipated sequence, and duration must be known in order to

create a Gantt Chart.

January February March MayApril

Development of RFP for new medical insurance plan

Identification of possible providers

Issuance of RFP

Evaluation of proposals

Company presentations

Selection

Presentation of new plan to employees

Development of plan

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Project Planning Tool: PERT Chart (Critical Path Method)

• An arrow diagram or road map identifying all major events. Requires two inputs: the events and their sequence and shows the critical path.

• Shows how much time is needed to complete a project.

• Used for very large, complex projects with a high degree of intertask dependency.

Numbers = Weeks

Legend:

Event

Critical Path

F

Activity

15

2

2

2

2

BA

C

D

E

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Organizational Concerns During Project Implementation

• Continuous, open, two-way communication

• Identification of success factors in the organization

• Use of established project management methodology

• Effective management of third-party contractors

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Managing ChangeThe 2nd critical skill

• The key is to be proactive, rather than reactive, in managing the process.

• Change works smoothly when employees have input in changes that involve them.

• Managing change is best accomplished by taking a systematic approach.

• Donald Kirkpatrick’s change model begins with assessment and ends with implementation and evaluation.

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Change Management Model

1. Determine the need or desire forchange.

2. Prepare tentative plans.

3. Discuss alternatives andprobable reactions.

4. Make a final decision.

5. Establish a project planand a timetable.

6. Communicate the change.

7. Implement and evaluatethe change.

HR challenge: To maintain the level of intensity and consistency of effort throughout the change process

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Managing Third-Party ContractorsThe 3rd critical skill

• Outsourcing is the practice of buying services externally rather than producing them internally.• Common reasons to outsource: save money, decrease

delivery times for HR services, increase productivity.• The danger when making outsourcing decisions is that

an organization may give up more strategic capability than they realize. Only non-core competencies are outsourced, not strategic management and development.

• Organizations run the risk of declining employee morale as employees may fear a loss of jobs.

• Remember, employers may remain liable for noncompliance with outsourced functions.

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Managing Third-Party ContractorsThe 3rd critical skill

• Offshoring refers to relocating facilities or functions to a foreign country but maintaining ownership control.

• Outsourcing is an arrangement with a third party to buy services externally rather than producing them internally.

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The Outsourcing Process

1. Analyze needs and define goals.

2. Define budget.

3. Create RFP.

4. Send RFPs to contractors.

5. Evaluate contractor proposals.

6. Choose contractor.

7. Negotiate contract.

8. Implement and monitor.

9. Evaluate.

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Managing TechnologyThe 4th critical skill

• HR’s role in managing technology is to help identify new technologies that can:

– Support achieving the organization’s strategic goals.

– Facilitate the rapid pace of change due to technology.

– Manage the cultural change and strategic redirection associated with the introduction of new technology.

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Trends in Technology

• E-procurement• Electronic recordkeeping• Electronic Signature-Electronic Signature in Global and

National Commerce Act– Electronic signatures will expand the transactions that can be done

on the web

• Application service providers (ASPs)– Positive side - Employees can access their benefit information,

training, development, and telecommuting opportunities emerge.– Negative side – Policies must be developed concerning record

retention, storage, and destruction. Employees may feel over worked because they now work from home, on weekends, and while traveling.

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Strategic Planning

• The art and science of formulating, developing, implementing, and evaluating (FDIE) cross-functional decisions that enable an organization to achieve its objectives.

• It is a complete look at how to position an organization for the future.

• It is a process that helps management focus on how to succeed.

• It takes time but it is a prerequisite for getting an organization to the next level of competitiveness. A common reason for neglecting strategic planning is that the process takes time.

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Strategic Planning Process

• Defines where the organization is now, where it wants to be, and how it will get there.

• Gathers internal and external information.

• Develops alternative strategies.

• Selects appropriate strategies.

• Implements a plan.

• Evaluates and revises the plan as needed.

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Strategy

Implementa-

tion

Phase 3

Strategy

Development

Phase 2

Strategy

Formulation

Phase 1

Strategy

Evaluation

Phase 4

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Phase 1: Strategy Formulation

Must understand:• What business the

company is in. • When to change the

mission and alter strategy.

• How and when to communicate the mission.

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Strategy Formulation

• Develop vision and mission statements.

• Define organizational values.

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Develop Vision, Mission Statements and Define Values

• Vision statement - A guiding image of the organization’s desired future.

