Human Resource Strategy and Planning CHAPTER 2 Human Resource Strategy and Planning

Learning Objectives Summarize the organization’s strategic planning process Explain the key differences between effective and ineffective strategies and suggest ways to implement strategic asset reallocation Outline how HR’s strategies are merged with organizational strategies and give two examples

Learning Objectives Discuss how to forecast the supply and demand of Human Resources List options for handling a shortage and surplus of employees Identify how organizations can measure and analyze the effectiveness of HR management practices

Strategy and Strategic Planning A plan an organization follows for how to compete successfully, survive, and grow Defining organizational strategy, or direction, and allocating resources toward its achievement

Figure 2-1: Strategic Planning Process for the Organization Evaluate and Reassess

Organizational Mission Organizational mission: The core reason for the existence of the organization and what makes it unique

Strategy Formulation Covers 3-5 years Consider internal and external forces Analyze strengths, weaknesses, opportunities, threats Determine objectives Formulate strategies to meet objectives Managers must focus on strategy

Strategic HR Management Provides input for strategic planning and develops specific HR initiatives to help achieve organizational goals The appropriate use of HR management practices to gain or keep a competitive advantage

Strategic HR Management HR can support organizational strategy by: Hiring good employees Placing employees in the right jobs Rewarding employees fairly Providing proper training Fostering good employer–employee communication Focusing employee efforts and rewards toward the company’s bottom line

Figure 2-2: Positioning HR to Be a Strategic Partner Source: Adapted from Torben Juul Anderson and Dana Minbaeva, “The Role of Human Resource Management in Strategy Making,” Human Resource Management 52 (2013), 809–827.

HR Contributions to Strategy Provide perspective and expertise by: Having a seat at the strategic table Being knowledgeable about business operations Focusing on the future Prioritizing business goals Understanding what to measure

Figure 2-3: HR Department’s Contri-bution to Organizational Sustainability Source: Adapted from Cathy L. Z. Dubois and David A. Dubois, “Strategic HRM as Social Design for Environmental Sustainability in Organization,” Human Resource Management 51 (2012), 799–826.

HR Strategies for Global Competitiveness Multinational corporation (MNC) An organization that has facilities and other assets in at least one country other than its home country Staffing Strategies Offshoring: Relocation of a business process or operation from one country to another Expatriate: Citizen of one country employed in a second country by a company in the first country Leadership development is critical. Leading in different cultures requires skill.

Figure 2-4: Strategic HR Approaches to International Staffing

Human Resource Planning Analyzes and identifies the need for, and availability of, people so that the organization can meet its strategic objectives Ensures right number of people with the right capabilities at the right times and in the right places

Figure 2-5: HR Planning Process Assess External and Internal Workforce • External conditions and influences • Internal workforce capabilities and KSAs Compile HR Planning Forecasts • Demands for Human Resources • Supply of Human Resources Develop HR Staffing Plans and Actions • Employee retention and turnover • Recruiting sources and means • Selection process and actions Review Organizations Environmental Analysis/Strategic Plans

Environmental Scanning Environmental scanning: Assessment of external and internal environmental conditions that affect the organization External environment Economic, political, and competitive forces Internal environment Quality and quantity of talent Organizational culture Talent pipeline and leadership bench strength Helps identify strengths, weaknesses, opportunities, and threats

Figure 2-6: HR Factors in the SWOT Analysis

Succession Planning Succession planning: Process of identifying a plan for the orderly replacement of key employees

Factors Affecting External Workforce Availability Economic and Governmental Factors – Impact HR Planning Government regulations affect labor supply Tax legislation at local, state, and federal levels Geographic/Competitive Evaluations Net migration Direct competitors International competition Changing Workforce Considerations Aging of the workforce Growing diversity of workers Female workers and work–life balancing concerns Availability of contingent workers Outsourcing possibilities

Factors Affecting Internal Workforce Availability Current and Future Job Audit Existing jobs Number of individuals performing each job Reporting relationships Vital KSAs (knowledge, skills, abilities) Jobs needed to implement future organizational strategies Characteristics of anticipated jobs Employee and Organizational Capabilities Inventory Employee demographics Career progression Performance data

Forecasting Forecasting: Using information from the past and present to predict future conditions

HR Forecasting Methods Judgmental Methods Estimates The rule of thumb The Delphi technique Nominal groups Mathematical Methods Statistical regression Simulation models Productivity ratio Staffing ratios

