Strategic HR Management and Planning
¡ Explain strategic HR management and how it is linked to organizational strategies.
¡ Discuss two possible contributors to competitive advantage and how HR contributes to each.
¡ Describe how legal, political, cultural, and economic factors affect global HR management.
¡ Define HR planning and outline the HR planning process.
¡ Describe the means for assessing the external and internal environments of HR management.
Chapter Objectives (cont’d)
¡ Discuss several ways of managing a surplus and a shortage of human resources.
¡ Identify why HR metrics must consider both strategic and operational HR measures.
Nature of Strategy and HR Management
FIGURE 2-1 Strategic HR Management Process
Strategic Success with HR Practices
• Recognized HR Best Practices
§ Employment security
§ Selective recruiting
§ High wages/incentives
§ Information sharing/participation
§ Training/cross training
§ Promotion from within
FIGURE 2-2 Common Areas for HR Strategies
Operationalizing HR Strategy
FIGURE 2-3 Possible HR Areas for Core Competencies
HR As Organizational Contributor
Ø Measure of the quantity and quality of work done, considering the cost of the resources used.
• Unit labor cost
Ø Computed by dividing the average cost of workers by their average levels of output.
FIGURE 2-4 Approaches to Improving Organizational Productivity
HR Effectiveness and Financial Performance
Ø The extent to which goals have been met.
Ø The degree to which operations are done in an economical manner.
Global Competitiveness and Strategic HR
Hofstede’s Dimensions of Culture
FIGURE 2-5 Hourly Compensation Costs for Manufacturing Production Workers
Human Resource Planning
• Human Resource (HR) Planning
Ø The process of analyzing and identifying the need for and availability of human resources so that the organization can meet its objectives.
• HR Planning Responsibilities
Ø Top HR executive and subordinates gather information from other managers to use in the development of HR projections for top management to use in strategic planning and setting organizational goals.
Purpose of HR Planning
FIGURE 2-6 Typical Division of HR Responsibilities: HR Planning
Small Businesses and HR Planning
FIGURE 2-7 HR Planning Process
Scanning the External Environment
• Environmental Scanning
Ø The process of studying the environment of the organization to pinpoint opportunities and threats.
Assessing the Internal Workforce
• Jobs and Skills Audit
Ø What jobs exist now?
Ø How many individuals are performing each job?
Ø What are the reporting relationships of jobs?
Ø How essential is each job?
Ø What jobs will be needed to implement future organizational strategies?
Ø What are the characteristics of anticipated jobs?
Assessing the Internal Workforce (cont’d)
• Organizational Capabilities Inventory
Ø HRIS databases—sources of information about employees’ knowledge, skills, and abilities (KSAs)
Ø Components of an organizational capabilities inventory
v Individual employee demographics
v Individual career progression
v Individual job performance data
Forecasting HR Supply and Demand
Ø The use of information from the past and present to identify expected future conditions.
• Types of Forecasts
Ø HR Demand
Ø Internal Supply
Ø External Supply
• Forecasting Periods
Ø Short-term—less than one year
Ø Intermediate—up to five years
Ø Long-range—more than five years
HR Forecasting Methods
Forecasting HR Demand
• Organization-Wide Estimate for Total HR Demand
Ø Unit breakdown for specific skill needs by number and type of employee
v Develop decision rules (“fill rates”) for positions to be filled internally and externally.
v Develop additional decision rules for positions impacted by the chain effects of internal promotions and transfers.
Forecasting HR Supply
• Forecasting External HR Supply
Ø Factors affecting external supply:
v Net migration for an area
v Individuals entering and leaving the workforce
v Individuals graduating from schools and colleges
v Changing workforce composition and patterns
v Economic forecasts
v Technological developments and shifts
v Actions of competing employers
v Government regulations and pressures
v Other circumstances affecting the workforce
FIGURE 2-8 Estimating Internal Labor Supply for a Given Unit
Forecasting HR Supply (cont’d)
• Succession Planning
Ø The process of identifying a long-term plan for the orderly replacement of key employees.
• Issues in Matching the Supply of Labor with the Demand for Labor
Ø Managing a Human Resources Surplus
Ø Outplacement Services
Ø HR Planning in Mergers and Acquisitions
Managing a Human Resources Surplus
Managing a Human Resource Surplus (cont’d)
• Outplacement services are provided to displaced employees to give them support and assistance:
Ø Personal career counseling
Ø Resume preparation and typing services
Ø Interviewing workshops
Ø Referral assistance
Ø Severance payments
Ø Continuance of medical benefits
Ø Job retraining
FIGURE 2-9 Making Downsizing More Effective
Managing a Shortage of Employees
HR Planning in Mergers and Acquisitions
• Cultural Compatibility
Ø 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
Ø Communicating decisions
Ø Revising the organization structure
Ø Merging HR activities
Key Factors in Cultural Fit
Measuring Effectiveness Using HR Metrics
• HR Metrics
Ø Specific measures tied to HR performance indicators.
v Development and use of metrics that can better demonstrate HR’s value and track its performance.
Ø Characteristics of good HR metrics:
v Are accurate.
v Are linked to strategic and operational objectives.
v Have clearly understood calculations.
v Meet information needs.
v Can be compared internally and internally.
v Can be used to drive HR management efforts.
FIGURE 2-10 Examples of Strategic and Operational HR Metrics
Measures of Strategic HR Effectiveness
• Return on Investment (ROI)
Ø Calculation showing the value of expenditures for HR activities.
Measures of Strategic HR Effectiveness (cont’d)
• Economic Value Added (EVA)
Ø A firm’s net operating profit after the cost of capital (required return) is deducted.
Ø Cost of capital is the benchmark for returns for all HR activities.
• HR and the Balanced Scorecard
Ø Internal business processes
Ø Learning and growth
Revenue and Income per FTE
HR Measurement and Benchmarking
Ø Comparing specific measures of performance against data on those measures in other “best practice” organizations
• Common Benchmarks
Ø Total compensation as a percentage of net income before taxes
Ø Percent of management positions filled internally
Ø Dollar sales per employee
Ø Benefits as a percentage of payroll cost
Assessing HR Effectiveness
• HR Audit
Ø A formal research effort that evaluates the current state of HR management in an organization
Ø Audit areas:
v Legal compliance
v Administrative processes
v Employee retention
v Absenteeism and turnover control
v Performance management system