• Mission statement -Specifies what activities the organization intends to pursue and what course management has charted for the future.

• Values - What is important to the organization and often dictates employee behavior. Values are at the heart of the culture of an organization.

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Phase 2: Strategy Development

S = Internal strengths

W = Internal weaknesses

O = External opportunities

T = External threats

Strategy Development

• Conduct a SWOT analysis, including environmental scan.

• Establish long-term objectives (three to five years).

• Identify corporate/organizational, business unit, and functional strategies.

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Indentify Strategies

• Corporate/organization strategy – The organization’s highest-level strategy. Directly connected with the information gathered from in the SWOT analysis.

• Business unit strategy – Strategic decisions at this level concentrate on the best way for the organization to compete in the specific markets identified in the organization strategy. A specific subunit of an organization is often referred to as a business unit or profit center.

• Functional strategy – Strategies focus on how to manage activities to support the unit and organizational goals. A function may be a whole department or it may be an individual.

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Phase 3: Strategy Implementation

Resources needed toachieve objectives:

• Financial

• Physical

• Human

• Technological

* The phase in which the most people are involved in the strategic management process.

Strategy Implementation

• Establish short-term objectives (six months to a year).

• Develop action plans.• Allocate resources.• Motivate employees.

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Phase 4: Strategy Evaluation

• Assess strategies by noting changes in:– Internal strengths and

weaknesses.

– External opportunities and threats.

• Take corrective action when changes have occurred.

Strategy Evaluation

• Review strategies at planned intervals.• Reviews should be on-

going, not a one-time event at the end of the process.

• Measure performance.• Take corrective action.

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Emergent Strategy

Strategy adjustments do not always follow the methodical process outlined in the strategy process. Business innovations will create new objectives or modifying existing ones may overlay a new direction compared to what was developed in the formal planning process. The result is often referred to as emergent strategy.

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Earning a Seat at the Table

• Learn the business you support. • The right to participate is earned if HR demonstrates

initiative, commitment, and an understanding of organizational needs, issues, and success factors.

• Serve the organization’s need first, HR second• Learn about your organization’s industry• Position yourself as a consultant, not a decision maker• Use facts and objective data as support for your

suggestions• Build partnerships across the organization• Contribute to measuring strategic success

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The Two Dimensions of an Organization’s Internal Environment

• First, HR must be able to describe the role of each function in the organization and how that function and HR can support each other and the organization’s strategic plan.

• Second, HR must understand how the organization has structured itself and the implications of that structure for implementing the strategic plan.

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Understanding the Internal Environment

InformationTechnology

Operations

Finance andAccounting

Employees

Marketingand Sales

HR

• Understand the perspective of your business partners.

• Create communication and collaboration.

• Identify internal needs and emerging issues.

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Finance and Accounting

• Finance helps business units with financial needs.– Pricing products

– Creating financial models

• Accounting balances the checkbook of the company.– Accounts receivable

– Accounts payable

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Budgeting Methods

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Balance Sheet

• Basic form of the balance sheet is:

Assets = Liabilities + Equity

• Every financial transaction is an exchange, and both sides are recorded.

• Only records transactions measured in money are recorded.

• Profits increase equity, and cash withdrawals decrease equity.

Summarizes the firm’s financial position - its assets, liabilities, and equity- at a particular time.

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Balance Sheet

AssetsCurrent assets

Fixed assets

Investments

Total assets

Liabilities and equityCurrent liabilities

Equity

Total liabilities and equity

$310,000

$70,000

$20,000

$400,000

$145,000

$255,000

$400,000

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Income Statement

• Basic form of the statement is:

Revenues – Expenses = Net income

• Some expenses are never cash outflows (depreciation).

• Some expenses may be paid partly in one period and partly in another (cost of goods sold).

• Owner withdrawals are distributions, not operating expenses.

Explains revenues, expenses, and profits over a specified period of time.

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Income Statement

Gross sales $360,000Less cost of goods sold $240,000Gross profit $120,000Less expenses:

Salaries $20,000Rent $18,000Utilities $ 7,200Depreciation $ 1,800Interest $ 3,000

Subtotal of expenses: $50,000Income less expenses $70,000Income tax expense $28,000Net income $42,000

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Marketing and Sales

Promotion

Price

Place

Product

Keyelements

Marketing:Plans, prices, promotes, and distributes goods and services.

