Module 1: Strategic Management

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

1-1© SHRM

Any student use of these slides is subject to the same License Agreement that governs the student’s use of the SHRM Learning System materials.

HR Roles

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

Historical:• Advice• Service• Control

Current: • Strategic• Operational• Administrative

1-2© SHRM

• Workforce composition

• Globalization

• Emphasis on ethics

• Flexible organizational boundaries

• Require:– Strategic HR perspective

– Alignment of human capital and corporate strategy

– Technology

Changes in the HR Profession

1-3© SHRM

Key Trend: Offshoring

• Domestic HR challenges– Displaced workers

– Increased HR workload

– Decline in employee morale

– Shortage of employees in positions vulnerable to offshoring

SPHR only

1-4© SHRM

• International HR challenges– Recruiting, managing, and

motivating the new workforce

– Communication and coordination across time zones

− Cultural issues

Key Trend: Mergers, Acquisitions, and Divestiture

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

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

3. Develop plans to address key issues.

4. Measure activity of new organization against benchmarks.

HR in the M&A Process

Perform due diligence

Planintegration

Prepare for M&A

Implement and measure

1 2 3 4

1-5© SHRM

SPHR only

Management Functions

ForecastSet goals

DesignAssist

ScheduleImplement

Measure

Planning Organizing Directing Controlling

1-6© SHRM

Project Management Steps

RolesInformational• Communicator• Information disseminator

Decisional• Conflict resolver• Resource allocator

Interpersonal• Leader• Liaison

Conception

1 2 3 4

Planning, scheduling, monitoring, and control

Completion Evaluation

1-7© SHRM

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.

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

1-8© SHRM

Project Planning Tool: PERT Chart

• An arrow diagram or road map identifying all major events

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

Numbers = Weeks

Legend:

Event

Critical Path

F

Activity

15

2

2

2

2

BA

C

D

E

1-9© SHRM

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

1-10© SHRM

A company must immediately downsize its workforce by 15% due to shrinking markets. What important role will HR play during the process?

A. Form new work teams based on the gaps created by the layoffs.

B. Summarize industry trends and communicate them to employees.

C. Ensure that top management regularly communicates with employees.

D. Launch a new quality initiative to preserve customer satisfaction.

Answer: C1-11© SHRM

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.

1-12© SHRM

Managing Technology Trends

1-13© SHRM

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.

Strategy

Implementa-

tion

Phase 3

Strategy

Development

Phase 2

Strategy

Formulation

Phase 1

Strategy

Evaluation

Phase 4

1-14© SHRM

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.

Strategy Formulation

• Develop vision and mission statements.

• Define organizational values.

1-15© SHRM

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, unit, and functional strategies.

1-16© SHRM

Phase 3: Strategy Implementation

Resources needed toachieve objectives:

• Financial

• Physical

• Human

• Technological

Strategy Implementation

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

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

1-17© SHRM

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.

• Measure performance.• Take corrective action.

1-18© SHRM

Which of the following activities best prepares HR to participate in the strategic planning process?

A. Evaluating a new HRIS system

B. Restructuring HR’s recruiting system

C. Training line managers on interviewing techniques

D. Reviewing the company’s key financial data

Answer: D1-19© SHRM

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.

1-20© SHRM

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

1-21© SHRM

Budgeting Methods

1-22© SHRM

Balance Sheet

• Basic form of the sheet is:

Assets = Liabilities + Equity.

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

• Only records transactions measured in money.

Summarizes the firm’s financial position.

1-23© SHRM

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

1-24© SHRM

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.

1-25© SHRM

Income Statement

Gross sales $360,000Less cost of goods sold $240,000Gross profit $120,000Less expenses: $50,000

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

Income less expenses $70,000Income tax expense $28,000Net income $42,000

1-26© SHRM

Marketing and Sales

Promotion

Price

Place

ProductMarketing:Plan, price, promote, and distribute goods and services.

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

1-27© SHRM

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.

1-28© SHRM

A company commits to answering all phone calls within 15 seconds. Which operational concept deals with observing and documenting actual results?

A. Capacity

B. Inventory

C. Scheduling

D. Control

Answer: D1-29© SHRM

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

1-30© SHRM

Employees

1-31© SHRM

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

1-32© SHRM

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.

Goal: To be the low-cost producer

1-33© SHRM

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

1-34© SHRM

Other Strategies

1-35© SHRM

Specialization and Departmentalization

• Specialization: Degree to which processes are divided into tasks and grouped into jobs– Balances need for productivity with employee

satisfaction

• Departmentalization: The way an organization groups jobs so work can be coordinated– Functional, divisional, or matrix

1-36© SHRM

Functional Structure

1-37© SHRM

Divisional Structure

1-38© SHRM

Matrix Structure

1-39© SHRM