HR Forecasting Planning Periods Short-range plans: Forecast for the immediate HR needs of an organization Intermediate-range plans: Project one to three years into the future Long-range plans: Extend beyond three years

Forecasting External Supply of Employees Net migration into and out of the area Individuals entering/leaving the workforce Individuals graduating from schools/colleges Changing workforce composition/patterns Economic forecasts for the next few years Technological developments and shifts Actions of competing employers Government regulations and pressures Circumstances affecting persons entering/leaving the workforce

Figure 2-8: Estimating Internal Labor Supply for a Given Unit

Figure 2-9: Managing Talent Supply Imbalances

Best Practices to Carry Out Layoffs Identify the work that is core to sustaining a profitable business Identify the knowledge, skills, and competencies needed to execute the business strategy Protect the bottom line and the corporate brand Constantly communicate with employees Pay attention to the survivors

Severance Benefits and Outplacement Services Severance benefits: Temporary payments made to laid-off employees to ease the financial burden of unemployment Outplacement services: give displaced employees support and assistance Personal career counselling Résumé-preparation services Interviewing workshops Referral assistance

Legal Considerations for Workforce Reductions Selection Criteria for Laying Off Title VII of the Civil Rights Act Age Discrimination in Employment Act Americans with Disabilities Act Other Regulations Consolidated Omnibus Budget Reconciliation Act (COBRA) Older Workers Benefit Protection Act (OWBPA) Worker Adjustment and Retraining Notification (WARN) Act

Managing a Talent Shortage Alternate Work Arrangements Outsourcing Nontraditional schedules that provide flexibility to employees Transferring the management and performance of a business function to an external service provider

Figure 2-10: Ways to Manage a Talent Shortage

Figure 2-11: HR Activities during Mergers and Acquisitions

Due Diligence Due diligence: Comprehensive assessment of all aspects of the business being acquired HR professionals review issues related to: Legal compliance Compensation and benefits programs Quality of talent Labor contract obligations Is complex when merger and acquisition involves companies in different countries

Changing the Organizational Culture Define the desired behaviors Deploy role models Provide meaningful incentives Provide clear and consistent messages

Measuring Effectiveness of Human Resources and Human Capital Effectiveness: Ability of a program, project, or task to produce a specific desired effect or result that can be measured Efficiency: Degree to which operations are carried out in an economical manner

HR Metrics and Analytics HR Metrics: Specific measures of HR practices HR Analytics: An evidence-based approach to making HR decisions on the basis of quantitative tools and models

Figure 2-12: Key HR Metrics

Characteristics of HR Metrics and Analytics Accurate data can be collected Measures are linked to strategic and operational objectives Calculations can be clearly understood Measures provide information valued by executives Results can be compared both externally and internally Measurement data drive HRM efforts

HR Benchmarking and Balanced Scorecard Process of comparing an organization’s business results to industry standards or best practices A framework organizations use to report on a diverse set of performance measures

Figure 2-13: Balanced Scorecard Framework

Human Capital Effectiveness Measures Return on investment (ROI): Calculation of the value of investments in human capital Human capital value added (HCVA): Adjusted operating profitability figure Human capital return on investment (HCROI): Calculation of the amount of profit derived from investment in labor Human economic value added (HEVA): Wealth created per employee

Human Capital Effectiveness Measures ROI = C/A+B A = Operating costs for a new or enhanced system for the time period B = One-time cost of acquisition and implementation C = Value of gains from productivity improvements for the time period

Human Capital Effectiveness Measures Human capital value added (HCVA) revenue – (operating expenses [compensation + benefit costs]) full-time head count Human capital return on investment (HCROI) revenue (operating expenses – [compensation + benefit costs]) (compensation + benefit costs) Human economic value added (HEVA) net profit after taxes – cost of capital

Human Resources Audit HR audit: Formal research effort to assess the current state of an organization’s HR practices Audit areas Staffing and compensation Health and safety Legal compliance Administrative processes and record keeping Employee retention and benefits

HR Audit Levels Compliance Audit Benefit Programs Audit I-9 Audit Checks record keeping on state and federal documentation requirements Benefit Programs Audit Reviews regulatory compliance, benefits administration, and reporting I-9 Audit Reviews compliance with immigration regulations and the I-9 form requirement Specific Program Audit Reviews specific HR subareas such as compensation, EEO, or training Full HR Audit Reviews all of the above plus all other HR functions