Strategic HR Planning Why Strategic Planning Is Important

Strategic HR Planning Why Strategic Planning Is Important To All Managers? Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 1

Info • Reading Chapter 3 set text • Also important is to access your materials for this unit • from www. uwcentre. ac. cn/hhu Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 2

Today’s tutorial • You were asked to get a copy of this article for discussion in your tutorials. • China's nascent low-cost airlines • By Lu Haoting (China Daily) Updated: 2009 -04 -13 07: 49 • In your LSGS decide the following : Q 1 What sort of strategy where these airlines following ? Why was it unsuccessful? • Q 2 How could HR have helped more to make these airlines profitable Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 3

Preparation for tutorial 3 • • • read – Maslow’s Hierarchy… 30 years old and Keeps on Ticking Do Maslow’s Theories Apply in China? www. humandimension. org Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 4

Strategy and HRM • Managers must adapt their departments’ personnel activities to the requirements of their firm’s strategic plans. ; Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 5

Why Strategic Planning Is Important To All Managers • The firm’s strategic plan guides much of what is done by all to accomplish organizational goals. • Decisions made by managers depend on the goals set at each organizational level in support of higher level goals. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 6

The Importance of Strategic Planning • When you’re managing, your firm’s strategic plan is guiding much of what you do. • Management expert Peter Drucker once said that management “. . . is the responsibility for execution. ” • Managers are judged by the extent to which they accomplish their unit’s goals. • Those aims or goals—and the hard work put into accomplishing them—all depend on the firm’s plans for the future. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 7

Goals • In well-run companies, the goals from the top of the organization down to where you’re working should form an unbroken chain (or “hierarchy”) of goals. • The hierarchy of goals diagram in Figure 3 -1 which follows in the next slide summarizes this. • At the top of the company, the president and his or her staff set strategic goals. Lower-level managers (in this case, vice presidents) then set goals (such as “Add one production line at Plant A”). • Without a clear plan at the top, no one in the company would have know what to do. At best, everyone would be all working at cross-purposes. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 8

FIGURE 3– 1 Sample Hierarchy of Goals Diagram for a Company Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 9

The Planning Process • People make plans every day, often without giving it a thought. • We plan our routes to school, what courses to take, and what to do at the weekend. • Underlying all those plans, however, is an often unstated planning process. • Once implemented, plans must be evaluated to see if they must be revised to better fit changing competitive conditions. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 10

Fundamentals of Management Planning The Planning Process 1 Set an objective. 2 Make forecasts and check assumptions. 3 Determine/develop alternative courses of action. 4 Evaluate the alternatives. 5 Implement and evaluate your plan. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 11

Putting Together the Business Plan • The business plan provides a comprehensive view of the firm’s situation today and of its company-wide and departmental goals and plans for the next 3 to 5 years. Larger firms label their plans “strategic plans. ” • There are no rigid rules regarding what such plans must contain. However, they usually include, at a minimum, (1) a description of the business (including ownership and products or services), • (2) the marketing plan, • (3) the financial plan, and • (4) the management and/or personnel plan. Figure 3 -2 which follows displays the contents of a typical business plan. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 12

FIGURE 3– 2 Business Plan Table of Contents Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 13

The Financial Plan • “What’s the bottom line? ” is the first question managers and bankers ask most. Plans, goals, and accomplishments end up expressed in financial terms. • The financial plan in Figure 3 -3 which follows is a projected (or “pro forma” or planned) profit and loss (P&L) statement showing the revenue, cost, and profit (or loss) implications of a company’s marketing, production, and personnel plans. • The pro forma P&L predicts that, if plans work out as anticipated, these are the revenues, costs, and profits or losses the firm should produce. • It shows the expected bottom line. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 14

FIGURE 3– 3 Acme Consulting Profit and Loss Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 15

Setting SMART Goals • Setting effective goals is an essential management skill. Experienced managers have a simple and effective way to check whether their goals are good or not—they use the acronym “SMART. ” • Good goals are specific (make clear what to achieve), measurable, attainable; relevant (in terms of what you’re setting the goal for), and timely (they have deadlines and milestones). Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 16

