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CHAPTER 2

Human Resource Strategy and Planning

Learning Objectives

Summarize the organization’s strategic planning process

Outline how H R’s strategies are merged with organizational strategies and give two examples

Discuss how to forecast the supply and demand of human resources

Learning Objectives (continued)

List options for handling imbalances in the workforce

Explain the importance of human resource consideration during mergers and acquisitions

Identify how organizations can measure and analyze the effectiveness of H R management practices

Strategy and Strategic Planning

Strategy: A plan an organization follows for how to compete successfully, survive, and grow

Strategic planning: Defining organizational strategy, or direction, and allocating resources toward its achievement

Strategic Planning Process for the Organization

Organizational mission

SWOT analysis

Establish goals and objectives

Formulate organizational strategies

Formulate supporting functional strategies

Implement

Evaluate and reassess

Strategic Planning

Guided by organizational mission, which is the core reason for the existence of the organization and what makes it unique

Planning cycle takes three to five years

Analyzes strengths, weaknesses, opportunities, and threats

Considers internal and external forces

Managers determine objectives and formulate strategies to meet objectives

Strategic H R Management

The appropriate use of H R management practices to gain or keep a competitive advantage

Provides input for strategic planning and develops specific H R initiatives to help achieve organizational goals

Strategic H R Management (continued)

H R can support organizational strategy by:

Hiring good employees

Placing employees in the right jobs

Rewarding employees fairly

Providing proper training

Fostering good employer–employee communication

Focusing employee efforts and rewards toward the company’s bottom line

Figure 2-3: Positioning H R to Be a Strategic Partner

Source: Adapted from Torben Juul Anderson and Dana Minbaeva, “The Role of Human Resource Management in Strategy Making,” Human Resource Management 52 (2013), 809–827.

H R Contributions to Strategy

Provide perspective and expertise by:

Having a seat at the strategic table

Being knowledgeable about business operations

Focusing on the future

Prioritizing business goals

Understanding what to measure

Figure 2-4: H R Department’s Contribution to Organizational Sustainability

Source: Adapted from Cathy L. Z. Dubois and David A. Dubois, “Strategic HRM as Social Design for Environmental Sustainability in Organization,” Human Resource Management 51 (2012), 799–826.

H R Strategies for Global Competitiveness

Multinational corporations need expertise to administer H R activities in a wide range of nations to compete on an international scale

Multinational corporation (M N C): An organization that has facilities and other assets in at least one country other than its home country

Organizations use offshoring, which is relocation of a business process or operation from one country to another, to respond to global labor conditions

Human Resource Planning

Analyzes and identifies the need for and availability of people so that the organization can meet its strategic objectives

Ensures the right number of people with the right capabilities at the right times and in the right places

Figure 2-5: H R Planning Process

Environmental Scanning

Assesses external and internal environmental conditions that affect the organization

External environment

Economic, political, and competitive forces

Internal environment

Quality and quantity of talent

Organizational culture

Talent pipeline and leadership bench strength

Helps identify strengths, weaknesses, opportunities, and threats

H R Factors in the SWOT Analysis

Strengths

Intellectual capital

Loyal, committed employees

Innovative, adaptive employees

High-performance practices

Weaknesses

Lack of skilled employees

Lack of leadership pipeline

Outdated talent management practices

H R Factors in the SWOT Analysis (continued)

Opportunities

Market position

Unexplored markets

Global expansion

Technology advances

Threats

Legal mandates and restrictions

Competitor power

Economic uncertainty

Talent shortage

Succession Planning

Process of identifying a plan for the orderly replacement of key employees

Ensures high-quality talent will be available to carry out business strategies

Factors Affecting External Workforce Availability

Economic and Governmental Factors

Government regulations affect labor supply

Tax legislation at local, state, and federal levels affects H R planning

Geographic and Competitive Evaluations

Net migration

Direct competitors

International competition

Factors Affecting External Workforce Availability (continued)

Changing Workforce Considerations

Aging of the workforce

Growing diversity of workers

Female workers and work–life integration concerns

Availability of contingent workers

Outsourcing possibilities

Factors Affecting Internal Workforce Availability

Current and Future Jobs Audit

Type of existing jobs

Number of individuals performing each job

Reporting relationships of jobs

Vital K S A s (knowledge, skills, abilities)

Jobs needed to implement future organizational strategies

Characteristics of anticipated jobs

Factors Affecting Internal Workforce Availability (continued)

Employee and Organizational Capabilities Inventory

Employee demographics

Individual competencies (K S A s)

Career progression

Performance data

Forecasting

Uses information from the past and present to predict future conditions

Subject to error and to changing conditions

H R Forecasting Methods

Qualitative Methods (Subjective)

Estimates

The rule of thumb

The Delphi technique

Nominal groups

Quantitative Methods (Mathematical)

Statistical regression analysis

Simulation models

Productivity ratios

Staffing ratios

H R Forecasting Planning Periods

Short-range: forecasts for the immediate H R needs of an organization

Intermediate-range: plans projecting one to three years into the future

Long-range: plans extending beyond three years

Forecasting External Supply of Employees

Factors to be considered while ascertaining external supply

Net migration into and out of the area

Individuals entering and leaving the workforce

Individuals graduating from schools and colleges

Changing workforce composition and patterns

Economic forecasts for the next few years

Technological developments and shifts

Actions of competing employers

Government regulations and pressures

Circumstances affecting persons entering and leaving the workforce

Figure 2-8: Estimating Internal Labor Supply for a Given Unit

Managing Talent Supply Imbalances

Managing a Talent Surplus

Reduce employee work hours or compensation

Attrition

Hiring freezes

Voluntary separation programs

Workforce downsizing/reduction in force (R I F)

