1. Strategic HR Management & Planning
Chapter 2
Strategic HR Management & Planning

2. Human Resources as a Core Competency
Strategic Human Resources Management
The use of employees to gain or keep a competitive advantage, resulting in greater organizational effectiveness.
Core Competencies
The unique capabilities of employees in an organization that create high value and that differentiate the organization from its competition
The source of an organization’s sustainable competitive advantage.

3. Strategic HR Management Process

4. Global Factors Types of organizations
Import/export
Multinational Enterprises (MNEs)
Global organizations
Legal, Political & Economic Factors
Unstable environments, unions, compliance issues
Cultural Factors
Hofstede’s five dimensions

5. Organizational Effectiveness and Strategic HR Management
The extent to which goals have been met.
Efficiency
The degree to which operations are done in an economical manner.
Dimensions of Organizational Effectiveness
Organizational productivity
Financial contributions
Service and quality
Organizational culture

6. Organizational Productivity and HR Efforts
A measure of the quantity and quality of work done, considering the cost of the resources used.
A ratio of the inputs and outputs that indicates the value added by an organization.
Unit labor cost: computed by dividing the average cost of workers by their average levels of output.
Improving Organizational Productivity
Organizational restructuring
Re-designing work
Aligning HR Activities
Outsourcing analyses and assistance

7. Approaches to Improving Organizational Productivity

8. Organizational Effectiveness and Financial Contributions of HR
Return on Investment (ROI)
Difficult to determine returns for HR contributions which affect many facets of the business
Former view of HR as a “cost center”

9. Customer Service and Quality Products Linked to HR Strategies
High quality products and services are the results of HR-enhancements to organizational performance.
Staffing
Customer service

10. Organizational Culture and Organizational Effectiveness
The shared values and beliefs in an organization
Strategy and culture must be compatible and aligned for the organization to be effective.
Culture affects recruitment and retention of employees.
Culture can enhance or constrain organizational performance.
Culture is the “climate” of an organization.

11. HR Planning

12. HR Planning Process

13. Human Resource Planning (cont’d)
Small Business and HR Planning Issues
Attracting and retaining qualified outsiders
Management succession between generations of owners
Evolution of HR activities as business grows
Family relationships and HR policies

14. Overall Strategic Plan Human Resources Strategic Plan
HR Planning Process
HR Strategies
The means used to anticipate and manage the supply of and demand for human resources.
Provide overall direction for the way in which HR activities will be developed and managed.
Overall Strategic Plan
Human Resources Strategic Plan
HR Activities

15. Benefits of HR Planning
Better view of the HR dimensions of business decisions
Lower HR costs through better HR management.
More timely recruitment for anticipate HR needs
More inclusion of protected groups through planned increases in workforce diversity.
Better development of managerial talent

16. Scanning the External Environment
Environmental Scanning
The process of studying the environment of the organization to pinpoint opportunities and threats.
Environmental Changes Impacting HR
Governmental Influences
Economic conditions
Geographic and competitive concerns
Workforce composition

17. Assessing the Internal Workforce
Jobs and Skills Audit
What jobs exist now?
How many individuals are performing each job?
What are the reporting relationships of jobs?
How essential is each job?
What jobs will be needed to implement future organizational strategies?
What are the characteristics of anticipated jobs?

18. Assessing the Internal Workforce (cont’d)
Organizational Capabilities Inventory
HRIS databases—sources of information about employees’ knowledge, skills, and abilities (KSAs)
Components of an organizational capabilities inventory
Individual employee demographics
Individual employee career progression
Individual job performance data

19. Forecasting HR Supply and Demand
The use of information from the past and present to identify expected future conditions.
Forecasting Methods
Judgmental
Estimates—asking managers’ opinions, top-down or bottom-up
Rules of thumb—using general guidelines
Delphi technique—asking a group of experts
Nominal groups—reaching a group consensus in open discussion

20. Forecasting HR Supply and Demand (cont’d)
Forecasting Methods (cont’d)
Mathematical
Statistical regression analysis
Simulation models
Productivity ratios—units produced per employee
Staffing ratios—estimates of indirect labor needs
Forecasting Periods
Short-term—less than one year
Intermediate—up to five years
Long-range—more than five years

21. Forecasting HR Supply and Demand (cont’d)
Forecasting the Demand for Human Resources
Organization-wide estimate for total demand
Unit breakdown for specific skill needs by number and type of employee
Develop decision rules (“fill rates”) for positions to be filled internally and externally.
Develop additional decision rules for positions impacted by the chain effects of internal promotions and transfers.
Forecasting the Supply for Human Resources
External Supply
Internal Supply

22. Forecasting HR Supply (cont’d)
Forecasting External HR Supply
Factors affecting external
Net migration for an area
Individuals entering and leaving the workforce
Individuals graduating from schools and colleges
Changing workforce composition and patterns
Economic forecasts
Technological developments and shifts
Actions of competing employers
Government regulations and pressures
Other circumstances affecting the workforce

23. Forecasting HR Supply Forecasting Internal HR Supply
Effects of promotions, lateral moves, and terminations
Succession analysis
Replacement charts
Succession planning
The process of identifying a longer-term plan for the orderly replacement of key employees.
Source: U.S. Office of Personnel Management,

24. Estimating Internal Labor Supply for a Given Unit

25. Developing and Using a Strategic HR Plan
Issues in Matching the Supply of Labor with the Demand for Labor
Succession Planning
Managing a Human Resources Surplus
Outplacement Services
HR Planning in Mergers and Acquisitions

26. Making Downsizing More Effective

27. HR Planning in Mergers and Acquisitions
Cultural Compatibility
The extent to which such factors as decision-making styles, levels of teamwork, information-sharing philosophies, and the formality of the two organizations are similar.
HR’s Role in Mergers and Acquisitions
Communicating decisions
Revising the organization structure
Merging HR activities

28. Measuring HR Effectiveness Using HR Metrics
Specific measures tied to HR performance indicators.
Development and use of metrics that can better demonstrate HR’s value and track its performance.
Characteristics of good HR metrics:
Accurate data can be collected.
Measures are linked to strategic and operational objectives.
Calculations can be clearly understood.
Measures provide information expected by executives.
Results can be compared both externally and internally.
Measurement data drives HR management efforts.

29. Examples of Strategic and Operational HR Metrics

30. Measures of Strategic HR Effectiveness
Return on Investment (ROI)
Calculation showing the value of expenditures for HR activities.
A = Operating costs for a new or enhance system for the time period
B = One-time cost of acquisition and implementation
C = Value of gains from productivity improvements for the time period

31. Measures of Strategic HR Effectiveness (cont’d)
Economic Value Added (EVA)
A firm’s net operating profit after the cost of capital (required return) is deducted.
Cost of capital is the benchmark for returns for all HR activities.
HR and the Balanced Scorecard
Financial
Internal business processes
Customer
Learning and growth

32. HR Measurement and Benchmarking
Comparing specific measures of performance against data on those measures in other “best practice” organizations
Common Benchmarks
Total compensation as a percentage of net income before taxes
Percent of management positions filled internally
Dollar sales per employee
Benefits as a percentage of payroll cost

33. Assessing HR Effectiveness
HR Audit
A formal research effort that evaluates the current state of HR management in an organization
Audit areas:
Legal compliance (e.g., EEO, OSHA, ERISA, and FMLA)
Current job specifications and descriptions
Valid recruiting and selection process
Formal wage and salary system  Benefits
Employee handbook
Absenteeism and turnover control
Grievance resolution process
Orientation program  Training and development
Performance management system