HR strategic and consulting roles

Chapter 2: Developing and Implementing Strategic HRM Plans

The Value of Planning

James stumbled into his position as the human resource manager. He had been working for Techno, Inc.

for three years, and when the company grew, James moved from a management position into a human

resource management position. Techno, Inc. is a technology and software consulting company for the

music industry.

James didn’t have a good handle on how to effectively run a human resources (HR) department, so for

much of the time he tried to figure it out as he went. When Techno started seeing rapid growth, he hired

thirty people within a one-month period to meet the demand. Proud of his ability to accomplish his task of

meeting the business’s current needs, James was rather pleased with himself. He had spent numerous

hours mulling over recruitment strategies, putting together excellent compensation plans, and then

eventually sifting through résumés as a small part of the hiring process. Now the organization had the

right number of people needed to carry out its projects.

Fast forward five months, however, and it turned out the rapid growth was only temporary. James met

with the executives of the business who told him the contracts they had acquired were finished, and there

wasn’t enough new work coming in to make payroll next month if they didn’t let some people go. James

felt frustrated because he had gone through so much effort to hire people, and now they would be laid off.

Never mind the costs of hiring and training his department had taken on to make this happen. As James

sat with the executives to determine who should be laid off, he felt sad for the people who had given up

other jobs just five months before, only to be laid off.

After the meeting, James reflected on this situation and realized that if he had spoken with the executives

of the company sooner, they would have shared information on the duration of the contracts, and he likely

would have hired people differently, perhaps on a contract basis rather than on a full-time basis. He also

considered the fact that the organization could have hired an outsourcing company to recruit workers for

him. As Jason mulled this over, he realized that he needed a strategic plan to make sure his department

was meeting the needs of the organization. He vowed to work with the company executives to find out

more about the company’s strategic plan and then develop a human resource management (HRM)

strategic plan to make sure Techno, Inc. has the right number of workers with the right skills, at the right

time in the future.

2.1 Strategic Planning LEARNING OBJECTIVES

1. Explain the differences been HRM and personnel management.

2. Be able to define the steps in HRM strategic planning.

In the past, human resource management (HRM) was called the personnel department. In the past, the

personnel department hired people and dealt with the hiring paperwork and processes. It is believed the

first human resource department was created in 1901 by the National Cash Register Company (NCR). The

company faced a major strike but eventually defeated the union after a lockout. (We address unions

in Chapter 11 "Working with Labor Unions".) After this difficult battle, the company president decided to

improve worker relations by organizing a personnel department to handle grievances, discharges, safety

concerns, and other employee issues. The department also kept track of new legislation surrounding laws

impacting the organization. Many other companies were coming to the same realization that a

department was necessary to create employee satisfaction, which resulted in more productivity. In 1913,

Henry Ford saw employee turnover at 380 percent and tried to ease the turnover by increasing wages

from $2.50 to $5.00, even though $2.50 was fair during this time period. [1] Of course, this approach

didn’t work for long, and these large companies began to understand they had to do more than hire and

fire if they were going to meet customer demand.

More recently, however, the personnel department has divided into human resource management and

human resource development, as these functions have evolved over the century. HRM is not only crucial

to an organization’s success, but it should be part of the overall company’s strategic plan, because so many

businesses today depend on people to earn profits. Strategic planning plays an important role in how

productive the organization is.

Table 2.1 Examples of Differences between Personnel Management and HRM

Personnel Management Focus HRM Focus

Administering of policies Helping to achieve strategic goals through people

Personnel Management Focus HRM Focus

Stand-alone programs, such as training

HRM training programs that are integrated with company’s

mission and values

Personnel department responsible for

managing people

Line managers share joint responsibility in all areas of people

hiring and management

Creates a cost within an organization Contributes to the profit objectives of the organization

Most people agree that the following duties normally fall under HRM. Each of these aspects has its own

part within the overall strategic plan of the organization:

1. Staffing. Staffing includes the development of a strategic plan to determine how many people you

might need to hire. Based on the strategic plan, HRM then performs the hiring process to recruit

and select the right people for the right jobs. We discuss staffing in greater detail in Chapter 4

"Recruitment", Chapter 5 "Selection", and Chapter 6 "Compensation and Benefits".

2. Basic workplace policies. Development of policies to help reach the strategic plan’s goals is the job

of HRM. After the policies have been developed, communication of these policies on safety,

security, scheduling, vacation times, and flextime schedules should be developed by the HR

department. Of course, the HR managers work closely with supervisors in organizations to

develop these policies. Workplace policies will be addressed throughout the book.

