hr m class 2 strategy and retention

7/29/2019 Hr m Class 2 Strategy and Retention

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Human Resource Management,

Class 2

Strategy in Human Resource Management

Organization/Individual Relations and Retention

Pcs,

2013. 12 February

Zsuzsanna Vitai HRM 2013 spring


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Concepts and learning objectives Explain strategic HR management and how it is linked to

organizational strategies. Identify ways HR professionals can support organizational

strategies for quality, growth, efficiency, and internationaloperations.

Define HR planning and outline the HR planning process. Identify why HR metrics must consider both strategic and

operational HR measures.

Identify the changing nature of the psychological contract.

Discuss how motivation is linked to individual performance.

List the five major drivers of retention and activities related tothem.

Describe different kinds of absenteeism and turnover.

Explain ways to measure absenteeism and turnover.


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Strategic Human Resource Management

Definitions:SHRM: organizational use of employees to gain

or keep a competitive advantage against

competitors, resulting in greater organizationaleffectiveness.

Core competency: a unique capability thatcreates high value and that differentiates the

organization from its competitionThe source of an organizations sustainable

competitive advantage

Organizational culture: the shared values and

beliefs of a workforce


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StrategicHR Management Process



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Strategic Success with HR Practices

Recognized HR Best Practices

Employment security

Selective recruiting

High wages/incentives

Information sharing/participation

Training/cross training

Promotion from within

Measurement

50%higher

marketvalue!



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FIGURE 2-2 Common Areas for HR

Strategies



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Operationalizing HR Strategy

ThinkingStrategically

Understand

the business

Focus on key

business goals

Know what

to measure

Prepare for

the future



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FIGURE 2-3 Possible HR Areas for Core

Competencies



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HR As Organizational Contributor

HR Contributions toOrganization Effectiveness

Organizationproductivity

Customer serviceand quality

Financialcontributions



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Organizational Productivity

Productivity

Measure of the quantity and quality of work done,considering the cost of the resources used.

Metrics example: employee wages +benefits

sales

Unit labor cost

Computed by dividing the average cost of workers by

their average levels of output.High wages can be competitive if people produce high

levels of output!



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2-4 Approaches to Improving

Organizational Productivity


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HR Effectiveness and Financial

Performance

Effectiveness

The extent to which goals have been met.

Efficiency

The degree to which operations are done in an

economical manner.



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Organizational Effectiveness and

Financial

Contributions of HR

Return on Investment

(ROI)Difficult to determine

returns for HRcontributions which affectmany facets of the business

Former view of HR as acost center



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Human Resource PlanningHuman Resource (HR) Planning

The process of analyzing and identifying the need

for and availability of human resources so that the

organization can meet its objectives.

HR Planning Responsibilities

Top HR executive and subordinates gather

information from other managers to use in the

development of HR projections for topmanagement to use in strategic planning and

setting organizational goals



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Purpose of HR Planning



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Typical Division of HR Responsibilities:

HR Planning



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Small Businesses and HR Planning

HR PlanningIssues in Small

Businesses

Attracting andretaining qualified

outsiders

Managementsuccession between

generations of owners

Family relationshipsand HR policies

Evolution of HRactivities as thebusiness grows



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FIGURE 2-7 HR Planning Process


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HR Planning Process 2HR Strategies

The 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

Strategic Plan

Human ResourcesStrategic Plan

HR Activities


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Benefits of HR Planning

Better view of the HR dimensions of businessdecisions

Lower HR costs through better HR

management.More timely recruitment for anticipate HR

needs

More inclusion of protected groups throughplanned increases in workforce diversity.

Better development of managerial talent



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Scanning the External Environment

Environmental ScanningThe process of studying the environment of the

organization to pinpoint opportunities and

threats.

Environmental Changes Impacting HR

Governmental Influences

Economic conditions

Geographic and competitive concerns

Workforce composition



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Assessing 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 2Organizational Capabilities Inventory

HRIS databasessources of information about

employees knowledge, skills, and abilities (KSAs)

Components of an organizational capabilities

inventoryIndividual employee demographics

Individual employee career progression

Individual job performance data

Creates a profile of the current organizational

workforce



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Forecasting HR supply and demand 1

Forecasting:definition: use of information from the past and

present to identify expected future conditions

combination of quantitative methods and

subjective judgment

Methods:

judgmental

mathematicalPeriods:

short, intermediate, long


?


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Judgmental methods

JudgmentalEstimatesasking managers opinions, top-down or

bottom-up

Rules of thumbusing general guidelines

Delphi techniqueasking a group of experts

Nominal groupsreaching a group consensus in open

discussion



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Mathematical methods

Statistical regression analysis

Simulation models

Productivity ratios

Staffing ratios



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Forecasting HR supply and demand 2

Forecasting Periods

Short-termless than one year

Intermediateup to three years

Long-rangemore than three years



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HR Forecasting


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Forecasting the demandfor human

resources

Organization-wide estimate for total demand

Unit breakdown for specific skill needs by number

and type of employeeDevelop 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.



