Strategy and Human Resources Planning Managing Human Resources

Strategy and Human Resources Planning Managing Human Resources Bohlander • Snell © 2007 Thomson/South-Western. All rights reserved. 14 th edition Power. Point Presentation by Charlie Cook The University of West Alabama

Objectives After studying this chapter, you should be able to: 1. Identify the advantages of integrating human resources planning and strategic planning. 2. Understand how an organization’s competitive environment influences strategic planning. 3. Recognize the importance of internal resource analysis. 4. Describe the basic tools for human resources forecasting. 5. Explain the linkages between competitive strategies and HR. © 2007 Thomson/South-Western. All rights reserved. 2– 2

Objectives (cont’d) After studying this chapter, you should be able to: 6. Understand the requirements of strategy implementation. 7. Recognize the methods for assessing and measuring the effectiveness of strategy. © 2007 Thomson/South-Western. All rights reserved. 2– 3

Strategic Planning and Human Resources • Strategic Planning Ø Procedures for making decisions about the organization’s long-term goals and strategies • Human Resources Planning (HRP) Ø Process of anticipating and making provision for the movement (flow) of people into, within, and out of an organization. © 2007 Thomson/South-Western. All rights reserved. 2– 4

Strategic Planning and HR Planning • Strategic Human Resources Management (SHRM) Ø The pattern of human resources deployments and activities that enable an organization to achieve its strategic goals v Strategy formulation—providing input as to what is possible given the types and numbers of people available. v Strategy implementation—making primary resource allocation decisions about structure, processes, and human resources. © 2007 Thomson/South-Western. All rights reserved. 2– 5

HRP and Strategic Planning • Strategic Analysis Ø What human resources are needed and what are available? • Strategic Formulation Ø What is required and necessary in support of human resources? • Strategic Implementation Ø How will the human resources be allocated? Human Resources Planning © 2007 Thomson/South-Western. All rights reserved. Strategic Planning 2– 6

Figure 2– 1 Linking Strategic Planning and Human Resources © 2007 Thomson/South-Western. All rights reserved. 2– 7

Step One: Mission, Vision, and Values • Mission Ø The basic purpose of the organization as well as its scope of operations • Strategic Vision Ø A statement about where the company is going and what it can become in the future; clarifies the longterm direction of the company and its strategic intent • Core Values Ø The strong and enduring beliefs and principles that the company uses as a foundation for its decisions © 2007 Thomson/South-Western. All rights reserved. 2– 8

Step Two: Environmental Scanning • Environmental Scanning Ø The systematic monitoring of the major external forces influencing the organization. 1. Economic factors: general and regional conditions 2. Competitive trends: new processes, services, and innovations 3. Technological changes: robotics and office automation 4. Political and legislative issues: laws and administrative rulings 5. Social concerns: child care and educational priorities 6. Demographic trends: age, composition, and literacy © 2007 Thomson/South-Western. All rights reserved. 2– 9

Figure 2– 2 Five Forces Framework © 2007 Thomson/South-Western. All rights reserved. 2– 10

Step Three: Internal Analysis Culture Competencies Internal Analysis Composition © 2007 Thomson/South-Western. All rights reserved. 2– 11

Scanning the Internal Environment • Cultural Audits Ø 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? © 2007 Thomson/South-Western. All rights reserved. 2– 12

Competitive Advantage through People • Core Competencies Ø Integrated knowledge sets within an organization that distinguish it from its competitors and deliver value to customers. • Sustained competitive advantage through people is achieved if these human resources: 1. Are valuable. 2. Are rare and unavailable to competitors. 3. Are difficult to imitate. 4. Are organized for synergy. © 2007 Thomson/South-Western. All rights reserved. 2– 13

Composition: The Human Capital Architecture • Core knowledge workers Ø Employees who have firm-specific skills that are directly linked to the company’s strategy. v Example: Senior software programmer • Traditional job-based employees Ø Employees with skills to perform a predefined job that are quite valuable to a company, but not unique. v Example: Security guard © 2007 Thomson/South-Western. All rights reserved. 2– 14

Composition: The Human Capital Architecture (cont’d) • Contract labor Ø Employees whose skills are of less strategic value and generally available to all firms. v Example: General electrician • Alliance/partners Ø Individuals and groups with unique skills, but those skills are not directly related to a company’s core strategy. v Example: Independent product label designer © 2007 Thomson/South-Western. All rights reserved. 2– 15

Forecasting: A Critical Element of Planning • Forecasting involves: a. forecasting the demand for labor b. forecasting the supply of labor c. balancing supply and demand considerations. © 2007 Thomson/South-Western. All rights reserved. 2– 16

Figure 2– 4 Model of HR Forecasting FORECASTING DEMAND Considerations • Product/service demand • Technology • Financial resources • Absenteeism/turnover • Organizational growth • Management philosophy Techniques • Staffing tables • Markov analysis • Skills inventories • Management inventories • Replacement charts • Succession planning Techniques • Trend analysis • Managerial estimates • Delphi technique BALANCING SUPPLY AND DEMAND (Shortage) Recruitment External Considerations • Demographic changes • Education of the workforce • Labor mobility • Government policies • Unemployment rate • Full-time • Part-time • Recalls (Surplus) Reductions • Layoffs • Terminations • Demotions • Retirements FORECASTING SUPPLY © 2007 Thomson/South-Western. All rights reserved. 2– 17

