2 Weekly Summary and 2 Discussions

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Chapter 2 Strategy and Human Resources Planning

Learning Outcomes

Explain how human resources planning and a firm’s mission, vision, and values are integrally linked to its strategy

Understand how an organization’s external environment influences its strategic planning

Understand why it is important for an organization to do an internal resource analysis

Explain the linkages between competitive strategies and HR

Learning Outcomes

Understand what is required for a firm to successfully implement a strategy and assess its effectiveness

Describe how firms evaluate their strategies and HR implementation

Strategic Planning and Human Resources

Strategic planning

Procedures for making decisions about the organization’s long-term goals and strategies

Human resources planning (HRP)

Process of anticipating and providing for the movement of people into, within, and out of an organization

Strategic Human Resources Management (SHRM)

Pattern of human resources deployments and activities that enable an organization to achieve its strategic goals

Combines strategic planning and HR planning

Strategy formulation - Provides input as to what is possible given the types and numbers of people available

Strategy implementation - Makes resource allocation decisions to implement the devised strategy

Alignment of HRP and Strategic Planning

Two-way process

A firm’s HR strategy follows the business strategy and helps implement it

People, culture, and climate of a company constrain a firm’s ability to achieve strategically

Step One: Mission, Vision, and Values

Mission

Basic purpose of the organization and its scope of operations

Strategic vision

Clarifies the long-term direction of the company and its strategic intent

Core values

Strong and enduring beliefs and principles that the company uses as a foundation for its decisions

Step One: Mission, Vision, and Values

Developing a mission statement

Factors to be considered

Organization’s reason of existence

Need fulfilled by the organization in comparison to the competitors

Knowledge of the need and methods for fulfilling them

Knowledge of market and the customers

Core values of the firm that will be practiced by the employees

Step One: Mission, Vision, and Values

HR’s role

Communicates mission, vision, and values frequently informally and formally

Recruit and hire employees whose values are consistent with the organization

Translate mission, vision, and values into:

Specific on-the-job behaviors

Job descriptions

Basis of employee rewards

Step Two: External Analysis

Environmental scanning: Systematic monitoring of major external forces influencing the organization

Business environment: Factors that a firm cannot directly control but can affect its strategy

Remote environment: Forces that generally affect specific firms

Economy and ecological, technological, social, demographic, and legal and regulatory changes

Step Two: External Analysis

Competitive environment: Consists of a firm’s specific industry

Includes the industry’s customers, rival firms, new entrants, substitutes, and suppliers

HR’s external analysis

Changes in a firm’s remote and competitive environments are monitored and analyzed

Affect hiring plans, recruitment and replacement polices

Figure 2.2 - Five Forces Framework

Step Three: Internal Analysis

Core capabilities: Integrated knowledge sets within an organization

Distinguish the organization from its competitors and deliver value to customers

Value creation: What the firm adds to a product or service by virtue of making it

Value = benefits – costs

Step Three: Internal Analysis

Resources of core capabilities

Processes - Standard routines for how work will be done and results will be accomplished

Systems - Information systems, databases, and proprietary technologies

People - Includes knowledge, skills, and abilities of employees used to create value for customers

Step Three: Internal Analysis

Criteria for sustaining competitive advantage

Resources should be:

Valuable

Rare

Difficult to imitate

Organized

Step Three: Internal Analysis

Trends of employment relationships and HR practices

Strategic knowledge workers

Hold unique skills directly linked to the company’s strategy

Difficult to replace

Core employees

Skills are transferable

Managers invest less in training and development

Step Three: Internal Analysis

Supporting workers

Scope of duties is limited

Employment relationships are transaction-based and focused on rules and procedures

External partners

Hold skills that are unique and specialized

Skills are not related to the company’s core strategy

Figure 2.3 - Mapping Human Capital

Step Three: Internal Analysis

Cultural audits: Audits of the culture and quality of work life in an organization

Firm surveys its employees on how they feel about a number of issues

Identifies groups with different views about the nature of work and how it should be done

Clan culture - Employees are closely knit and exhibit concern for one another

Values their customers, loyalty, and cohesion

Step Three: Internal Analysis

Adhocracy culture - Characterized by risk-taking, innovation, and a spirit of entrepreneurship

