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Strategic Human Resource Management Strategic Human Resource Management Chapter# 3Chapter# 3

Management Planning FundamentalsManagement Planning Fundamentals

The Planning ProcessThe Planning Process Set objectivesSet objectives Make forecastsMake forecasts Determine your alternativesDetermine your alternatives Evaluate alternativesEvaluate alternatives Implement and evaluate planImplement and evaluate plan

Business PlanBusiness PlanComprehensive view of the firms situation today and Comprehensive view of the firms situation today and company wide and departmental plan for the next 3 to 5 company wide and departmental plan for the next 3 to 5 years.years.

Marketing Plan, Financial Plan, HR Plan, Production Operation PlanMarketing Plan, Financial Plan, HR Plan, Production Operation Plan

Management Planning Fundamentals cont.Management Planning Fundamentals cont.

Setting objectivesSetting objectives SMARTSMART MBOMBO

Using MBOUsing MBO set organizational goalsset organizational goals set departmental goalsset departmental goals discuss departmental goalsdiscuss departmental goals set individual goalsset individual goals give feedbackgive feedback

The Strategic Management ProcessThe Strategic Management Process

• StrategyStrategy A chosen course of action.A chosen course of action.

• Strategic ManagementStrategic Management Policies and procedures that deal with the long range Policies and procedures that deal with the long range

performance of an organizationperformance of an organization

The process of identifying and executing the The process of identifying and executing the organization’s mission by matching its capabilities organization’s mission by matching its capabilities with the demands of its environment.with the demands of its environment.

FIGURE 3–1 The Strategic Management Process

Strategic ManagementStrategic Management

• VisionVision A general statement of an organization’s intended A general statement of an organization’s intended

direction that evokes emotional feelings in direction that evokes emotional feelings in organization members.organization members.

• MissionMission Spells out who the company is, what it does, and Spells out who the company is, what it does, and

where it’s headed.where it’s headed.

FIGURE 3–2 A SWOT Chart

FIGURE 3–3 Strategies in a Nutshell

FIGURE 3–4 Relationships Among Strategies in Multiple-Business Firms

Types of StrategiesTypes of Strategies

Concentration

Strategy

Geographic Expansion Strategy

Vertical Integration Strategy

Corporate-Level

Strategies

Diversification Strategy

Consolidation

Strategy

Types of Strategies (cont’d)Types of Strategies (cont’d)

Cost Leadership Focus/Niche

Business-Level/Competitive Strategies

Differentiation

FIGURE 3–5The Southwest Airlines’ Activity System

Note: Companies like Southwest tailor all of their activities so that they fit and contribute to making their strategies a reality.

Achieving Strategic FitAchieving Strategic Fit

The “Fit” Point of View The “Fit” Point of View All of the firm’s activities must be tailored to or fit All of the firm’s activities must be tailored to or fit

the chosen strategy such that the firm’s functional the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies support its corporate and competitive strategies.strategies.

Leveraging Leveraging ““Stretch” in leveraging resources—supplementing Stretch” in leveraging resources—supplementing

what you have and doing more with what you have—what you have and doing more with what you have—can be more important than just fitting the strategic can be more important than just fitting the strategic plan to current resources.plan to current resources.

Competitive AdvantageCompetitive Advantage

Strategic Human Resource ManagementStrategic Human Resource Management

• Strategic Human Resource ManagementStrategic Human Resource Management The linking of HRM with strategic goals and The linking of HRM with strategic goals and

objectives in order to improve business performance objectives in order to improve business performance and develop organizational cultures that foster and develop organizational cultures that foster innovation and flexibility.innovation and flexibility. Involves formulating and executing HR systems—HR Involves formulating and executing HR systems—HR

policies and activities—that produce the employee policies and activities—that produce the employee competencies and behaviors that the company needs competencies and behaviors that the company needs to achieve its strategic aims.to achieve its strategic aims.

Three Main Strategic Human Resource System Components

Characteristics of HPWS• multi-skilled work teams• empowered front-line

workers• extensive training• labor-management

cooperation• commitment to quality• customer satisfaction

Linking Company-Wide and HR Strategies

Basic Model of How to Align HR Strategy and Actions with Business Strategy

“

Strategic HR in Action improving Mergers and Strategic HR in Action improving Mergers and AcquisitionsAcquisitions

Due Diligence Due Diligence Stage(before finalizing the dealStage(before finalizing the deal))Reviewing organizational culture, employee Reviewing organizational culture, employee compensation, labor relations, pending employee compensation, labor relations, pending employee litigations, HR policies and procedureslitigations, HR policies and procedures

Integration Stage(Integration Stage(first few monthsfirst few months))

Choosing top management, communicating Choosing top management, communicating changes, aliening cultures, ensuring top changes, aliening cultures, ensuring top management leadershipmanagement leadership