Sales:Sells the organization's product to the marketplace.

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Operations

Control

Inventory Scheduling

Standards

Capacity

Keyconcepts

• Goal: To provide goods and services to customers.

• Focuses on productivity, quality, cost, delivery, and performance.

• Affected by supply chain management.

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Capacity

• The ability to yield output. It is a measure of capability.

• Capacity is a description of the system’s limitations.

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Standards

• The detailed estimates that permit planning of capacity requirements.

• The yardstick by which the amount and quality of output are measured.

• The important element in measuring performance standards is time.

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Scheduling

• The act of detailed planning, and it is based upon incoming orders, order history, and forecasts of future demand.

• It is the function of coordination of resources, of their allocation and management, and of their organization by time and place.

• The operations function is less concerned with the demand itself than with the effect that demand has on capacity.

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Inventory

• After physical buildings and equipment, inventory is a company’s major asset.

• Dominant view of the finance department is – there is too much of it (inventory).

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Control

• Control is an after the fact evaluation of the company’s ability to meet its own specifications and its customer’s needs.

• The three steps of control are:– Observe what happened.– Compare what happened to what was supposed

to happen.– Decide if comparison shows that objectives were

met and determine what, if anything, needs changing and, if so, change it to ensure success next time.

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Information Technology

Enables an organization to use information to support its strategic objectives.

• Strategic information systems are designed to achieve competitive superiority.− Airline reservation systems

• Operational systems focus on reducing costs or improving productivity.− Remote access systems that allow

telecommuting

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Employees

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Creativity

• The attribute of bringing into existence a unique concept or thing that would not have occurred or evolved naturally.

• The fruit of creativity is innovation.

• Can occur at the individual and group level by providing the right supportive environment and resources.

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Organizational Design

• HR must understand the organization and how it works as an entity.

• Organizational design can impact strategic management, and strategic management can impact the organization.

• Knowing where a business is in the evolutionary development of organizations will tell you about the challenges the business will face and the strategies that may help it to avert decline.

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Evolution of Organizations

• Phase 1: Introduction

• Organization relies on high energy and creativity, may use experienced staff to limit training, may meet or exceed standard pay range to recruit talent, may recruit locally and offer high involvement, use stock in the company in return for initially less-acceptable terms of employment. Basic policies in place.

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Evolution of Organizations

• Phase 2: Growth

• Characterized by change, expansion of facilities, marketing, and people to keep up with demand for products. Backlogs and scheduling problems are common, policies, procedures and rules begin to be formalized.

• Recruitment efforts are increased to staff new positions.

• Leadership attempts to sustain morale and motivation.

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Evolution of Organizations

• Phase 3 – Maturity

• Scheduling problems largely resolved, staffing and organizational cultures begin to stabilize. Policies procedures, and rules are formalized. Labor cost control also becomes a factor.

• The rate of change levels off.

• Training is necessary to maintain the workforce skills and increase productivity.

• A company in the maturity phase will emphasize training to improve workforce productivity.

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Evolution of Organizations

• Phase 4 – Decline• The organization is entrenched in rules and

policies, leadership becomes resistant to change. • Leadership employs a series of product

enhancements or cost-reduction programs. If unsuccessful, reductions in force (RIFs), early retirements, or closing major facilities may occur.

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Evolution of Organizations

HR Focus:Staffing Compensation, HR planning,

training

Introduction

Staffing andtraining

Change managementOutplacementCross-training

Growth Maturity Decline

Crisis: Leadership

Need:Creativity

Crisis: Delegation

Need: Clear direction

Need:Formal systems

Crisis: Bureaucracy

Crisis: Change resistance

Need:• Streamlined

decision making• Flexibility• Small-company

thinking

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Strategic Orientation

• Organizations can be strongly influenced by the competitive strategies they adopt.

• Organizations must offer customers a competitive advantage.

• Michael Porter’s “Competitive Strategy”

– Cost Leadership

– Differentiation

– Focus

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Cost Leadership Strategy

• Requires:– Exploitation of all sources of cost advantage.– Efficiency and productivity.– Sharing of information.– Centralized decision making.– Cross-training and job rotation.– Process improvements.– Compensation frequently tied to production.– Information sharing is essential.

