chapter 2 strategic hr management and planning

Copyright © 2005 Thomson Business & Professional Publishing.All rights reserved.

ROBERT L. MATHIS

JOHN H. JACKSON

PowerPoint Presentation by Charlie CookThe University of West Alabama

Strategic HR ManagementStrategic HR Managementand Planningand Planning

Chapter 2Chapter 2

SECTION 1SECTION 1Nature ofNature of

Human ResourceHuman ResourceManagement Management

Copyright © 2005 Thomson Business & Professional Publishing. All rights reserved.

2–2

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

• After you have read this chapter, you should be able to:

Explain strategic HR management and how it is linked to organizational strategies.

Describe how legal, political, cultural, and economic factors affect global HR management.

Discuss four dimensions of organizational effectiveness and how HR contributes to each.

Define HR planning and outline the HR planning process.

Discuss several ways of managing a surplus of human resources.

Identify why HR metrics must consider both strategic and operational HR measures.


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Human Resources as a Core CompetencyHuman Resources as a Core CompetencyHuman Resources as a Core CompetencyHuman Resources as a Core Competency

• Strategic Human Resources ManagementThe use of employees to gain or keep a competitive

advantage, resulting in greater organizational effectiveness.

• Core CompetenciesThe unique capabilities of employees in an

organization that create high value and that differentiate the organization from its competition

The source of an organization’s sustainable competitive advantage.


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Strategic HR Management ProcessStrategic HR Management ProcessStrategic HR Management ProcessStrategic HR Management Process

Figure 2–1


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Linkage of Organizational and HR Linkage of Organizational and HR StrategiesStrategies

Linkage of Organizational and HR Linkage of Organizational and HR StrategiesStrategies• Cost Leadership

Competition on the basis of low price and high quality of product or service

Relies on “building” employees to fit specialized needs

Requires a longer HR planning horizon approach

• Differentiation Competition on the basis of

either offering distinctively different products or services or establishing an exclusive image for quality products and services

Relies on hiring needed skills.

Needs a shorter planning time frame in order to be responsive to dynamic environments


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Globalization of Business and HRGlobalization of Business and HRGlobalization of Business and HRGlobalization of Business and HR

Global Global CommunicationsCommunications

Global Global CommunicationsCommunications

Global Population Global Population ChangesChanges

Global Population Global Population ChangesChanges

Global Economic Global Economic InterdependenceInterdependence

Global Economic Global Economic InterdependenceInterdependence

Regional AlliancesRegional AlliancesNAFTA, EUNAFTA, EU

Regional AlliancesRegional AlliancesNAFTA, EUNAFTA, EU

Globalization Globalization ForcesForces

Globalization Globalization ForcesForces


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Types of Global OrganizationsTypes of Global OrganizationsTypes of Global OrganizationsTypes of Global Organizations

• Importing and ExportingBuying and selling goods and services with

organizations in other countries

• Multinational Enterprise (MNE)An organization with operating units located in foreign

countries.

• Global OrganizationAn organization having corporate units in a number of

countries that are integrated to operate worldwide.


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Transition to Global OrganizationsTransition to Global OrganizationsTransition to Global OrganizationsTransition to Global Organizations


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Transition to Global OrganizationsTransition to Global OrganizationsTransition to Global OrganizationsTransition to Global Organizations


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Global EmploymentGlobal EmploymentGlobal EmploymentGlobal Employment

Global EmployeeGlobal EmployeeRelations IssuesRelations Issues

Global EmployeeGlobal EmployeeRelations IssuesRelations Issues

Global Labor-Global Labor-Management Management

RelationsRelations

Global Labor-Global Labor-Management Management

RelationsRelations

Global Health, Global Health, Safety, and Safety, and

SecuritySecurity

Global Health, Global Health, Safety, and Safety, and

SecuritySecurity

Discrimination Discrimination Regulations Regulations

GloballyGlobally

Discrimination Discrimination Regulations Regulations

GloballyGlobally


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Factors Affecting Global HR ManagementFactors Affecting Global HR ManagementFactors Affecting Global HR ManagementFactors Affecting Global HR Management