Using HR consultantsUsing HR consultants

Percent of Successful Mergers in Which HR Manager Was Involved

FIGURE 3–A1 The Basic HR Scorecard Relationships

HR Activities

Organizational Performance

Emergent Employee Behaviors

Strategically Relevant

Organizational Outcomes

Achieve Strategic

Goals

Creating an HR ScorecardCreating an HR Scorecard

1

2

3

4

5

Outline value chain activities

Define the business strategy

Outline a strategy map

Identify strategically required outcomes

Identify required workforce competencies and behaviors

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7

8

9

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Create HR Scorecard

Identify required HR policies and activities

Choose HR Scorecard measures

Summarize Scorecard measures on digital dashboard

Monitor, predict, evaluate

The 10-Step HR Scorecard Process

Step 1: Define the business strategyStep 1: Define the business strategy

• Medical company:Medical company: have a strategy of becoming have a strategy of becoming a comprehensive healthcare network.a comprehensive healthcare network.

• By the end of this step, management translates By the end of this step, management translates its broad strategic plans into specific, its broad strategic plans into specific, actionable strategic goals.actionable strategic goals.

Step 2: Outline the company’s value chainStep 2: Outline the company’s value chain

• Value chain: Value chain: identifies the primary activities that identifies the primary activities that create value for customers and related support create value for customers and related support activities.activities.

• It is a tool for identifying, isolating, visualizing It is a tool for identifying, isolating, visualizing and analyzing the firm’s most important and analyzing the firm’s most important activities and strategic costs.activities and strategic costs.

• Outlining and analyzing the company’s value Outlining and analyzing the company’s value chain help the HR manager formulate the chain help the HR manager formulate the policies and practices that make sense in terms policies and practices that make sense in terms of firm’s strategy.of firm’s strategy.

FIGURE 3–A3 Simple Value Chain for “The Hotel Paris”

Step 3: Outline a strategy mapStep 3: Outline a strategy map

• It is a diagram that summarizes the chain of It is a diagram that summarizes the chain of major interrelated activities that contribute to a major interrelated activities that contribute to a company’s success.company’s success.

• It shows a “big picture” of how each It shows a “big picture” of how each department/team performance contributes to department/team performance contributes to achieving the company’s overall strategic goal. achieving the company’s overall strategic goal.

FIGURE 3–A4Strategy Map for Southwest Airlines

Step 4: Identify strategically required Step 4: Identify strategically required organizational outcomes organizational outcomes

• Dell:Dell: receiving quick, competent and courteous receiving quick, competent and courteous technical advice by phone is one such technical advice by phone is one such outcome.outcome.

• This step identifies and specifies firm’s This step identifies and specifies firm’s strategically relevant outcomes.strategically relevant outcomes.

Step 5: Identify the required workforce Step 5: Identify the required workforce competencies and behaviors competencies and behaviors

• Medical companyMedical company: employees have to take : employees have to take personal accountability for the results, willing to personal accountability for the results, willing to work proactively (be “generative”) to find new work proactively (be “generative”) to find new and novel solutions.and novel solutions.

Step 6: Identify the required HR system,Step 6: Identify the required HR system, policies and activities policies and activities

• Medical company: new training and pay plansMedical company: new training and pay plans• In this step one should be specificIn this step one should be specific

We need new training programsWe need new training programs Exactly what sort of new training programs do we Exactly what sort of new training programs do we

needneed

Step 7: Choose HR scorecard measuresStep 7: Choose HR scorecard measures

• How to measure HR policies and activities.How to measure HR policies and activities.• Improve company's disciplinary systemImprove company's disciplinary system

How to manage such improvementsHow to manage such improvements Solution: Number of grievancesSolution: Number of grievances

• HR score card contains a balance of financial and non HR score card contains a balance of financial and non financial, short and long-term, external and internal financial, short and long-term, external and internal goals.goals.

• Example:Example:

Southwest might measure turnaround time in terms of “ Southwest might measure turnaround time in terms of “ improve turnaround time from an average of 30-mins improve turnaround time from an average of 30-mins per plane to 26-mins per plane and then measure per plane to 26-mins per plane and then measure customer satisfaction with periodic year.customer satisfaction with periodic year.

Step 8: Summarize the scorecard measureStep 8: Summarize the scorecard measure in a digital dashboard in a digital dashboard

• ““A picture is worth thousand words”A picture is worth thousand words”• It presents HRM function, core measures from It presents HRM function, core measures from

HR scorecard Via a PC desktop screen.HR scorecard Via a PC desktop screen.• Example: A manager’s dashboard for Example: A manager’s dashboard for

Southwest Airline might display daily trends for Southwest Airline might display daily trends for activities such as fast turnaround, attracting activities such as fast turnaround, attracting and keeping customers, on time flights and and keeping customers, on time flights and employee morale.employee morale.

• Gives manager time to take corrective actions.Gives manager time to take corrective actions.