Goal: To be the low-cost producer

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Differentiation Strategy

• Requires:– Reduced costs in areas not related to

differentiation.– Strong research and development and

marketing.– Product knowledge and quality training.– Decentralized decision making for quicker

speed to market.

Goal: Attempt to set the product apart from its competition by giving it unique characteristics for which customers will pay a premium price.

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Other Strategies

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Focus Strategy

• Built around serving a particular target to the exclusion of others. – In differentiation focus, the organization is able to differentiate itself by

either meeting unusual customer needs or providing unique products.

– In cost focus, the organization achieves lower costs in serving the target market. Sometimes an organization is able to achieve both.

• Managers focus on :– Providing product knowledge and application to employees.

– Recruiting and retaining customer-service-oriented employees.

– Selecting employees who are skilled at helping clients manage change.

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Human Capital Advantage

• The organization believes that investing more in human capital than their competition does has an immeasurable competitive advantage.

• Managers focus on:

– Identifying values that employees are looking for and working with management to deliver those values.

– Developing innovative organizational development programs.

– Aligning recruitment with the strategic plan to identify and hire the types of employees the organization will need in the future.

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Customer Intimacy Strategy

• The organization offers a unique range of services to help customers get the most out of their products. For example, a customer would find retail sales staff who were knowledgeable, caring, unhurried, and educated enough to provide advice on the company’s products.

• Managers focus on:– Providing product knowledge and application training to employees.

– Recruiting and retaining customer-service-oriented employees.

– Selecting employees who are skilled at helping their clients to share information about customers and that empowers first-line employees to solve customer problems immediately rather than passing the situation along to another expert or supervisor.

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Specialization and Departmentalization

• Specialization: Degree to which processes are divided into tasks and grouped into jobs.– Can increase productivity, but too much specialization

can lead to employee dissatisfaction which can lead to higher rates of absenteeism and lower levels of quality. Used more often at the extremes of the spectrum or skilled labor.

– Departmentalization: The way an organization groups jobs so work can be coordinated.

– Functional, divisional, or matrix

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Functional Structure

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Functional Structure

• Most common organization structure.

• Departments are defined by what services they contribute to the organization’s overall mission.

• Tendencies that emerge:– Emphasis on quality from a technical standpoint.

– Rigidity in regard to change, especially if change in one functional area is necessary to help other functional areas.

– Difficulty in coordinating the actions of different functional areas, especially if the organization must continually adjust to external conditions.

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Divisional Structure

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Divisional Structure

• More decentralized than functional structure because divisions are separated on the basis of product, customer or market, or region.

• All the resources necessary to produce and sell the product are under the control of a particular division. Popular in organizations that benefit from local authority and accountability.

• HR likely to report to general manager of the business unit with “dotted line” accountability to corporate HR.

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Divisional Structure

• Emphasis on flexibility and adaptability to the needs of important external units.

• Lag in the technical quality of products and services vis-à-vis functionally structured competitors.

• Difficulty in coordination across divisions, especially where divisions must work closely with or sell to each other.

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Matrix Structure

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Matrix Structure

• Combines departmentalization by division and function to gain the benefits of both. Creates a dual chain of command. (Some employees report to two managers).

• Expensive and difficult to explain to employees.

• Blends technical and market emphasis.

• Combines strengths of both functional and divisional departmentalization.

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Authority and Reporting Issues

Chain of Command

• Line of authority within an organization.

• Defines the boundaries within which a manager can make decisions.

Span of Control

• Number of individuals who report to a supervisor.

– Narrow span (“tall” organization)

– Wide span (“flat” organization)

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Centralization and Decentralization

Decision Making

Centralization

Authority resides with upper management.

Decentralization

Authority is shared with lower levels.

Formalization: Degree of discretion individuals have over to perform their work.

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Centralization

• Recommended when:

– Operating units have conflicting goals and strategies.

– Corporate-level decisions provide needed economy of scale and/or uniform policy.

– There is frequent need for contractual negotiations with external agents.

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Decentralization

• Recommended when:

– Organizational tasks are unique to the product or market of the operating unit.

– Only reasonable collaboration within operational units is needed.

– The operating unit’s staff performs organizational tasks competently.

– Conflicting strategies, uncertainty, and complexity exist, requiring local adaptability and decision making.

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Environmental Scanning

• A process that systematically surveys and interprets data related to external opportunities and threats.

• Prepares HR to participate in strategic planning.