Market culture - Encourages competitive, result-oriented behaviors

Hierarchical culture - Characterized by formal structures and procedures

Values efficiency and stability

Value-based hiring: Outlining behaviors that exemplify a firm’s corporate culture and hiring people who are a fit for them

Step Three: Internal Analysis

Forecasting - Key elements

Forecasting demand for labor

Forecasting supply of labor

Balancing supply and demand considerations

Figure 2.4 - Model of HR Forecasting

Step Three: Internal Analysis

Forecasting a firm’s demand for employees

Quantitative approaches

Trend analysis: Forecasts labor demand based on an organizational index such as sales

Modeling or multiple predictive techniques - Combine several factors to predict employment levels

Qualitative approaches

Management forecasts: Opinions of supervisors, department managers, or experts, knowledgeable about the organization’s future employment needs

Delphi technique - Solicits and summarizes judgments of a preselected group of individuals

Step Three: Internal Analysis

Forecasting the supply of employees

Staffing tables: Graphic representations of all organizational jobs

Contains numbers of employees currently occupying those jobs and future employment requirements

Markov analysis: Tracks the pattern of employee movements through various jobs

Quality of fill: Metric designed to measure how well new hires are performing on the job

Step Three: Internal Analysis

Skill inventories: Files of personnel education, experience, interests, and skills

Allow managers to quickly match job openings with employee backgrounds

Management inventories - Data gathered on managers

Replacement charts: Listings of current jobholders and potential replacements if an opening occurs, used for succession planning

Succession planning: Identifying, developing, and tracking key individuals for executive positions

Step Three: Internal Analysis

Human capital readiness: Evaluating the availability of critical talent in a company and comparing it to the firm’s supply

Difference between the quantity and quality of employees required and available represent the gap that needs to be remedied

Provides managers a foundation to establish future strategy and specific requirements for developing talent to implement it

Step Four: Formulating Strategy

SWOT analysis: Comparison of strengths, weaknesses, opportunities, and threats for strategy formulation purposes

Strategy formulation builds on SWOT analysis to devise a coherent course of action

Corporate strategy

Growth and diversification

Mergers and Acquisitions

Strategic alliances and joint ventures

Step Four: Formulating Strategy

Business strategy

Low-cost strategy

Focuses on efficiency, productivity, and minimizing waste

Linked to HR planning through productivity and outsourcing activities

Differentiation strategy

Based on delivering high-quality products, innovative features, speed to market, or superior service

Step Four: Formulating Strategy

Functional Strategy

Vertical fit/alignment

Focuses on the connection between the business objectives and the major initiatives in HR

Horizontal fit/alignment

Aligning HR practices with one another internally to establish a configuration that is mutually reinforcing

Step Five: Strategy Implementation

Organizations strive for balance between demand and supply considerations

Demand is based on forecasted trends in business activities

Supply depends on locating required human resource

To meet human resources demands, organizations have staffing options

Figure 2.9 - The 7-S Model

Step Five: Strategy Implementation

If labor shortage is acute, company develops talent from ground up

Firms restrict hiring, reduce their employees’ work hours, and consider layoffs when forecasts project surplus employees

Organizations have to be prepared to exit and enter new lines of business, restructure, outsource, offshore and downsize

HR managers should ensure no laws are violated while downsizing

Step Six: Evaluation

Benchmarking: Looking at an organization’s practices and performances in an area and comparing them with those of other companies

Gathering competitive information

HR metrics

Human capital metrics assess aspects of the workforce

HR metrics assess the performance of the HR function

Managers can gather informal information on competitors through certain legal means

Figure 2.11 - Building the Metrics Model

Step Six: Evaluation

Measuring a firm’s strategic alignment

Balanced scorecard (BSC): Helps managers translate strategic goals into operational objectives

Related cells - Financial, customer, processes and learning

Measuring horizontal fit

Managers identify key workforce objectives they look to achieve

Identify HR practices used to elicit or reinforce the objectives

Evaluate each HR practice

Step Six: Evaluation

Successful HRP helps increase organizational capability

Organizational capability: Capacity of the organization to act and change in pursuit of sustainable competitive advantage

Flexibility

Coordination flexibility - Ability to rapidly reallocate resources to new or changing needs

Resource flexibility - Result from having adaptable people and resources that can be used different ways