Strategy and Human Resources Planning

1. Strategy and HumanResources Planning The Challenges of Human Resources Management

2. Chapter ObjectivesAfter 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

3. Strategic Planning and Human Resources • Strategic Planning • 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.

4. 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.

5. Step One: Mission, Vision, and Values • Mission • 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

7. 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 StrategicPlanning

8. 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

9. Step Two: Environmental Analysis (Cont.)

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

11. Step Two: Environmental Analysis (Cont.)

12. 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?

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

15. Quantitative Methods Qualitative Methods Forecasting Demand for Employees Forecasting Demand

16. 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).

17. Forecasting Demand for Employees

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

19. Forecasting the Supply of Employees: Internal Labor Supply

20. 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.

22. 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.

23. Step Four: Formulating Strategy

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

25. Business Strategy • Value Creation • 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.

26. 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.

27. 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

28. Step Five: Strategy Implementation (Cont.)

29. 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

30. Step Six: Evaluation and Assessment

31. 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

32. Measuring a Firm’s Strategic Alignment

33. 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.

34. Measuring a Firm’s Strategic Alignment

35. 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

36. Chapter 2 - Learning Outcomes

37. Calculating employee Turnover and Absenteeism

38. 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:

39. 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:

40. Employee Absenteeism Rates • Computing Absenteeism Rates