Managing a Talent Shortage

Increase employee work hours through overtime

Outsource to a third party

Implement alternative work arrangements

Use contingent workers (temporaries, independent contractors)

Reduce employee turnover

Best Practices to Carry Out Layoffs

Identify the work that is core to sustaining a profitable business

Identify the knowledge, skills, and competencies needed to execute the business strategy

Protect the bottom line and the corporate brand

Constantly communicate with employees

Pay attention to the survivors

Severance Benefits and Outplacement Services

Severance benefits: Temporary payments made to laid-off employees to ease the financial burden of unemployment

Outplacement services: give displaced employees support and assistance

Personal career counseling

Résumé-preparation services

Interviewing workshops

Referral assistance

Legal Considerations for Workforce Reductions

Selection Criteria for Laying Off

Title 7 of the Civil Rights Act

Age Discrimination in Employment Act

Americans with Disabilities Act

Other Regulations

Consolidated Omnibus Budget Reconciliation Act (C O B R A)

Older Workers Benefit Protection Act (O W B P A)

Worker Adjustment and Retraining Notification (W A R N) Act

Ways to Manage a Talent Shortage

The following are in a common order of usage:

First — Use overtime

Second — Outsource work

Third — Try alternative work arrangements

Fourth — Bring back recent retirees

Fifth — Increase contingent workers

Sixth — Reduce turnover

Managing a Talent Shortage

Outsourcing: Transferring the management and performance of a business function to an external service provider

Alternate Work Arrangements: Nontraditional schedules that provide flexibility to employees

H R Ac tivities during Mergers and Acquisitions

Before the Deal

Conduct due diligence

Assess risks

Identify possible conflicts

During Integration

Address key H R processes

Retain key talent

Recognize cultural differences

Post-Integration

Optimize workforce

Identify and establish new culture

Due Diligence

Due diligence: Comprehensive assessment of all aspects of the business being acquired

Is complex when merger and acquisition involves companies in different countries

H R professionals review issues related to:

Legal compliance

Labor contract obligations

H R policies used in the firm

Available talent and culture

Changing the Organizational Culture

Culture

Define the desired behaviors

Deploy role models

Provide meaningful incentives

Provide clear and consistent messages

Measuring Effectiveness of Human Resources and Human Capital

Effectiveness: Ability of a program, project, or task to produce a specific desired effect or result that can be measured

Efficiency: Degree to which operations are carried out in an economical manner

H R Metrics and Analytics

H R metrics: Specific measures of H R practices

H R analytics: An evidence-based approach to making H R decisions on the basis of quantitative tools and models

Key H R Metrics

H R Staff and Expenses

H R-to-employee ratio

Total H R staff

H R expenses per F T E

Staffing

Number of positions filled

Time to fill

Cost per hire

Annual turnover rate

Compensation

Annual wage and salary increases

Payroll as a percentage of operating expenses

Benefit costs as a percentage of payroll

Key H R Metrics (continued)

Training

Hours of training per employee

Total costs for training

Percentage of employees participating in tuition reimburse-ment program

Retention and Quality

Average tenure of employees

Percentage of new hires retained for 90 days

Performance quality of employees in first year

Development

Positions filled internally

Percentage of employees with career plan

Characteristics of H R Metrics and Analytics

Accurate data can be collected

Measures are linked to strategic and operational objectives

Calculations can be clearly understood

Measures provide information valued by executives

Results can be compared both externally and internally

Measurement data drive H R M efforts

H R Benchmarking and Balanced Scorecard

Benchmarking: Process of comparing an organization’s business results to industry standards or best practices

Balanced scorecard: A framework organizations use to report on a diverse set of performance measures

Figure 2-13: Balanced Scorecard Framework

Human Capital Effectiveness Measures

Total cost of workforce (T C O W): Takes into account the full cost for all people that contribute work to the organization

Return on investment (R O I): Calculation showing the value of investments in human capital

R O I = C divided by (A + B)

Human Capital Effectiveness Measures (continued)

R O I = C divided by (A+B)

A = Operating costs for a new or enhanced system for the time period

B = One-time cost of acquisition and implementation

C = Value of gains from productivity improvements for the time period

Human Capital Effectiveness Measures (continued 1)

Human capital value added (H C V A): Adjusted operating profitability figure

revenue − (operating expenses [compensation + benefit costs]) divided by (full-time head count)

Human capital return on investment (H C R O I): Amount of profit derived from investment in labor

revenue (operating expenses − [compensation + benefit costs]) divided by (compensation + benefit costs)

Human Capital Effectiveness Measures (continued 2)

Human economic value added (H E V A): Wealth created per employee

(net profit after taxes − cost of capital) divided by (full-time head count)

Human Resources Audit

H R audit: Formal research effort to assess the current state of an organization’s H R practices

Audit areas

Staffing and compensation

Health and safety

Legal compliance

Administrative processes and recordkeeping

Employee retention and benefits

H R Audit Levels

Compliance Audit

Checks recordkeeping on state and federal documentation requirements

Benefit Programs Audit

Reviews regulatory compliance, benefits administration, and reporting

I-9 Audit

Reviews compliance with immigration regulations and the I-9 form requirement

H R Audit Levels (continued)

Specific Program Audit

Reviews specific H R subareas such as compensation, E E O, or training

Full H R Audit

Reviews all of the above plus any and all other H R functions

H U M A N R E S O U R C E

MANAGEMENT

V A L E N T I N E M E G L I C H M A T H I S J A C K S O N

S I X T E E N T H E D I T I O N