3. Compensation and benefits. In addition to paychecks, 401(k) plans, health benefits, and other

perks are usually the responsibility of an HR manager. Compensation and benefits are discussed

in Chapter 6 "Compensation and Benefits" and Chapter 7 "Retention and Motivation".

4. Retention. Assessment of employees and strategizing on how to retain the best employees is a

task that HR managers oversee, but other managers in the organization will also provide

input. Chapter 9 "Managing Employee Performance" and Chapter 10 "Employee

Assessment" cover different types of retention strategies, from training to assessment.

5. Training and development. Helping new employees develop skills needed for their jobs and

helping current employees grow their skills are also tasks for which the HRM department is

responsible. Determination of training needs and development and implementation of training

programs are important tasks in any organization. Succession planning includes handling the

departure of managers and making current employees ready to take on managerial roles when a

manager does leave.

6. Regulatory issues and worker safety. Keeping up to date on new regulations relating to

employment, health care, and other issues is generally a responsibility that falls on the HRM

department. While various laws are discussed throughout the book, unions and safety and health

laws in the workplace are covered in Chapter 11 "Working with Labor Unions" and Chapter 12

"Safety and Health at Work".

In smaller organizations, the manager or owner is likely performing the HRM functions. [2] They hire

people, train them, and determine how much they should be paid. Larger companies ultimately perform

the same tasks, but because they have more employees, they can afford to employ specialists, or human

resource managers, to handle these areas of the business. As a result, it is highly likely that you, as a

manager or entrepreneur, will be performing HRM tasks, hence the value in understanding the strategic

components of HRM.

HRM vs. Personnel Management

Human resource strategy is an elaborate and systematic plan of action developed by a human resource

department. This definition tells us that an HR strategy includes detailed pathways to implement HRM

strategic plans and HR plans. Think of theHRM strategic plan as the major objectives the organization

wants to achieve, and the HR plan as the specific activities carried out to achieve the strategic plan. In

other words, the strategic plan may include long-term goals, while the HR plan may include short-term

objectives that are tied to the overall strategic plan. As mentioned at the beginning of this chapter, human

resource departments in the past were called personnel departments. This term implies that the

department provided “support” for the rest of the organization. Companies now understand that the

human side of the business is the most important asset in any business (especially in this global

economy), and therefore HR has much more importance than it did twenty years ago. While personnel

management mostly involved activities surrounding the hiring process and legal compliance, human

resources involves much more, including strategic planning, which is the focus of this chapter. The Ulrich

HR model, a common way to look at HRM strategic planning, provides an overall view of the role of HRM

in the organization. His model is said to have started the movement that changed the view of HR; no

longer merely a functional area, HR became more of a partnership within the organization. While his

model has changed over the years, the current model looks at alignment of HR activities with the overall

global business strategy to form a strategic partnership. [3] His newly revised model looks at five main

areas of HR:

1. Strategic partner. Partnership with the entire organization to ensure alignment of the HR

function with the needs of the organization.

2. Change agent. The skill to anticipate and respond to change within the HR function, but as a

company as a whole.

3. Administrative expert and functional expert. The ability to understand and implement policies,

procedures, and processes that relate to the HR strategic plan.

4. Human capital developer. Means to develop talent that is projected to be needed in the future.

5. Employee advocate. Works for employees currently within the organization.

According to Ulrich, [4] implementation of this model must happen with an understanding of the overall

company objectives, problems, challenges, and opportunities. For example, the HR professional must

understand the dynamic nature of the HRM environment, such as changes in labor markets, company

culture and values, customers, shareholders, and the economy. Once this occurs, HR can determine how

best to meet the needs of the organization within these five main areas.

HRM AS A STRATEGIC COMPONENT OF THE BUSINESS

Keeping the Ulrich model in mind, consider these four aspects when creating a good HRM strategic plan:

1. Make it applicable. Often people spend an inordinate amount of time developing plans, but the

plans sit in a file somewhere and are never actually used. A good strategic plan should be the

guiding principles for the HRM function. It should be reviewed and changed as aspects of the

business change. Involvement of all members in the HR department (if it’s a larger department)

and communication among everyone within the department will make the plan better.

2. Be a strategic partner. Alignment of corporate values in the HRM strategic plan should be a major

objective of the plan. In addition, the HRM strategic plan should be aligned with the mission and

objectives of the organization as a whole. For example, if the mission of the organization is to

Figure 2.1

To be successful in writing an HRM strategic plan, one must understand the dynamic

external environment.

promote social responsibility, then the HRM strategic plan should address this in the hiring

criteria.