PoliticalPoliticalPoliticalPolitical EconomicEconomicEconomicEconomic

CulturalCulturalCulturalCulturalLegalLegalLegalLegal


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Global Cultural FactorsGlobal Cultural FactorsGlobal Cultural FactorsGlobal Cultural Factors

• Culture Societal forces affecting the values, beliefs, and actions of a

distinct group of people.

• Geert Hofstede’s Culture Dimensions Power Distance: the inequality among the people of a nation.

Individualism: the extent to which people prefer to act as individuals instead of members of groups.

Masculinity/Femininity: the degree to which “masculine” values prevail over “feminine” values.

Uncertainty Avoidance: the preference of people in a country for structured rather than unstructured situations.

Long-Term Orientation: the preference for long-term values emphasizing the future as opposed to short-term values focusing on the present.


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Hourly Hourly Compensation Costs Compensation Costs

for Manufacturingfor ManufacturingProduction WorkersProduction Workers

Hourly Hourly Compensation Costs Compensation Costs

for Manufacturingfor ManufacturingProduction WorkersProduction Workers

Figure 2–2

Hourly Costs (in U.S. Dollars)

Source: U.S. Bureau of Labor Statistics, www.bls.gov; and www.uschinabiz.com, 2004.


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Global Economic FactorsGlobal Economic FactorsGlobal Economic FactorsGlobal Economic Factors

• Sources of Economic FactorsDifferences in economic, political, legal, and cultural

systems

• Global Economic InterdependenceRegional trade and political alliances

NAFTA, EU, WTO

• Global Productivity and Strategic HR Management Issue: How to increase organizational effectiveness

and performance (productivity) in the face of global influences and foreign competition.


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Organizational Effectiveness and Organizational Effectiveness and Strategic HR ManagementStrategic HR Management

Organizational Effectiveness and Organizational Effectiveness and Strategic HR ManagementStrategic HR Management

• EffectivenessThe extent to which goals have been met.

• EfficiencyThe degree to which operations are done in an

economical manner.

• Dimensions of Organizational EffectivenessOrganizational productivityFinancial contributionsService and qualityOrganizational culture


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Organizational Productivity and HR EffortsOrganizational Productivity and HR EffortsOrganizational Productivity and HR EffortsOrganizational Productivity and HR Efforts

• ProductivityA measure of the quantity and quality of work done,

considering the cost of the resources used.A ratio of the inputs and outputs that indicates the

value added by an organization. Unit labor cost: computed by dividing the average cost of

workers by their average levels of output.

• Improving Organizational ProductivityOrganizational restructuringRe-designing workAligning HR ActivitiesOutsourcing analyses and assistance


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Approaches to Improving Organizational ProductivityApproaches to Improving Organizational ProductivityApproaches to Improving Organizational ProductivityApproaches to Improving Organizational Productivity

Figure 2–3


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Organizational Effectiveness and FinancialOrganizational Effectiveness and FinancialContributions of HRContributions of HR

Organizational Effectiveness and FinancialOrganizational Effectiveness and FinancialContributions of HRContributions of HR

• Return on Investment (ROI)Difficult to determine returns for

HR contributions which affect many facets of the business

Former view of HR as a “cost center”


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Customer Service and Quality Products Customer Service and Quality Products Linked to HR StrategiesLinked to HR Strategies

Customer Service and Quality Products Customer Service and Quality Products Linked to HR StrategiesLinked to HR Strategies

• High quality products and services are the results of HR-enhancements to organizational performance.StaffingCustomer service


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Organizational Culture and Organizational Culture and Organizational EffectivenessOrganizational EffectivenessOrganizational Culture and Organizational Culture and Organizational EffectivenessOrganizational Effectiveness

• Organizational CultureThe shared values and beliefs in an organizationStrategy and culture must be compatible and aligned

for the organization to be effective.Culture affects recruitment and retention of

employees.Culture can enhance or constrain organizational

performance.Culture is the “climate” of an organization.