Forecasting Demand for Employees Quantitative Methods Forecasting Demand Qualitative Methods © 2007 Thomson/South-Western. All rights reserved. 2– 18

Quantitative Approach: Trend Analysis • Forecasting labor demand based on an organizational index such as sales: 1. Select a business factor that best predicts human resources needs. 2. Plot the business factor in relation to the number of employees to determine the labor productivity ratio. 3. Compute the productivity ratio for the past five years. 4. Calculate human resources demand by multiplying the business factor by the productivity ratio. 5. Project human resources demand out to the target year(s). © 2007 Thomson/South-Western. All rights reserved. 2– 19

Figure 2– 5 Example of Trend Analysis of HR Demand BUSINESS FACTOR YEAR (SALES IN THOUSANDS) LABOR PRODUCTIVITY (SALES/EMPLOYEE) = HUMAN RESOURCES DEMAND (NUMBER OF EMPLOYEES) 2000 $2, 351 14. 33 164 2001 $2, 613 11. 12 235 2002 $2, 935 8. 34 352 2003 $3, 306 10. 02 330 2004 $3, 613 11. 12 325 2005 $3, 748 11. 12 337 2006 $3, 880 12. 52 310 2007* $4, 095 12. 52 327 2008* $4, 283 12. 52 342 2009* $4, 446 12. 52 355 *Projected figures © 2007 Thomson/South-Western. All rights reserved. 2– 20

Qualitative Approaches • Management Forecasts Ø The opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organization’s future employment needs. • Delphi Technique Ø An attempt to decrease the subjectivity of forecasts by soliciting and summarizing the judgments of a preselected group of individuals. Ø The final forecast represents a composite group judgment. © 2007 Thomson/South-Western. All rights reserved. 2– 21

Forecasting the Supply of Employees: Internal Labor Supply • Staffing Tables • Markov Analysis • Skill Inventories • Replacement Charts • Succession Planning © 2007 Thomson/South-Western. All rights reserved. 2– 22

Forecasting Internal Labor Supply • Staffing Tables Ø Graphic representations of all organizational jobs, along with the numbers of employees currently occupying those jobs and future (monthly or yearly) employment requirements. • Markov Analysis Ø A method for tracking the pattern of employee movements through various jobs. © 2007 Thomson/South-Western. All rights reserved. 2– 23

Figure 2– 6 Hypothetical Markov Analysis for a Retail Company © 2007 Thomson/South-Western. All rights reserved. 2– 24

Internal Demand Forecasting Tools • Skill Inventories Ø Files of personnel education, experience, interests, skills, etc. , that allow managers to quickly match job openings with employee backgrounds. • Replacement Charts Ø Listings of current jobholders and persons who are potential replacements if an opening occurs. • Succession Planning Ø The process of identifying, developing, and tracking key individuals for executive positions. © 2007 Thomson/South-Western. All rights reserved. 2– 25

Figure 2– 7 An Executive Replacement Chart © 2007 Thomson/South-Western. All rights reserved. 2– 26

Step Four: Formulating Strategy • Strategy Formulation Ø Moving from simple analysis to devising a coherent course of action. • SWOT analysis Ø A comparison of strengths, weaknesses, opportunities, and threats for strategy formulation purposes. Ø Use the strengths of the organization to capitalize on opportunities, counteract threats, and alleviate internal weaknesses. © 2007 Thomson/South-Western. All rights reserved. 2– 27

Corporate Strategy Growth and Diversification Mergers and Acquisitions Corporate Strategy Strategic Alliances and Joint Ventures © 2007 Thomson/South-Western. All rights reserved. 2– 28

Business Strategy • Value Creation Ø 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. Ø Low-cost strategy: competing on productivity and efficiency v Keeping costs low to offer an attractive price to customers (relative to competitors). Ø Differentiation strategy: compete on added value v Involves providing something unique and distinctive to customers that they value. © 2007 Thomson/South-Western. All rights reserved. 2– 29

Step Five: Strategy Implementation • Taking Action: Reconciling Supply and Demand Ø Balancing demand supply considerations v Forecasting business activities (trends) v Locating applicants Ø Organizational downsizing v Reducing “headcount” Ø Making layoff decisions v Seniority or performance? v Labor agreements © 2007 Thomson/South-Western. All rights reserved. 2– 30

Step Six: Evaluation and Assessment • Evaluation and Assessment Issues Ø Benchmarking: The process of comparing the organization’s processes and practices with those of other companies Ø Human capital metrics v Assess aspects of the workforce Ø HR metrics v Assess the performance of the HR function itself © 2007 Thomson/South-Western. All rights reserved. 2– 31

Measuring Strategic Alignment • Strategy Mapping and the Balanced Scorecard Ø Balanced Scorecard (BSC) v A measurement framework that helps managers translate strategic goals into operational objectives – financial – customer – processes – learning © 2007 Thomson/South-Western. All rights reserved. 2– 32

Figure 2– 9 Balanced Scorecard © 2007 Thomson/South-Western. All rights reserved. 2– 33

Ensuring Strategic Flexibility for the Future • Organizational Capability Ø Capacity of the organization to act and change in pursuit of sustainable competitive advantage. Ø Coordination flexibility v The ability to rapidly reallocate resources to new or changing needs. Ø Resource flexibility v Having human resources who can do many different things in different ways. © 2007 Thomson/South-Western. All rights reserved. 2– 34