How Managers Set Objectives: SMART Goals S Specific M Measureable A Attainable R Relevant T Timely Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 17

How to Set Motivational Goals Motivational Goal Setting Assign specific goals Assign measurable goals Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Assign challenging but doable goals Encourage employee participation 3– 18

Management by Objectives (MBO) • The supervisor and subordinate jointly set goals for the latter and periodically assess progress toward those goals. • MBO has benefits. • It provides a simple process for working through how the goals at each level will relate to those above and to those below. • It also capitalizes on the advantages of employee participation. • The downside is that MBO is time consuming. • These programs often involve numerous meetings among employees and supervisors, and then extensively documenting each person’s goals in various electronic or hardcopy formats. • All that takes time. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 19

Using Management by Objectives (MBO) The MBO Process 1 Set overall organizational goals. 2 Set departmental (supporting) goals. 3 Discuss departmental goals with subordinates. 4 Set individual goals and timetables. 5 Give feedback on progress toward goal. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 20

Long term planning • In practice, determining what the organization’s long-term, overall plan should be requires some special tools. • For example, you need to be able to systematically review the competitive landscape and analyze what your best strategic, long-term courses of action might be. • Strategic planning, which we turn to now, provides these special tools. • Lets consider some definitions Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 21

The Strategic Management Process • Strategy Ø A course of action the organization intends to pursue to achieve its strategic aims. • Strategic Plan Ø How an organization intends to match its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage over the long term. • Strategic Management Ø The process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment. • Leveraging Ø Capitalizing on a firm’s unique competitive strength while underplaying its weaknesses. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 22

Vision & Mission • Managers sometimes formulate a vision statement to summarize how they see the essence of their business down the road. • The vision statement is a general statement of the firm’s intended direction and shows, in broad terms, “what we want to become. ” • Whereas vision statements usually describe in broad terms what the business should be, the firm’s mission statement summarizes its answer to the question, “What business are we in? ” • Managers often use the mission statement to pinpoint whether and how the firm will vertically integrate, as well as the firm’s product scope (diversity), geographic coverage, and competitive advantage. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 23

Business Vision and Mission • Vision Ø A general statement of an organization’s intended direction that evokes emotional feelings in organization members. • Mission Ø Spells out who the firm is, what it does, and where it’s headed. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 24

Multiple Choice Question • The sales director at Web. MD is calculating annual sales revenue targets and the number of new medical-related content providers that the firm needs to maintain a competitive advantage. In which step of the strategic management process is the sales director involved? • A) performing external and internal audits • B) defining the business and its mission • C) translating a mission into strategic goals • D) evaluating strategic decisions • E) implementing a strategy • Answer: ? ? ? ? • Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 25

Answer • Answer C • Explanation: The sales director is in the process of translating the firm's mission, which is to maintain a competitive advantage, into strategic goals, which in this case involve sales revenue targets. • This step is the fourth one in the strategic process, and it occurs after the firm's business and mission have been defined and after audits have been performed. Implementation and evaluation occur after strategic goals are developed. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 26

The Strategic Management Process • Figure 3 -5 which follows sums up the strategic management process. • This includes (1) defining the business and developing a mission, (2) evaluating the firm’s internal and external strengths, weaknesses, opportunities, and threats, (3) formulating a new business direction, (4) translating the mission into strategic goals, and (5) formulating strategies or courses of action. • Step (6) and Step (7) entail implementing and then evaluating the strategic plan. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 27

FIGURE 3– 5 The Strategic Management Process Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 28

Environmental Scanning • The environmental scanning worksheet in Figure 3 -6 which follows is a simple guide for compiling relevant information about the company’s environment. • This includes things like economic, competitive, and political trends that have an effect on the company and its strategy for competing in its market. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 29

FIGURE 3– 6 Worksheet for Environmental Scanning Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 30

SWOT • The SWOT chart in Figure 3 -7 which follows is used in strategic planning by managers to compile an estimate of the company strengths, weaknesses, opportunities, and threats when creating the firm’s strategy. • SWOT helps identify the factors that will allow a company to differentiate its product or service from those of its competitors to increase market share and gain a competitive advantage. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 31