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Human Resource PlanningHuman Resource PlanningHuman Resource PlanningHuman Resource Planning

• Human Resource (HR) PlanningThe process of analyzing and identifying the need for

and availability of human resources so that the organization can meet its objectives.

• HR Planning ResponsibilitiesTop HR executive and subordinates gather

information from other managers to use in the development of HR projections for top management to use in strategic planning and setting organizational goals


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Purpose of HR PlanningPurpose of HR PlanningPurpose of HR PlanningPurpose of HR Planning

Figure 2–4


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Typical Division of HR Responsibilities: Typical Division of HR Responsibilities: HR PlanningHR Planning

Typical Division of HR Responsibilities: Typical Division of HR Responsibilities: HR PlanningHR Planning

Figure 2–5


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HR Planning ProcessHR Planning ProcessHR Planning ProcessHR Planning Process

Figure 2–6


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Human Resource Planning (cont’d)Human Resource Planning (cont’d)Human Resource Planning (cont’d)Human Resource Planning (cont’d)

• Small Business and HR Planning IssuesAttracting and retaining qualified outsidersManagement succession between generations of

ownersEvolution of HR activities as business growsFamily relationships and HR policies


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HR Planning ProcessHR Planning ProcessHR Planning ProcessHR Planning Process

• HR StrategiesThe means used to anticipate and manage the supply

of and demand for human resources. Provide overall direction for the way in which HR activities

will be developed and managed.

Overall Overall Strategic PlanStrategic Plan

Human Resources Human Resources Strategic PlanStrategic Plan

HR ActivitiesHR Activities


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Benefits of HR PlanningBenefits of HR PlanningBenefits of HR PlanningBenefits of HR Planning

• Better view of the HR dimensions of business decisions

• Lower HR costs through better HR management.

• More timely recruitment for anticipate HR needs• More inclusion of protected groups through

planned increases in workforce diversity.• Better development of managerial talent


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Scanning the External EnvironmentScanning the External EnvironmentScanning the External EnvironmentScanning the External Environment

• Environmental ScanningThe process of studying the environment of the

organization to pinpoint opportunities and threats.

• Environmental Changes Impacting HRGovernmental InfluencesEconomic conditionsGeographic and competitive concernsWorkforce composition


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Assessing the Internal WorkforceAssessing the Internal WorkforceAssessing the Internal WorkforceAssessing the Internal Workforce

• Jobs and Skills Audit What jobs exist now?How many individuals are performing each job?What are the reporting relationships of jobs?How essential is each job?What jobs will be needed to implement future

organizational strategies?What are the characteristics of anticipated jobs?


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Assessing the Internal Workforce (cont’d)Assessing the Internal Workforce (cont’d)Assessing the Internal Workforce (cont’d)Assessing the Internal Workforce (cont’d)

• Organizational Capabilities InventoryHRIS databases—sources of information about

employees’ knowledge, skills, and abilities (KSAs)Components of an organizational capabilities

inventory Individual employee demographics Individual employee career progression Individual job performance data


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Forecasting HR Supply and DemandForecasting HR Supply and DemandForecasting HR Supply and DemandForecasting HR Supply and Demand

• ForecastingThe use of information from the past and present to

identify expected future conditions.