3. Involve people. An HRM strategic plan cannot be written alone. The plan should involve everyone

in the organization. For example, as the plan develops, the HR manager should meet with various

people in departments and find out what skills the best employees have. Then the HR manager

can make sure the people recruited and interviewed have similar qualities as the best people

already doing the job. In addition, the HR manager will likely want to meet with the financial

department and executives who do the budgeting, so they can determine human resource needs

and recruit the right number of people at the right times. In addition, once the HR department

determines what is needed, communicating a plan can gain positive feedback that ensures the

plan is aligned with the business objectives.

4. Understand how technology can be used. Organizations oftentimes do not have the money or the

inclination to research software and find budget-friendly options for implementation. People are

sometimes nervous about new technology. However, the best organizations are those that

embrace technology and find the right technology uses for their businesses. There are thousands

of HRM software options that can make the HRM processes faster, easier, and more effective.

Good strategic plans address this aspect.

HR managers know the business and therefore know the needs of the business and can develop a plan to

meet those needs. They also stay on top of current events, so they know what is happening globally that

could affect their strategic plan. If they find out, for example, that an economic downturn is looming, they

will adjust their strategic plan. In other words, the strategic plan needs to be a living document, one that

changes as the business and the world changes.

The Steps to Strategic Plan Creation

As we addressed in Section 2.1.2 "The Steps to Strategic Plan Creation", HRM strategic plans must have

several elements to be successful. There should be a distinction made here: the HRM strategic plan is

different from the HR plan. Think of the HRM strategic plan as the major objectives the organization

wants to achieve, while the HR plan consists of the detailed plans to ensure the strategic plan is achieved.

Oftentimes the strategic plan is viewed as just another report that must be written. Rather than jumping

in and writing it without much thought, it is best to give the plan careful consideration.

The goal of Section 2 "Conduct a Strategic Analysis"is to provide you with some basic elements to consider

and research before writing any HRM plans.

Conduct a Strategic Analysis

A strategic analysis looks at three aspects of the individual HRM department:

1. Understanding of the company mission and values. It is impossible to plan for HRM if one does

not know the values and missions of the organization. As we have already addressed in this

chapter, it is imperative for the HR manager to align department objectives with organizational

objectives. It is worthwhile to sit down with company executives, management, and supervisors to

make sure you have a good understanding of the company mission and values.

Another important aspect is the understanding of the organizational life cycle. You may have learned

about the life cycle in marketing or other business classes, and this applies to HRM, too.

An organizational life cycle refers to the introduction, growth, maturity, and decline of the organization,

which can vary over time. For example, when the organization first begins, it is in the introduction phase,

and a different staffing, compensation, training, and labor/employee relations strategy may be necessary

to align HRM with the organization’s goals. This might be opposed to an organization that is struggling to

stay in business and is in the decline phase. That same organization, however, can create a new product,

for example, which might again put the organization in the growth phase. Table 2.2 "Lifecycle Stages and

HRM Strategy" explains some of the strategies that may be different depending on the organizational life

cycle.

2. Understanding of the HRM department mission and values. HRM departments must develop

their own departmental mission and values. These guiding principles for the department will

change as the company’s overall mission and values change. Often the mission statement is a list

of what the department does, which is less of a strategic approach. Brainstorming about HR goals,

values, and priorities is a good way to start. The mission statement should express how an

organization’s human resources help that organization meet the business goals. A poor mission

statement might read as follows: “The human resource department at Techno, Inc. provides

resources to hiring managers and develops compensation plans and other services to assist the

employees of our company.”

A strategic statement that expresses how human resources help the organization might read as follows:

“HR’s responsibility is to ensure that our human resources are more talented and motivated than our

competitors’, giving us a competitive advantage. This will be achieved by monitoring our turnover rates,

compensation, and company sales data and comparing that data to our competitors.” [5] When the mission

statement is written in this way, it is easier to take a strategic approach with the HR planning process.

3. Understanding of the challenges facing the department. HRM managers cannot deal with change

quickly if they are not able to predict changes. As a result, the HRM manager should know what

upcoming challenges may be faced to make plans to deal with those challenges better when they

come along. This makes the strategic plan and HRM plan much more usable.

Table 2.2 Lifecycle Stages and HRM Strategy

Life Cycle

Stage Staffing Compensation

Training and

Development

Labor / Employee

Relations

Introduction

Attract best technical

and professional talent.

Meet or exceed labor

market rates to attract

needed talent.

Define future skill

requirements and

begin establishing

career ladders.

Set basic employee-

relations philosophy

of organization.

Growth

Recruit adequate

numbers and mix of

qualifying workers. Plan

management succession.

Manage rapid internal

labor market

movements.

Meet external market

but consider internal

equity effects.

Establish formal

compensation

structures.