FIGURE 3– 7 SWOT Matrix, with Generic Examples Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 32

Strategy types • In Figure 3 -8 which follows we see three types of strategies that managers use, one for each level of the company. • There is corporate-wide strategic planning, business unit (or competitive) strategic planning, and functional (or departmental) strategic planning. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 33

FIGURE 3– 8 Type of Strategy at Each Company Level Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 34

Strategies • With a concentration (single business) strategy, the firm offers one product or product line, usually in one market. Concentration growth strategies include market penetration, product development, and horizontal integration. • A related diversification strategy implies that the firm will expand by adding new product lines and diversifying so that a firm’s lines of business still possess some kind of fit. • A conglomerate (unrelated) diversification strategy means diversifying into products or markets not related to a firm’s current businesses or to one another. • A vertical integration strategy means the firm expands by, perhaps, producing its own raw materials, or selling its products direct. • A consolidation strategy focuses on reducing a firm’s size. • Geographic expansion is taking the business abroad. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 35

Types of Corporate Strategies Corporate Strategy Possibilities Diversification Concentration Vertical integration Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Consolidation Geographic expansion 3– 36

Generic Strategies • Cost leadership means that a firm is seeking to become the overall low-cost leader in an industry. • Firms using a differentiation strategy seek to be unique in their industry along competitive dimensions that are widely valued by buyers. • Focusers are firms that attempt to compete in a narrow market segment (niche) through the provision of a product or service that specify customers can get in no other way. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 37

Types of Competitive Strategies Business-Level Competitive Strategies Cost leadership Differentiation Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Focus/Niche 3– 38

Achieving Strategic Fit • The “Fit” Point of View (Porter) Ø All of the firm’s activities must be tailored to or fit the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies. • Leveraging (Hamel and Prahalad) Ø “Stretch” in leveraging resources—supplementing what you have and doing more with what you have—can be more important than just fitting the strategic plan to current resources. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 39

Role of Departmental managers • Departmental managers can play big roles in strategic planning and management. • Specifically, they help the top managers devise the strategic plan, formulate functional, departmental plans that support the overall strategic plan, and then execute the plans. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 40

Departmental Managers’ Strategic Planning Roles Department Managers and Strategy Planning Help devise the strategic plan Formulate supporting, functional/ departmental strategies Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Execute the strategic plans 3– 41

Strategic Human Resource Management • Strategic Human Resource Management Ø The linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. Ø 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. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 42

FIGURE 3– 10 Linking Company-Wide and HR Strategies Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 43

FIGURE 3– 11 Basic Model of How to Align HR Strategy and Actions with Business Strategy Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 44

Relationship between HR and Company strategy • Figure 3 -10 which follows demonstrates the relationship between human resource strategy and the company’s strategic plans. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 45

Strategic HRM Tools Strategy map HR scorecard Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Digital dashboard 3– 46

The Strategy Map • A strategic planning tool that shows the “big picture” of how each department’s performance contributes to achieving the company’s overall strategic goals. • Figure 3 -13 presents a strategy map example, in this case for Southwest Airlines. • Southwest has a low-cost leader strategy. • The strategy map for Southwest lays out the hierarchy of main activities required for Southwest Airlines to succeed. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 47

FIGURE 3– 13 Strategy Map for Southwest Airlines Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 48

The HR Scorecard • A process for assigning financial and nonfinancial goals or metrics to the human resource management–related chain of activities required for achieving the company’s strategic aims and for monitoring results. • Figure 3 -14 which follows summarizes this process. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 49

FIGURE 3– 14 The Basic HR Scorecard Relationships HR activities Emergent employee behaviors Strategically relevant organizational outcomes Organizational performance Achieve strategic goals Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 50

Computerized scorecards • Managers use special scorecard software to facilitate this. • The computerized scorecard process helps you to quantify the relationships between (1) the HR activities (amount of testing, training, and so forth), (2) the resulting employee behaviors (customer service, for instance), and (3) the resulting firm-wide strategic outcomes and performance (such as customer satisfaction and profitability). Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 51

