1. Strategic Human Resource Management and the HR Scorecard
Pakistan Institute of Management Human Resource Management Professional Diploma Course Session: Sep 2016 – Jan 2017
Strategic Human Resource Management and the HR Scorecard
Chapter 03
Sir. Mallick Mustafa Imam

2. FIGURE 3–1 The Strategic Management Process

3. The Strategic Management Process
The process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment.
Strategy
A chosen course of action.
Strategic Plan
How an organization intends to balance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage over the long-term.

4. Business Vision and Mission
A general statement of an organization’s intended direction that evokes emotional feelings in organization members.
Mission
Spells out who the company is, what it does, and where it’s headed.

5. FIGURE 3–2 A SWOT Chart
© 2008 Prentice Hall, Inc. All rights reserved.

6. FIGURE 3–3 Strategies in a Nutshell
Source: Arit Gadiesh and James Gilbert, “Frontline Action,” Harvard Business Review, May 2001, p. 74.
© 2008 Prentice Hall, Inc. All rights reserved.

7. FIGURE 3–4 Relationships Among Strategies in Multiple-Business Firms

8. Types of Strategies Corporate-Level Strategies
Diversification Strategy
Geographic Expansion Strategy
Vertical Integration Strategy
Corporate-Level Strategies
Consolidation Strategy

9. Types of Strategies (cont’d)
Cost Leadership
Focus/Niche
Business-Level/ Competitive Strategies
Differentiation

10. Strategic Human Resource Management
The linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility.
Involves formulating and executing HR systems—HR policies and activities—that produce the employee competencies and behaviors that the company needs to achieve its strategic aims.

11. FIGURE 3–6 Linking Company-Wide and HR Strategies
Source: © Gary Dessler, Ph.D., 2007.
© 2008 Prentice Hall, Inc. All rights reserved.

12. Human Resource Management’s Strategic Roles
Strategic Planning Roles
p. 91
Strategy Execution Role
Strategy Formulation Role

13. Creating the Strategic Human Resource Management System
Human Resource Professionals
Employee Behaviors and Competencies
Components of a Strategic HRM System
Human Resource Policies and Practices p

14. Competencies required for HR to become The Strategic Partner

15. 1. Leadership
Understand the nature and styles of leadership, and display appropriate leadership characteristics in performance of professional responsibilities.
Demonstrate leadership at multiple performance levels:
Individual
Team
Unit or organization 19

16. 2. Knowledge of the Business
Understand corporate business (structure, vision and values, goals, strategies, financial and performance characteristics).
Understand the unit’s business, including special knowledge of competitors, products, technology, and sources of competitive advantage.
Understand internal and external customers.
Understand the environment (external and internal) of corporation and individual business.
Understand:
Key business disciplines
Nature, scope, and HR implications of business globalization
Information technology as it affects competitiveness and business processes 20

17. 3. HR Strategic Thinking
Understand the strategic business planning process.
Understand and be able to apply a systematic HR planning process.
Be able to select, design, and integrate HR systems or practices to build organizational mindset, capability, and competitive advantage for the business.
Be able to develop and integrate business unit HR strategies within framework of corporate HR strategies. 21

18. 4. Process Skills
All HR professionals should be competent in key corporate processes and understand management processes critical to particular business units.
Understand key process skills such as consulting, problem solving, evaluation / diagnosis, workshop design, and facilitation.
Understand the basic principles, methodologies, and processes of organizational change and development. Facilitate and manage organizational change.
Balance, integrate, and manage under conditions of uncertainty and paradox. 22

19. 5. HR Technology
All HR professionals should have a generalist perspective on HR systems and practices as they relate to achievement of business competitive advantage.
Generalists are capable of designing, integrating, and implementing HR systems to build organizational capability and create business competitive advantage.
Specialists are capable of designing / delivering leading-edge practices to meet competitive business needs.
All HR professional are capable of measuring effectiveness of HR, systems and practices. 23

20. FIGURE 3–8 Three Main Strategic Human Resource System Components
Characteristics of HPWS
multi-skilled work teams
empowered front-line workers
extensive training
labor-management cooperation
commitment to quality
customer satisfaction
Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance (Boston: Harvard Business School Press, 2001), p. 12.
© 2008 Prentice Hall, Inc. All rights reserved.