Mold effective

management team

through

management

development and

organizational

development.

Maintain labor

peace, employee

motivation, and

morale.

Maturity

Encourage sufficient

turnover to minimize

layoffs and provide new

openings. Encourage

mobility as

reorganizations shift

jobs around.

Control

compensation costs.

Maintain flexibility

and skills of an

aging workforce.

Control labor costs

and maintain labor

peace. Improve

productivity.

Life Cycle

Stage Staffing Compensation

Training and

Development

Labor / Employee

Relations

Decline

Plan and implement

workforce reductions

and reallocations;

downsizing and

outplacement may occur

during this stage.

Implement tighter

cost control.

Implement

retraining and career

consulting services.

Improve productivity

and achieve

flexibility in work

rules. Negotiate job

security and

employment-

adjustment policies

Source: Seattle University Presentation, accessed July 11, 2011, http://fac-

staff.seattleu.edu/gprussia/web/mgt383/HR%20Planning1.ppt.

Identify Strategic HR Issues

In this step, the HRM professionals will analyze the challenges addressed in the first step. For example,

the department may see that it is not strategically aligned with the company’s mission and values and opt

to make changes to its departmental mission and values as a result of this information.

Many organizations and departments will use a strategic planning tool that identifies strengths,

weaknesses, opportunities, and threats (SWOT analysis) to determine some of the issues they are facing.

Once this analysis is performed for the business, HR can align itself with the needs of the business by

understanding the business strategy. See Table 2.3 "Sample HR Department SWOT Analysis for Techno,

Inc." for an example of how a company’s SWOT analysis can be used to develop a SWOT analysis for the

HR department.

Once the alignment of the company SWOT is completed, HR can develop its own SWOT analysis to

determine the gaps between HR’s strategic plan and the company’s strategic plan. For example, if the HR

manager finds that a department’s strength is its numerous training programs, this is something the

organization should continue doing. If a weakness is the organization’s lack of consistent compensation

throughout all job titles, then the opportunity to review and revise the compensation policies presents

itself. In other words, the company’s SWOT analysis provides a basis to address some of the issues in the

organization, but it can be whittled down to also address issues within the department.

Table 2.3 Sample HR Department SWOT Analysis for Techno, Inc.

Strengths

Hiring talented people

Company growth

Technology implementation for business processes

Excellent relationship between HRM and management/executives

Weaknesses

No strategic plan for HRM

No planning for up/down cycles

No formal training processes

Lacking of software needed to manage business processes, including go-to-market staffing

strategies

Opportunities

Development of HRM staffing plan to meet industry growth

HRM software purchase to manage training, staffing, assessment needs for an unpredictable

business cycle

Continue development of HRM and executive relationship by attendance and participation in

key meetings and decision-making processes

Develop training programs and outside development opportunities to continue development

of in-house marketing expertise

Threats

Economy

Changing technology

Prioritize Issues and Actions

Based on the data gathered in the last step, the HRM manager should prioritize the goals and then put

action plans together to deal with these challenges. For example, if an organization identifies that they

lack a comprehensive training program, plans should be developed that address this need. (Training

needs are discussed in Chapter 8 "Training and Development" .) An important aspect of this step is the

involvement of the management and executives in the organization. Once you have a list of issues you will

address, discuss them with the management and executives, as they may see other issues or other

priorities differently than you. Remember, to be effective, HRM must work with the organization and

assist the organization in meeting goals. This should be considered in every aspect of HRM planning.

Draw Up an HRM Plan

Once the HRM manager has met with executives and management, and priorities have been agreed upon,

the plans are ready to be developed. Detailed development of these plans will be discussed in Section 2.2

"Writing the HRM Plan". Sometimes companies have great strategic plans, but when the development of

the details occurs, it can be difficult to align the strategic plan with the more detailed plans. An HRM

manager should always refer to the overall strategic plan before developing the HRM strategic plan and

HR plans.

Even if a company does not have an HR department, HRM strategic plans and HR plans should still be

developed by management. By developing and monitoring these plans, the organization can ensure the

right processes are implemented to meet the ever-changing needs of the organization. The strategic plan

looks at the organization as a whole, the HRM strategic plan looks at the department as a whole, and the

HR plan addresses specific issues in the human resource department.

[1] Michael Losey, “HR Comes of Age,” HR Magazine, March 15, 1998, accessed July 11,

2011,http://findarticles.com/p/articles/mi_m3495/is_n3_v43/ai_20514399.

[2] Jan de Kok and Lorraine M. Uhlaner, “Organization Context and Human Resource Management in the Small

Firm” (Tinbergen Institute Discussion Papers 01-038/3, Tinbergen Institute, 2001), accessed August 13,

2011, http://ideas.repec.org/s/dgr/uvatin.html.