• Examines seven key factors:– Demographic – Political

– Economic – Social

– Employment – Technological

– International

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Demographic Factors

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• Age

• Gender

• Generational differences

• Population shifts

• Ethnicity

• Unskilled labor

• Nontraditional labor force

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Age

• Low birthrate coupled with the retirement of baby boomers could mean a shrinking workforce.

• New strategies may be required to recruit and maintain older workers who are educated, trained, loyal, flexible and dependable.

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Gender

• Nearly 47% of workforce is made up of women. Women also represent the majority of college students.

• Look at strategies to retain women in the workforce. Remove barriers such as inflexible working conditions, gender stereotyping, and occupational barriers.

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Generational Differences

• Sandwich generation – Reported high levels of stress. Need flexible work environments, flexible benefits with care-giving options, and hotlines for assistance

• Generation X – Are flexible, good at collaboration and consensus building, mature beyond their years. (Born between 1965 and 1980)

• Generation Y – Millennium Generation, better educated, highly creative, more techno-savvy. (Born after 1980 and includes people now entering the workforce)

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Ethnicity

• Diversity is spreading into small urban centers. Hispanics are now the largest minority group in U.S.

• HR must consider cultures and development needs of these future workers and increase diversity training to avoid charges of discrimination.

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Unskilled Labor

• Education trends in the U.S. suggest that the percentage of individuals obtaining higher levels of training will not increase.

• This is occurring at the same time employers are needing more highly skilled workers.

• HR may need to assist unskilled workers to pursue more education.

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Economic Factors

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Interestrates

InflationDisposable

income

CPI

GDP

EconomicFactors

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Interest Rates

• Affect consumer and corporate confidence in the economy.

• Low rates are associated with economic growth and full employment.

• High rates lead to recession and unemployment, meaning less money to purchase products. Company will have less money to invest in capital improvements.

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Gross Domestic Product (GDP)

• An estimate of the total value of goods and services produced in a country in a given year.

• GDP grows – the economy tends to be good and wage increases tend to be larger.

• GDP shrinks – businesses may hold wage increases down and restructure, downsize, and regroup.

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Consumer Price Index (CPI)

• A measure of the average change over time in the prices paid by consumers for goods and services.

• CPI is the most widely used measure of inflation.

• One of the factors tied to salary increases.

• Does not necessarily fluctuate equally across the country.

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Disposable Income

• The amount of money (adjusted for inflation) that consumers have to spend after taxes are paid.

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Inflation

• Occurs when the supply of money is in excess of the amount of goods and services.

• Inflation has an immediate, direct effect on cost-of-living adjustments to wage and pension benefits.

• Salary compression is an inflation problem that occurs when year-to-year increases in starting salaries outpace year-to-year raises.

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Employment Factors

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• Attitude toward careers

• Immigration

• Occupational and industry shifts

• Recruitment

• Unions

• Unemployment

• Turnover

• Relocation

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Attitude toward Careers

• Younger employees assume they will be changing careers throughout their working lives.

• They expect the workplace to prepare them for their next move.

• Many older workers do not plan to retire.

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Immigration

• Influx of immigrants has impact on training considerations. (English as a second language, diversity training, HR needs to be aware of visa requirements and immigration caps.)

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Occupational and Industry Shifts

• The movement in the U.S. from a production of goods to a provision of services economy.

• Manufacturing has a smaller share of economic growth.

• Service industry is creating more jobs.

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Recruitment

• Degreed professional are generally recruited nationally.

• Technicians and craft workers generally recruited regionally.

• Office, administrative and craft workers are recruited locally.

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Unions

• Unions set expectations for the workforce.

• Workers generally earn higher wages.

• Strengthen in weak economy, weaken in strong economy.

• Shifted to smaller businesses (retail and healthcare) and nontraditional groups such as women and immigrants.

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International Factors

• European Union

• Wage comparisons

• Trade agreements

• International labor law

• Globalization

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European Union

• Organizations must be aware that the conduct of business may be subject to European Union (EU) regulations as well as (or in place of) local regulations.

• Coordination among EU members may make some international competitors more formidable.

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Wage Comparisons

• Organizations must monitor threats as well as opportunities that result from an increasingly global business environment.

• Companies may combine lower wages with the latest technology to dominate a market.

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Trade Agreements

• The General Agreement on Tariffs and Trade (GATT) established:

• An international agreement, i.e., a document setting out the rules for conducting international trade.