21. FIGURE 3–9 Basic Model of How to Align HR Strategy and Actions with Business Strategy“
Source: Adapted from Garrett Walker and J. Randal MacDonald, “Designing and Implementing an HR Scorecard,” Human Resources Management 40, no. 4 (2001), p. 370.
© 2008 Prentice Hall, Inc. All rights reserved.

22. THE HR SCORECARD
The HR Scorecard is a concise measurement system. It shows the quantitative standards or metrics the firm uses to measure HR activities and to measure the employee behaviors resulting from these activities, and to measure the strategically relevant organizational outcomes of those employee behaviors.
It highlights in a concise but comprehensive way, the causal link between the HR activities and the emergent employee behaviors and the resulting firm-wide strategic outcomes and performance.
The most potent action HR managers can take to ensure their strategic contribution is to develop a measurement system that convincingly showcases HR’s impact on business performance.

23. The HR Scorecard
To create an HR scorecard, the manager needs three types of information.
Know the company strategy
Understand the links between HR strategy, employee behaviors, the organizational outcomes and the organization’s performance.
Have metrics that can be used to measure all the activities and results involved, specifically the HR activities, the emergent employee behaviors, the strategically relevant organizational outcomes and the organizational performance.

24. The Seven Steps in the HR Scorecard Approach to Formulating HR Policies, Activities, and Strategies

25. Simple Value Chain for “The Hotel Paris”

26. HR Metrics Absence Rate Cost per Hire Health Care Costs per Employee
[(Number of days absent in month) ÷ (Average number of employees during mo.) × (number of workdays)] × 100
Cost per Hire
(Advertising + Agency Fees + Employee Referrals + Travel cost of applicants and staff + Relocation costs + Recruiter pay and benefits) ÷ Number of Hires
Health Care Costs per Employee
Total cost of health care ÷ Total Employees
HR Expense Factor
HR expense ÷ Total operating expense
Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13–20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey;

27. HR Metrics (cont’d) Human Capital ROI Human Capital Value Added
Revenue − (Operating Expense − [Compensation cost + Benefit cost]) ÷ (Compensation cost + Benefit cost)
Human Capital Value Added
Revenue − (Operating Expense − ([Compensation cost + Benefit Cost]) ÷ Total Number of FTE
Revenue Factor
Revenue ÷ Total Number of FTE
Time to fill
Total days elapsed to fill requisitions ÷ Number hired
Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13–20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey;

28. HR Metrics (cont’d) Training Investment Factor Turnover Costs
Total training cost ÷ Headcount
Turnover Costs
Cost to terminate + Cost per hire + Vacancy Cost + Learning curve loss
Turnover Rate
[Number of separations during month ÷ Average number of employees during month] × 100
Workers’ Compensation Cost per Employee
Total WC cost for Year ÷ Average number of employees
Sources: Robert Grossman, “Measuring Up,” HR Magazine, January 2000, pp. 29–35; Peter V. Le Blanc, Paul Mulvey, and Jude T. Rich, “Improving the Return on Human Capital: New Metrics,” Compensation and Benefits Review, January/February 2000, pp. 13–20;Thomas E. Murphy and Sourushe Zandvakili, “Data and Metrics-Driven Approach to Human Resource Practices: Using Customers, Employees, and Financial Metrics,” Human Resource Management 39, no. 1 (Spring 2000), pp. 93–105; [HR Planning, Commerce Clearing House Incorporated, July 17, 1996;] SHRM/EMA 2000 Cost Per Hire and Staffing Metrics Survey;