Creating an HR Scorecard The 10 -Step HR Scorecard Process 1 Define the business strategy 6 Identify required HR policies and activities 2 Outline value chain activities 7 Create HR Scorecard 3 Outline a strategy map 8 Choose HR Scorecard measures 4 Identify strategically required outcomes 9 Summarize Scorecard measures on digital dashboard 5 Identify required workforce competencies and behaviors 10 Monitor, predict, evaluate Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 52

Strategic HR tools • Figure 3 -15 which follows summarizes the three important strategic HR tools. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 53

FIGURE 3– 15 Three Important Strategic HR Tools Strategy Map HR Scorecard Digital Dashboard A graphical tool that summarizes the chain of activities that contribute to a company's success, and so shows employees the "big picture" of how their performance contributes to achieving the company's overall strategic goals. A process for managing employee performance and for aligning all employees with key objectives, by assigning financial and nonfinancial goals, monitoring and assessing performance, and quickly taking corrective action. An information technology tool that presents the manager with desktop graphs and charts, so he or she gets a picture of where the company has been and where it's going, in terms of each activity in the strategy map. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 54

HPW Systems • High-performance work systems became popular in the 1990 s. • Faced with global competition, U. S. companies needed ways to improve quality, productivity, and responsiveness. • Characteristics of high-performance work organizations include multi-skilled work teams, empowered front-line workers, extensive training, labor-management cooperation, commitment to quality, and customer satisfaction Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 55

Building A High-Performance Work System • High-Performance Work System (HPWS) Ø A set of human resource management policies and practices that promote organizational effectiveness. • High-Performance Human Resource Policies and Practices Ø Emphasize the use of relevant HR metrics. Ø Set out the things that HR systems must do to become an HPWS. Ø Foster practices that encourage employee self-management. Ø Practice benchmarking to set goals and measure the notable performance differences required of an HPWS. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 56

Tutorial activities to day • China's nascent low-cost airlines • By Lu Haoting (China Daily) Updated: 2009 -04 -13 07: 49 • In your LSGS decide the following : • Q 1 What sort of strategy where these airlines following ? Why was it unsuccessful? • Q 2 How could HR have helped more to make these airlines profitable Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 57

Preparation for tutorial 3 • • • Preparation for tutorial 3 read – Maslow’s Hierarchy… 30 years old and Keeps on Ticking Do Maslow’s Theories Apply in China? • www. humandimension. org • Check it out on line Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 58

• Try these multiple choice questions Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 59

SMART goals set by managers are ____. • A) specific, measurable, aggressive, required, and tested • B) short-term, motivational, attainable, relevant, and total • C) standardized, manageable, accurate, restrictive, and tested • D) short-term, measurable, aggressive, risky, and timely • E) specific, measurable, attainable, relevant, and timely • Answer: ? ? ? Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 60

SMART • Answer E • Explanation: SMART is an acronym used by experienced managers to check whether their goals are effective or not. Good goals are described as specific (make clear what to achieve), measurable, attainable, relevant (in terms of what you're setting the goal for), and timely (they have deadlines and milestones). Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 61

Multiple choice questions • A(n) ____ is a firm's method for matching its internal strengths and weaknesses with external opportunities and threats to maintain a competitive advantage. • A) strategic plan • B) situation analysis • C) environmental scan • D) SWOT analysis • E) tactical plan • Answer: ? ? ? ? ? Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 62

Answer • • • Answer A Explanation: A strategic plan is a firm's plan for assessing internal strengths and weaknesses with external opportunities and threats. • The essence of strategic planning involves asking, "Where are we now as a business, where do we want to be, and how should we get there? " • Managers then develop specific strategies for taking a firm where it wants to be. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 63

Question What is the first step in the strategic management process? • A) formulating a strategy • B) defining the current business • C) translating a mission into goals • D) performing internal and external audits • E) implementing an environmental scan • Answer: ? ? ? ? Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 64

Answer • Answer B • Explanation: The first step in the strategic planning process is defining a firm's current business situation, which involves assessing what products are sold, where the products are sold, and how the products differ from those offered by the competition. • This step is followed by performing internal and external audits, which may involve using an environmental scanning worksheet. • A firm would then formulate a new mission and translate the mission into strategic goals before developing a strategy to achieve those goals. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3– 65