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Chapter 2

Chapter 2. Strategic HR Management & Planning. 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

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Chapter 2

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  1. 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 • Effectiveness • 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 • Productivity • 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 FinancialContributions 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 • Organizational Culture • 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 Activities 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.

  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 • Forecasting • 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, www.opm.gov.

  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 • 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 • 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

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