• An international organization to support the agreement (the World Trade Organization).

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International Labor Law

• There is a trend toward global coordination on labor issues.

• International Labor Organization (ILO), formulates international labor standards, U.S. is a member.

• Organization for Economic Cooperation and Development (OECD) focuses on employment and industrial relations.

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Globalization

• Worldwide strategic alliances, ventures, and mergers are becoming the norm.

• Challenges are: Growing feeling of anti-Americanism and increasing ethnic and regional tensions that can erupt in violence.

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Other Factors

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Political Factors

• Taxes and the federal deficit

• Health benefits and health-care delivery

• Social Security reform

• Unemployment benefits

• Retirement funds

• Union Organization

• Immigration

• Corporate Governance

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Social Factors

• The changing definition of families can affect benefit structures.

• U.S. high school graduation rates are lower than the average among industrialized economies

• Cost of a college education. • Increasing rates of obesity. • Prominence of women in the workplace, HR must

explore how to attract, reward, and motivate this growing segment of the workforce.

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Technological Factors

• Technology can alter the structure of jobs and the structure of the organization.

• Monitoring needed employee skill sets and education options becomes critical to the success of the organization.

• The “digital divide” may limit the sharing of information and the opening of educational and training opportunities.

• Technological changes often initiates sweeping changes in the way we do our work.

• Swarming – The rapid linking of networks of individuals through cell phones and other electronic devices.

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HR’s Strategic Contributions

• HR represents a substantial portion of the organization’s investment.

• HR must be prepared to demonstrate the value of HR activities to the company’s bottom line.

• Any organizational function can be measured at two levels:– Effectiveness – the extent to which goals have

been met.– Efficiency – the degree to which operations are

done in an economical and timely manner.

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Financial Measurement Techniques

• Return on Investment

• Cost-benefit analysis

• Break-even analysis

• Financial statement analysis

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Return on Investment (ROI)

Most effective way for HR to evaluate the strategic impact of its initiatives. Measures the economic return on a project or investment.

ROI = Value of benefits received

Costs to produce benefits

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Cost-Benefit Analysis

• Determines the financial impact that programs have on company profitability.

• Presents data as a ratio.

-Value of projected benefits

Cost benefit =Cost

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Steps in a Cost-Benefit Analysis

1. Identify each program in the HR plan.2. Evaluate the effectiveness of each program based on:– Relevance of the program to corporate objectives.– Willingness and ability of line managers to execute the

program.– Cost versus projected benefits of the program.– Economic risks of not executing the program.

3. Prioritize all programs and allocate staff resources.

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Break-Even Analysis

One of the simplest forms of cost-benefit analysis. Determines the point in time at which total revenue associated with an HR program is equal to the total cost of the program.

-Cost

Break even point = × Time*Savings

* Time = The period of time for which the return is being analyzed.

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Financial Statement Analysis

• Used to determine the financial health of a company and is a common metric among investors.– Gross profit margin– Operating profit margin– Net profit margin

• Used to measure the overall impact of a strategic plan.

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Balanced Scorecard

• Aligns business function measures with organizational strategies.

• Measures the effectiveness of a department or the entire company.

• Considers perspective of all stakeholders.

• Should be implemented gradually in every area of the organization.

Finance

Learningand

growth

Businessprocesses

Customers

MissionVisionValues

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Balanced Scorecard- Step 1Plan the Process

• Confirm the scope of the project and establish a project time line.

• Outline a project communication approach.

• Determine organizational participation.

• Confirm expected project deliverables.

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Balanced Scorecard- Step 2Design the Scorecard

• Focus on specific measures that support business strategy.

• Identify critical success factors for implementation.

• Develop an action plan to support implementation.

• Collect and prepare data.

• Tracking measures.

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Balanced Scorecard- Step 3Employ and Refine Measures

• Employ scorecard.

• Monitor performance gaps.

• Refine measures of the scorecard.

• Identify implementation issues.

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HR Audit

• Analyzes effectiveness and efficiency of HR programs.

• Keeps executives current on HR activities.

• Allows HR managers to cut or enhance programs and address noncompliance.

• Conducted by HR staff or a third-party contractor.

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HR Audit Cautions

• The audit results may be discoverable in litigation.