[3] David Ulrich and Wayne Brockbank, The HR Value Proposition (Boston: Harvard Business Press, 2005), 9–14.

[4] David Ulrich, “Evaluating the Ulrich Model,” Acerta, 2011, accessed July 11,

2011,http://www.goingforhr.be/extras/web-specials/hr-according-to-dave-ulrich#ppt_2135261.

[5] Gary Kaufman, “How to Fix HR,” Harvard Business Review, September 2006, accessed July 11,

2011, http://hbr.org/2006/09/how-to-fix-hr/ar/1.

2.2 Writing the HRM Plan LEARNING OBJECTIVE

1. Describe the steps in the development of an HRM plan.

As addressed in Section 2.1 "Strategic Planning", the writing of an HRM strategic plan should be based on

the strategic plans of the organization and of the department. Once the strategic plan is written, the HR

professional can begin work on the HR plan. This is different from the strategic plan in that it is more

detailed and more focused on the short term. The six parts described here are addressed in more detail

in Chapter 4 "Recruitment", Chapter 5 "Selection", Chapter 6 "Compensation and Benefits", Chapter 7

"Retention and Motivation", Chapter 8 "Training and Development", Chapter 9 "Managing Employee

Performance", and Chapter 10 "Employee Assessment".

The six parts of the HRM plan include the following:

Figure 2.3

As you can see from this figure, the company strategic plan ties into the HRM strategic plan,

and from the HRM strategic plan, the HR plan can be developed.

1. Determine human resource needs. This part is heavily involved with the strategic plan. What

growth or decline is expected in the organization? How will this impact your workforce? What is

the economic situation? What are your forecasted sales for next year?

2. Determine recruiting strategy. Once you have a plan in place, it’s necessary to write down a

strategy addressing how you will recruit the right people at the right time.

3. Select employees. The selection process consists of the interviewing and hiring process.

4. Develop training. Based on the strategic plan, what training needs are arising? Is there new

software that everyone must learn? Are there problems in handling conflict? Whatever the

training topics are, the HR manager should address plans to offer training in the HRM plan.

5. Determine compensation. In this aspect of the HRM plan, the manager must determine pay scales

and other compensation such as health care, bonuses, and other perks.

6. Appraise performance. Sets of standards need to be developed so you know how to rate the

performance of your employees and continue with their development.

Each chapter of this text addresses one area of the HR plan, but the next sections provide some basic

knowledge of planning for each area.

Determine Human Resource Needs

The first part of an HR plan will consist of determining how many people are needed. This step involves

looking at company operations over the last year and asking a lot of questions:

1. Were enough people hired?

2. Did you have to scramble to hire people at the last minute?

3. What are the skills your current employees possess?

4. What skills do your employees need to gain to keep up with technology?

5. Who is retiring soon? Do you have someone to replace them?

6. What are the sales forecasts? How might this affect your hiring?

These are the questions to answer in this first step of the HR plan process. As you can imagine, this cannot

be done alone. Involvement of other departments, managers, and executives should take place to obtain

an accurate estimate of staffing needs for now and in the future. We discuss staffing in greater detail

in Chapter 4 "Recruitment".

Many HR managers will prepare an inventory of all current employees, which includes their educational

level and abilities. This gives the HR manager the big picture on what current employees can do. It can

serve as a tool to develop employees’ skills and abilities, if you know where they are currently in their

development. For example, by taking an inventory, you may find out that Richard is going to retire next

year, but no one in his department has been identified or trained to take over his role. Keeping the

inventory helps you know where gaps might exist and allows you to plan for these gaps. This topic is

addressed further in Chapter 4 "Recruitment".

HR managers will also look closely at all job components and will analyze each job. By doing this analysis,

they can get a better picture of what kinds of skills are needed to perform a job successfully. Once the HR

manager has performed the needs assessment and knows exactly how many people, and in what positions

and time frame they need to be hired, he or she can get to work on recruiting, which is also called

astaffing plan. This is addressed further in Chapter 4 "Recruitment".

Recruit

Recruitment is an important job of the HR manager. More detail is provided in Chapter 4 "Recruitment".

Knowing how many people to hire, what skills they should possess, and hiring them when the time is right

are major challenges in the area of recruiting. Hiring individuals who have not only the skills to do the job

but also the attitude, personality, and fit can be the biggest challenge in recruiting. Depending on the type

of job you are hiring for, you might place traditional advertisements on the web or use social networking

sites as an avenue. Some companies offer bonuses to employees who refer friends. No matter where you

decide to recruit, it is important to keep in mind that the recruiting process should be fair and equitable

and diversity should be considered. We discuss diversity in greater detail in Chapter 3 "Diversity and

Multiculturalism".

