Human Resources: Strategic Planning The Challenges of Human Resources Management Principles of Human Resource Management 16 e Bohlander | Snell

Chapter Objectives After 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

Strategic Planning and Human Resources Procedures for making decisions about the organization’s long-term goals and strategies Human Resources Planning (HRP) Process of anticipating and making provision for the movement (flow) of people into, within, and out of an organization.

Strategic Planning and HR Planning 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 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

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? Human Resources Planning Strategic Planning

Step Two: 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

Step Two: Environmental Analysis (Cont.)

Step Two: Environmental Analysis (Cont.) Culture Composition Capabilities Internal Analysis

Step Two: Environmental Analysis (Cont.)

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?

Forecasting: A Critical Element of Planning Forecasting involves: forecasting the demand for labor forecasting the supply of labor balancing supply and demand considerations.

Forecasting Demand for Employees Quantitative Methods Qualitative Methods Forecasting Demand

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).

Forecasting Demand for Employees

Forecasting the Supply of Employees: Internal Labor Supply Staffing Tables Markov Analysis Skill Inventories Replacement Charts Succession Planning

Forecasting the Supply of Employees: Internal Labor Supply

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.

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.

Step Four: Formulating Strategy

Step Four: Formulating Strategy Strategic Alliances and Joint Ventures Growth and Diversification Mergers and Acquisitions Corporate Strategy

Value Creation Business Strategy 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.

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.

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

Step Five: Strategy Implementation (Cont.)

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

Step Six: Evaluation and Assessment

Measuring a Firm’s Strategic Alignment 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

Measuring a Firm’s Strategic Alignment

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.

Measuring a Firm’s Strategic Alignment

Key Terms Balanced Scorecard (BSC) benchmarking core capabilities core values cultural audits environmental scanning human capital readiness human resources planning (HRP) management forecasts Markov analysis mission organizational capability replacement charts skill inventories staffing tables strategic human resources management (SHRM) strategic planning strategic vision succession planning SWOT analysis trend analysis value 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? 2 Understand 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? 3 Understand 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?

Calculating employee Turnover and Absenteeism

Employee Turnover Rates Computing Turnover Rates: 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:

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:

Employee Absenteeism Rates Computing Absenteeism Rates