• Forecasting MethodsJudgmental

Estimates—asking managers’ opinions, top-down or bottom-up

Rules of thumb—using general guidelines Delphi technique—asking a group of experts Nominal groups—reaching a group consensus in open

discussion


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HR ForecastingHR ForecastingHR ForecastingHR Forecasting

Figure 2–7


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Forecasting HR Supply and Demand Forecasting HR Supply and Demand (cont’d)(cont’d)


• Forecasting Methods (cont’d)Mathematical

Statistical regression analysis Simulation models Productivity ratios—units produced per employee Staffing ratios—estimates of indirect labor needs

• Forecasting PeriodsShort-term—less than one year Intermediate—up to five yearsLong-range—more than five years


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• Forecasting the Demand for Human ResourcesOrganization-wide estimate for total demandUnit breakdown for specific skill needs by number and

type of employee Develop decision rules (“fill rates”) for positions to be filled

internally and externally. Develop additional decision rules for positions impacted by

the chain effects of internal promotions and transfers.

• Forecasting the Supply for Human ResourcesExternal Supply Internal Supply


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Forecasting HR Supply (cont’d)Forecasting HR Supply (cont’d)Forecasting HR Supply (cont’d)Forecasting HR Supply (cont’d)

• Forecasting External HR SupplyFactors affecting external

Net migration for an area

Individuals entering and leaving the workforce

Individuals graduating from schools and colleges

Changing workforce composition and patterns

Economic forecasts

Technological developments and shifts

Actions of competing employers

Government regulations and pressures

Other circumstances affecting the workforce


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Forecasting HR SupplyForecasting HR SupplyForecasting HR SupplyForecasting HR Supply

• Forecasting Internal HR SupplyEffects of promotions, lateral moves, and terminations

• Succession analysisReplacement chartsSuccession planning

The process of identifying a longer-term plan for the orderly replacement of key employees.

Source: U.S. Office of Personnel Management, www.opm.gov.


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Estimating Internal Labor Supply for a Given UnitEstimating Internal Labor Supply for a Given UnitEstimating Internal Labor Supply for a Given UnitEstimating Internal Labor Supply for a Given Unit

Figure 2–8


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Developing and Using a Strategic HR PlanDeveloping and Using a Strategic HR PlanDeveloping and Using a Strategic HR PlanDeveloping and Using a Strategic HR Plan

• Issues in Matching the Supply of Labor with the Demand for LaborSuccession PlanningManaging a Human Resources SurplusOutplacement ServicesHR Planning in Mergers and Acquisitions


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Managing a Human Resources SurplusManaging a Human Resources SurplusManaging a Human Resources SurplusManaging a Human Resources Surplus

• Workforce Reductions and the Worker Adjustment and Retraining Notification (WARN Act)Sets out employer requirements for advance notice of

a layoff or facility closing. 60-day notice to employees and the local community before

a layoff or facility closing involving more than 50 people.

Does not cover part-time or seasonal workers.

Imposes fines for not following notification procedure.

Has hardship clauses for unanticipated closures or lack of business continuance capabilities.


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Managing a Human Resources Surplus Managing a Human Resources Surplus (cont’d)(cont’d)

Managing a Human Resources Surplus Managing a Human Resources Surplus (cont’d)(cont’d)

• Workforce Realignment “Downsizing”, “Rightsizing”, and “Reduction in Force”

(RIF) all mean reducing the number of employees in an organization.

Causes Economic—weak product demand, loss of market share to

competitors Structural—technological change, mergers and acquisitions


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Managing a Human Resource Surplus Managing a Human Resource Surplus (cont’d)(cont’d)


• Workforce Realignment (cont’d)Positive consequences

Increase competitiveness Increased productivity

Negative consequences Cannibalization of HR resources Loss of specialized skills and experience Loss of growth and innovation skills

Managing survivors Provide explanations for actions and the future Involve survivors in transition/regrouping activities


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• Downsizing ApproachesAttrition and hiring freezes

Not replacing departing employees and not hiring new employees

Voluntary Separation Programs Early retirement buyouts offer incentives to encourage senior

employees to leave the organization early.

Layoffs Employees are placed on unpaid leave until called back to

work when business conditions improve. Employees are selected for layoff on the basis of their

seniority or performance or a combination of both.