Depending on availability and time, some companies may choose to outsource their recruiting processes.

For some types of high-level positions, a head hunter will be used to recruit people nationally and

internationally. A head hunter is a person who specializes in matching jobs with people, and they usually

work only with high-level positions. Another option is to use an agency that specializes in hiring people

for a variety of positions, including temporary and permanent positions. Some companies decide to hire

temporary employees because they anticipate only a short-term need, and it can be less expensive to hire

someone for only a specified period of time.

No matter how it is done, recruitment is the process of obtaining résumés of people interested in the job.

In our next step, we review those résumés, interview, and select the best person for the job.

Select

After you have reviewed résumés for a position, now is the time to work toward selecting the right person

for the job. Although we discuss selection in great detail in Chapter 6 "Compensation and Benefits", it is

worth a discussion here as well. Numerous studies have been done, and while they have various results,

the majority of studies say it costs an average of $45,000 to hire a new manager. [1] While this may seem

exaggerated, consider the following items that contribute to the cost:

1. Time to review résumés

2. Time to interview candidates

3. Interview expenses for candidates

4. Possible travel expenses for new hire or recruiter

5. Possible relocation expenses for new hire

6. Additional bookkeeping, payroll, 401(k), and so forth

7. Additional record keeping for government agencies

8. Increased unemployment insurance costs

9. Costs related to lack of productivity while new employee gets up to speed

Because it is so expensive to hire, it is important to do it right. First, résumés are reviewed and people who

closely match the right skills are selected for interviews. Many organizations perform phone interviews

first so they can further narrow the field. The HR manager is generally responsible for setting up the

interviews and determining the interview schedule for a particular candidate. Usually, the more senior the

position is, the longer the interview process takes, even up to eight weeks. [2] After the interviews are

conducted, there may be reference checks, background checks, or testing that will need to be performed

before an offer is made to the new employee. HR managers are generally responsible for this aspect. Once

the applicant has met all criteria, the HR manager will offer the selected person the position. At this point,

salary, benefits, and vacation time may be negotiated. Compensation is the next step in HR management.

Determine Compensation

What you decide to pay people is much more difficult than it seems. This issue is covered in greater detail

in Chapter 6 "Compensation and Benefits". Pay systems must be developed that motivate employees and

embody fairness to everyone working at the organization. However, organizations cannot offer every

benefit and perk because budgets always have constraints. Even governmental agencies need to be

concerned with compensation as part of their HR plan. For example, in 2011, Illinois State University gave

salary increases of 3 percent to all faculty, despite state budget cuts in other areas. They reasoned that the

pay increase was needed because of the competitive nature of hiring and retaining faculty and staff. The

university president said, “Our employees have had a very good year and hopefully this is a good shot in

the arm that will keep our morale high.” [3]

The process in determining the right pay for the right job can have many variables, in addition to keeping

morale high. First, as we have already discussed, the organization life cycle can determine the pay strategy

for the organization. The supply and demand of those skills in the market, economy, region, or area in

which the business is located is a determining factor in compensation strategy. For example, a company

operating in Seattle may pay higher for the same job than their division in Missoula, Montana, because

the cost of living is higher in Seattle. The HR manager is always researching to ensure the pay is fair and

at market value. In Chapter 6 "Compensation and Benefits", we get into greater detail about the variety of

pay systems, perks, and bonuses that can be offered. For many organizations, training is a perk.

Employees can develop their skills while getting paid for it. Training is the next step in the HR planning

process.

Develop Training

Once we have planned our staffing, recruited people, selected employees, and then compensated them, we

want to make sure our new employees are successful. Training is covered in more detail in Chapter 8. One

way we can ensure success is by training our employees in three main areas:

1. Company culture. A company culture is the organization’s way of doing things. Every company

does things a bit differently, and by understanding the corporate culture, the employee will be set

up for success. Usually this type of training is performed at an orientation, when an employee is

first hired. Topics might include how to request time off, dress codes, and processes.

2. Skills needed for the job. If you work for a retail store, your employees need to know how to use

the register. If you have sales staff, they need to have product knowledge to do the job. If your

company uses particular software, training is needed in this area.

3. Human relations skills. These are non-job-specific skills your employees need not only to do their

jobs but also to make them all-around successful employees. Skills needed include

communication skills and interviewing potential employees.