• Make sure you have buy-in to fix any problem you discover. Learning of a problem and then ignoring it invites problems such as liquidated damages (double), punitive, or other damages.

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Other Measurement Methods

• Organization’s most important issues (e.g., dollar sales per employee or percentage of workforce that is unionized)

• Human capital ROI

• Turnover cost

• Compensation as a percentage of operating expense

• Training investment factor

• Time to start

• Cost per hire

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Inductive and Deductive Reasoning

• Inductive (from specific to general)– Looks at a set of

observations and designs a rule.

– Joe, John, and Mary are top salespeople and have accounting backgrounds. Therefore, for this job accounting background indicates success.

• Deductive (from general to specific)

− Starts with a general rule and deduces specific instances.

− Research shows that units led by controlling managers have decreased morale. John is a controlling manager. His unit will suffer morale problems.

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Primary and Secondary Research

Primary(data gathered firsthand)

Secondary(data gathered by others)

• Experimental

• Pilot projects

• Surveys

• Interviews

• Focus groups

• Direct observation

• Testing

• Secondhand reports

• Historical data

• Purchased data

• Professional publications

• Benchmarking

• Best-practices reports

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Scientific Method

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Step 1: Problem Specification

• State the problem as a question.

• Develop a statement that provides clear implications for observation and measurement.

• Identify key factors that contribute to the problem.– “Why are there so many

voluntary terminations?”

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Step 2: Hypothesis Formulation

• Restate problem as a testable prediction.– “Voluntary terminations

are high because of low job satisfaction.”

• State the relationship between two factors that can be tested.

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Step 3: Experimental Design (Classic)

• Classic design is the most basic experimental design, called the “one-factor-at-a-time” design or true experiments.

• Provide cause-and-effect knowledge of relationships

• Subjects are randomly assigned to two equal groups.

• Experimental group is exposed to the variable; control group is not exposed to the variable.

Experimental group R O X O

Control group R O O

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Step 3: Experimental Design(Quasi-Experimental)

• Most common is the nonequivalent group design, which requires a pre-test and a post-test for a treated (experimental) group and a comparison (control) group.

• Subjects are not assigned at random.

• ONLY the experimental group is exposed to the variable; control group is not exposed to the variable.

Experimental group O X O

Control group O O

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Steps 4 and 5: Data Collection and Analysis

Step 4: Data Collection• Data is gathered through primary and secondary research

methods.

Step 5: Data Analysis

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• Data is analyzed and placed into a useful context.– Quantitative analysis: Based on numeric data that is

analyzed with statistical methods.

– Qualitative analysis: Based on attitudes, opinions, and feelings. Based on research that supplies non-numeric data.

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Scientific MethodMy way to remember

Problem Specification Paul Smith

Hypothesis Formulation Had Frequent

Experimental Design (E) (D)

Data Collection Dandruff Constantly

and

Data Analysis Dates Avoided

him

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Quantitative Analysis

• Descriptive Statistics– Charts and graphs– Measures of central tendency– Measures of variation– Measures of association

• Inferential Statistics– Population– Sample– Normal distribution

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Descriptive Statistics:Measures of Central Tendency

Mean = Average = 10.33

Median = Point below which 50% of scores lie = 12

Mode = Most frequently occurring score = 12

4668

1010101212121213131314

15 scores for a total of 155 points

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Descriptive Statistics:Measures of Variation

• Provides an indicator of variation around central tendency values.

– Range

• Distance between highest and lowest scores

– Percentile

• Specific point that has a given percentage of cases below it

– Standard deviation

• How much scores are spread out around a mean

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Descriptive Statistics: Measures of Association—Correlation

Shows the relationship between two variables.

Negative Relationship

As the value of one variable increases, the other decreases.

Example: The higher one's satisfaction, the lower his or her intention to quit.

No Relationship Positive Relationship

As the value of one variable increases, so does the other.

Example: The higher one's satisfaction, the higher his or her intention to remain with the company.

–1.00 0.00 1.00

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Descriptive Statistics:Measures of Association—Regression

• A statistical method used to predict a variable from one or more predictor variables. Its purpose is to determine whether a relationship exists between variables and the strength of the relationship.

• For a causal relationship can be inferred:– There has to be evidence of association.– The dependent variable has to change in a consistent

way after the independent variable has changed.– All other possible causes have to be eliminated.