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• Downsizing Approaches (cont’d)Outplacement services provided to displaced

employees to give them support and assistance: Personal career counseling Resume preparation and typing services Interviewing workshops Referral assistance Severance payments Continuance of medical benefits Job retraining


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Making Downsizing More EffectiveMaking Downsizing More EffectiveMaking Downsizing More EffectiveMaking Downsizing More Effective

Figure 2–9


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HR Planning in Mergers and AcquisitionsHR Planning in Mergers and AcquisitionsHR Planning in Mergers and AcquisitionsHR Planning in Mergers and Acquisitions

• Cultural CompatibilityThe extent to which such factors as decision-making

styles, levels of teamwork, information-sharing philosophies, and the formality of the two organizations are similar.

• HR’s Role in Mergers and AcquisitionsCommunicating decisionsRevising the organization structureMerging HR activities


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Measuring HR Effectiveness Measuring HR Effectiveness Using HR MetricsUsing HR Metrics

Measuring HR Effectiveness Measuring HR Effectiveness Using HR MetricsUsing HR Metrics

• HR MetricsSpecific measures tied to HR performance indicators.

Development and use of metrics that can better demonstrate HR’s value and track its performance.

Characteristics of good HR metrics: Accurate data can be collected. Measures are linked to strategic and operational objectives. Calculations can be clearly understood. Measures provide information expected by executives. Results can be compared both externally and internally. Measurement data drives HR management efforts.


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Examples of Strategic and Operational Examples of Strategic and Operational HR MetricsHR Metrics

Examples of Strategic and Operational Examples of Strategic and Operational HR MetricsHR Metrics

Figure 2–10


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Measures of Strategic HR EffectivenessMeasures of Strategic HR Effectiveness

• Return on Investment (ROI)Calculation showing the value of expenditures for HR

activities.

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

B = One-time cost of acquisition and implementationB = One-time cost of acquisition and implementation

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

B A

C

+= ROI


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Measures of Strategic HR Effectiveness (cont’d)

Measures of Strategic HR Effectiveness (cont’d)

• Economic Value Added (EVA)A firm’s net operating profit after the cost of capital

(required return) is deducted.Cost of capital is the benchmark for returns for all HR

activities.

• HR and the Balanced ScorecardFinancial Internal business processesCustomerLearning and growth


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HR Measurement and BenchmarkingHR Measurement and BenchmarkingHR Measurement and BenchmarkingHR Measurement and Benchmarking

• BenchmarkingComparing specific measures of performance against

data on those measures in other “best practice” organizations

• Common BenchmarksTotal compensation as a percentage of net income

before taxesPercent of management positions filled internallyDollar sales per employeeBenefits as a percentage of payroll cost


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Costs per Employee of the HR FunctionCosts per Employee of the HR FunctionCosts per Employee of the HR FunctionCosts per Employee of the HR Function

Figure 2–11Source: Adapted from HR Department Benchmarks and Analysis (Washington, DC: Bureau of National Affairs, 131, 140. 2004) To purchase this publication and find out more about other BNA HR solutions visit http://hrcenter.bna.com or call 800-372-1033. Used with permission.


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Assessing HR EffectivenessAssessing HR EffectivenessAssessing HR EffectivenessAssessing HR Effectiveness

• HR AuditA formal research effort that evaluates the current

state of HR management in an organizationAudit areas:

Legal compliance (e.g., EEO, OSHA, ERISA, and FMLA) Current job specifications and descriptions Valid recruiting and selection process Formal wage and salary system Benefits Employee handbook Absenteeism and turnover control Grievance resolution process Orientation program Training and development Performance management system

chapter 2 strategic hr management and planning

Recruiting & HR

hr metrics

strategic hr managementissue

hr planning process

operational hr measures

global organizationstransition

longterm values

linkage of organizational

preference of people