Perform a Performance Appraisal

The last thing an HR manager should plan is the performance appraisal. While we discuss performance

appraisals in greater detail in Chapter 10 "Employee Assessment", it is definitely worth a mention here,

since it is part of the strategic plan. Aperformance appraisal is a method by which job performance is

measured. The performance appraisal can be called many different things, such as the following:

1. Employee appraisal

2. Performance review

3. 360 review

4. Career development review

No matter what the name, these appraisals can be very beneficial in motivating and rewarding employees.

The performance evaluation includes metrics on which the employee is measured. These metrics should

be based on the job description, both of which the HR manager develops. Various types of rating systems

can be used, and it’s usually up to the HR manager to develop these as well as employee evaluation forms.

The HR manager also usually ensures that every manager in the organization is trained on how to fill out

the evaluation forms, but more importantly, how to discuss job performance with the employee. Then the

HR manager tracks the due dates of performance appraisals and sends out e-mails to those managers

letting them know it is almost time to write an evaluation.

[1] Susan Herman, Hiring Right: A Practical Guide (Thousand Oaks, CA: Sage, 1993), xv.

[2] John Crant, “How Long Does an Interview Process Take?” Jobsinminneapolis.com, December 2, 2009, accessed

October 28, 2010,http://www.jobsinminneapolis.com/articles/title/How-Long-Does-an-Interview-Process-

Take/3500/422.

[3] Stephanie Pawlowski, “Illinois State University to Get Salary Bump,” WJBC Radio, July 11, 2011, accessed July

11, 2011, http://wjbc.com/illinois-state-university-faculty-to-get-salary-bump.

2.3 Tips in HRM Planning LEARNING OBJECTIVE

1. Explain the aspects needed to create a usable and successful HRM plan.

As you have learned from this chapter, human resource strategic planning involves understanding your

company’s strategic plan and HR’s role in the organization. The planning aspect meets the needs of the

strategic plan by knowing how many people should be hired, how many people are needed, and what kind

of training they need to meet the goals of the organization. This section gives some tips on successful HR

strategic planning.

FORTUNE 500 FOCUS

Like many Fortune 500 companies throughout the world, IBM in India finds that picking the best

prospects for job postings isn’t always easy. By using advanced analytics, however, it aims to connect the

strategic plan, staffing needs, and the hiring process using a simple tool. The project was originally

developed to assign people to projects internally at IBM, but IBM found this tool able to not only extract

essential details like the number of years of experience but also make qualitative judgments, such as how

good the person actually is for the job. [1] This makes the software unique, as most résumé-scanning

software programs can only search for specific keywords and are not able to assess the job fit or tie the

criteria directly to the overall strategic plan. The project uses IBM India’s spoken web technology, in

which the prospective employee answers a few questions, creating the equivalent of voice résumé. Then

using these voice résumés, the hiring manager can easily search for those prospects who meet the needs of

the organization and the objectives of the strategic plan.

Some of the challenges noted with this software include the recognition of language and dialect issues.

However, the IBM human resources solution is still one of the most sophisticated of such tools to be

developed. “Services is very people-intensive. Today, there is talk of a war for talent, but attracting the

right kind of people is a challenge, yet unemployment is very high. Our solution applies sophisticated

analytics to workforce management,” says Manish Gupta, director at IBM Research-India. [2]

It is likely that this is only the beginning of the types of technology that allow HR professionals to tie their

HR plans directly to a strategic plan with the touch of a few buttons.

Link HRM Strategic Plan to Company Plan

Understanding the nature of the business is key to being successful in creating a strategic plan for HRM.

Because every business is different, the needs of the business may change, depending on the economy, the

season, and societal changes in our country. HR managers need to understand all these aspects of the

business to better predict how many people are needed, what types of training are needed, and how to

compensate people, for example. The strategic plan that the HR manager writes should address these

issues. To address these issues, the HR manager should develop the departmental goals and HR plans

based on the overall goals of the organization. In other words, HR should not operate alone but in tandem

with the other parts of the organization. The HRM plan should reflect this.

Monitor the Plan Constantly

Oftentimes a great strategic plan is written, taking lots of time, but isn’t actually put into practice for a

variety of reasons, such as the following:

1. The plan wasn’t developed so that it could be useful.

2. The plan wasn’t communicated with management and others in the HRM department.

3. The plan did not meet the budget guidelines of the organization.

4. The plan did not match the strategic outcomes of the organization.

5. There was lack of knowledge on how to actually implement it.

There is no point in developing a plan that isn’t going to be used. Developing the plan and then making

changes as necessary are important to making it a valuable asset for the organization. A strategic plan

should be a living document, in that it changes as organizational or external factors change. People can get

too attached to a specific plan or way of doing things and then find it hard to change. The plan needs to

change constantly or it won’t be of value.