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Measures of AssociationMy way to remember

• Remember that the word “Association” has 2 (S)– Scatter Diagrams contains 2 (t)s

– Correlation contains 2 (r)s

– Regression analysis contains 2 (s)s

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Inferential Statistics

• Form a conclusion by studying a sample of the population.

– Population: Entire group (all employees).

– Sample: Part of the population (20 random employees).

– Normal distribution: Expected distribution given a random sampling of a large population.

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Qualitative Analysis

• Most useful for:– Depth of information.

– Brainstorming and idea generation.

– Discovering underlying motivation, feelings, values, attitudes, and perceptions.

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• Gathered from:– Interviews.

– Surveys and questionnaires.

– Observation, file studies, testing.

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Reliability

• Ability of an instrument to measure consistently.

• Test A scores are more consistent.

• This test is considered reliable.

Test A Test B

Candidate Form 1 Form 2 Form 1 Form 2

1 90 92 87 95

2 89 90 79 86

3 92 94 81 93

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Reliability can be measured by:

• Parallel forms- Uses two tests that are identical in format and content but which the actual items use different ways of expressing the same question.

• Test/Retest- One form of the test is given to the same group on 2 separate occasions, with a specified interval between tests.

• Internal Consistency- Test is divided into 2 equal parts – results are correlated

• Rater agreement- Raters are assessed to see if they are consistent. Important! To improve reliability, it is usually necessary to train observers so they are clear on the “rules” for rating.

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Validity

• Ability of an instrument to measure what it is intended to measure.

• Answers the questions:– What does the instrument measure?

– How well does it measure it?

• A reliable instrument is not always valid.

• A valid instrument is always reliable.

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Ethics

• System of moral principles and values that establish appropriate conduct.

• Organizations must be concerned with more than simply not breaking the law. Investors, employees, and communities look to businesses to act both legally and ethically and to fulfill their social responsibilities.– Ethics is not synonymous with legality.

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On a strategic level, HR must play a role in:

• Creating a culture where ethics is valued and violations will result in disclosure and by training managers and leaders on ethical issues.

• Determining an organization’s ethics policy.

• Determining supportive procedures and training.

• Conducting investigations and applying discipline, when required.

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Ethical Issues

• Board of directors’ training

• Workplace privacy

• Whistleblowing

• Conflict of interest

• Bribes, payoffs, and kickbacks

• Organizational abuse

• Insider trading• Cultural clashes• Copyrights• Corporate responsibility

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Privacy in the Workplace – Employment Information

• When giving references, “the truth is an absolute defense” to a defamation claim.

• Always speak in terms of behaviors as opposed to labels since behaviors are easier to prove. Rather than saying “poor work ethic”, say “missed three important deadlines.”

• Employers are allowed “safe harbor” from defamation and other tort lawsuits if a reference is given objectively and without malice.

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Corporate Responsibility

• Johnson and Johnson removed Tylenol from store shelves when bottles of Tylenol were found to have been tampered with.

• In contrast, when glass particles were found in jars of its baby food, Gerber elected not to immediately remove jars of the baby food from store shelves. The public remembers such behavior.

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Responsibility to the Community

• Reactive corporate philanthropy- Small charitable donations.

• Strategic contributions- Focused on topics relevant to business, long-term business benefit in mind, goal to enhance corporate reputation.

• Mainstream involvement- Linked to immediate operational business concerns, encompass in-kind resources (staff time)

• Corporate accountability- Company has a full, open, and long-term engagement with charity. Practices “social auditing”

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Mainstream Involvement

• Involvement is broadened from money to encompass in-kind resources, such as staff time and expertise, donated products, and access to company facilities.

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Legislative and Regulatory Environment

• Laws are actions passed by Congress and state legislatures.

• Regulations reflect how laws will be implemented and often have the force of law.

– Regulatory agencies may issue guidelines that interpret how regulations will be enforced.

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Law-Making 101: Passage of a Bill

• 1-Referral to a committee• 2-Committee action• 3-Subcommittee review• 4-Mark-up• 5-Committee action to report a bill• 6-Publication of a written report• 7-Scheduling of floor action• 8-Debate• 9-Voting• 10-Referral to other chamber• 11-Conference committee action• 12-Final actions • 13-Override of veto

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Rule-Making Process

The public may comment via public hearings, conversation, e-mail, or letter for a specified time period.

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Laws are made by legislatures, and rules are made by agencies.