Measure It

A good strategic plan and HR plan should discuss the way “success” will be measured. For example, rather

than writing, “Meet the hiring needs of the organization,” be more specific: “Based on sales forecasts from

our sales department, hire ten people this quarter with the skills to meet our ten job openings.” This is a

goal that is specific enough to be measured. These types of quantitative data also make it easier to show

the relationship between HR and the organization, and better yet, to show how HR adds value to the

bottom line. Likewise, if a company has a strategic objective to be a safe workplace, you might include a

goal to “develop training to meet the needs of the organization.” While this is a great goal, how will this be

measured? How will you know if you did what you were supposed to do? It might be difficult to measure

this with such a general statement. On the other hand, a goal to “develop a safety training workshop and

have all employees complete it by the end of the year” is specific and can be measured at the end to

determine success.

Sometimes Change Is Necessary

It can be difficult to base an entire plan on forecasted numbers. As a result, an HRM department that is

willing to change quickly to meet the needs of the organization proves its worthiness. Consider a sales

forecast that called for fifteen new hires, but you find out months later the organization is having a hard

time making payroll. Upon digging deeper, you find the sales forecasts were overexaggerated, and now

you have fifteen people you don’t really need. By monitoring the changes constantly (usually done by

asking lots of questions to other departments), you can be sure you are able to change your strategic plan

as they come.

Be Aware of Legislative Changes

One of the major challenges in HRM, as we discuss in Chapter 1 "The Role of Human Resources", is

having an awareness of what is happening from a legal perspective. Because most budgets are based on

certain current laws, knowing when the law changes and how it will affect department budgets and

planning (such as compensation planning) will create a more solid strategic plan. For example, if the

minimum wage goes up in your state and you have minimum wage workers, reworking the budget and

communicating this change to your accounting team is imperative in providing value to the organization.

We will discuss various legislation throughout this book.

[1] Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst, July 11, 2011, accessed July 11,

2011, http://www.istockanalyst.com/business/news/5283887/ibm-automates-parsing-of-resumes.

[2] Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst, July 11, 2011, accessed July 11,

2011, http://www.istockanalyst.com/business/news/5283887/ibm-automates-parsing-of-resumes.

2.4 Case and Summary CHAPTER SUMMARY

• Human resource management was once called the personnel department. In the past, hiring

people and working with hiring paperwork was this department’s job. Today, the HRM

department has a much broader role, and as a result, HR managers must align their strategies

with the company’s strategies.

• Functions that fall under HRM today include staffing, creation of workplace policies,

compensation and benefits, retention, training and development, and working with regulatory

issues and worker protection.

• Human resource strategy is a set of elaborate and systematic plans of action. The company

objectives and goals should be aligned with the objectives and goals of the individual

departments.

• The steps to creating an HRM strategic plan include conducting a strategic analysis. This entails

having an understanding of the values and mission of the organization, so you can align your

departmental strategy in the same way.

• The second step is to identify any HR issues that might impact the business.

• The third step, based on the information from the first and second steps, is to prioritize issues and

take action. Finally, the HRM professional will draw up the HRM plan.

• The HRM plan consists of six steps. The first is to determine the needs of the organization based

on sales forecasts, for example. Then the HR professional will recruit and select the right person

for the job. HRM develops training and development to help better the skills of existing

employees and new employees, too. The HR manager will then determine compensation and

appraise performance of employees. Each of these parts of the HRM plan is discussed in its own

separate chapter in greater detail.

• As things in the organization change, the strategic plan should also change.

• To make the most from a strategic plan, it’s important to write the goals in a way that makes them

measurable.

CHAPTER CASE

We Merged…Now What?

Earlier this month, your company, a running equipment designer and manufacturer called Runners

Paradise, merged with a smaller clothing design company called ActiveLeak. Your company initiated the

buyout because of the excellent design team at ActiveLeak and their brand recognition, specifically for

their MP3-integrated running shorts. Runners Paradise has thirty-five employees and ActiveLeak has ten

employees. At ActiveLeak, the owner, who often was too busy doing other tasks, handled the HRM roles.

As a result, ActiveLeak has no strategic plan, and you are wondering if you should develop a strategic

plan, given this change. Here are the things you have accomplished so far:

• Reviewed compensation and adjusted salaries for the sake of fairness. Communicated this to all

affected employees.

• Developed job requirements for current and new jobs.

• Had each old and new employee fill out a skills inventory Excel document, which has been

merged into a database.

From this point, you are not sure what to do to fully integrate the new organization.

1. Why should you develop an HRM strategic plan?

2. Which components of your HR plan will you have to change?

3. What additional information would you need to create an action plan for these changes?