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Forecasting the supplyof human

resources 1

External supply

government labor force population estimates

individual demographics

changing workforce composition and patternsmigration!

industrial trends

economic forecasts

technological developments

actions of competing employers

government regulations and pressures



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Forecasting the supplyof human resources 2

Forecasting Internal HR Supply

Effects of promotions, lateral moves, and

terminations

Succession analysis

Replacement charts

Succession planning

The process of identifyinga longer-term plan for the

orderly replacement of key

employees.Zsuzsanna Vitai HRM 2013 spring


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Estimating Internal Labor Supply for a Given

Unit


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Workforce realignment

Layoff:in response to shortfall in demand for products

employees are put on unpaid leaves of absence

Laid - off employees may be rehired if demandbecomes stronger!

Downsizing: planned elimination of large

number of personnel with the goal ofenhancing the organizations competitiveness- workers are not rehired!



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Downsizing 1Objectives:

reducing costs

replacing labor with technology

mergers and acquisitions

moving to more economical locations

Effects:

not all positive!

Does not generate additional revenue - cuts costs only

in the short runremaining employees are overburdened and

demoralized



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Downsizing 2

Attrition:people who quit, die, or retire are notreplaced

in addition companies use hiring freezes

Early retirement buyouts

encouraging more senior workers of the organizationto leave early

needs additional financial resources, but saves moneyon the long run

humane workforce reduction technique

problem: those may leave whom you would like tohave!



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Downsizing 3

How to?

Investigate alternatives to downsizing

involve people necessary for success in the

planning for downsizing

develop comprehensive communication plans

nurture the survivors

outplacement pays off



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Outplacement servicesDefinition:

a group of services provided to displaced employees togive them support and assistance

personal career counselingresume preparation

typing servicesinterviewing workshopsreferral assistancespecial severance pay arrangementsmedical benefit coverageretraining for different jobsestablishing on-site career centerscontacting other employers for job placement

opportunitiesZsuzsanna Vitai HRM 2013 spring


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Making Downsizing More Effective



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Managing a Shortage of Employees


Use overtime

Add contingent workers

Bring back recent retirees

Outsource work

Reduce turnover

HumanResourceShortage


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HR Planning in Mergers and

Acquisitions

Cultural Compatibility

The extent to which such factors as decision-

making styles, levels of teamwork, information-

sharing philosophies, and the formality of the twoorganizations are similar.

HRs Role in Mergers and Acquisitions

Communicating decisionsRevising the organization structure

Merging HR activities



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Measuring HR Effectiveness

Using HR Metrics 1

HR Metrics

Specific measures tied to HR performance

indicators.Development and use of metrics that can better

demonstrate HRs value and track its performance.



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Measuring HR Effectiveness

Using HR Metrics 2

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 byexecutives.

Results can be compared both externally andinternally.

Measurement data drives HR management efforts.


f


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Examples of Strategic and Operational

HR Metrics

Strategic Operational

Revenue generated per FTE

Net income before taxes per FTE

Ratio of managers to non-

managers Labor costs as percentage of

total operating costs

ROI of human capital

expenditures

HR department expenses aspercentage of total expenses

Payroll/benefits costs as

percentage of revenues

Annual turnover rate

Benefits costs as percentage of

payroll

Training expenditures per FTE Average time to fill openings

Workers compensation costs per

FTE

Number of applicants per opening

Absenteeism by employee

level/department

Note: An FTE is a measure equal to one employee working full-time for oneyear.


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Measures of Strategic HR Effectiveness

1

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

activities.


A = Operating costs for a new or enhanced system for the time periodB = One-time cost of acquisition and implementation

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

BA

C

ROI

M f S i HR Eff i


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Measures of Strategic HR Effectiveness

2

Economic Value Added (EVA)

A firms net operating profit after the cost of capital(required return) is deducted.

Cost of capital is the benchmark for returns for all HRactivities.

HR and the Balanced Scorecard

Financial

Internal business processesCustomer

Learning and growth

Robert S. Kaplan and David P. NortonZsuzsanna Vitai HRM 2013 spring


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The balanced scorecard



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HR Measurement and BenchmarkingBenchmarking

Comparing specific measures of performanceagainst data on those measures in other bestpractice organizations

Common BenchmarksTotal compensation as a percentage of net income

before taxes

Percent of management positions filled internally

Dollar sales per employee

Benefits as a percentage of payroll cost



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Assessing HR effectivenessRECORDS!

Must be kept current and properly organised

Important documentation if legal problems occur

Basis for research

Examples:

HR expense per employee

Compensation as a percent of expenses

HR dept. expense as a % of total expenses

Cost of hires

Turnover rate

Absence rate

Workers compensation cost per employee



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HR audit

Definition:

A formal research effort that evaluates the current state ofHR management in an organisation

Legal compliance

Current job descriptions and specifications

Valid recruiting and selection processes

Wage/salary and benefits systems

Absenteeism and turnover control measures

Training and development effort

Performance management system

Employee handbook policies

Health, safety and security issues



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Web pages

http://www.ilo.org/public/english/bureau/stat/http://epp.eurostat.ec.europa.eu/portal/page/portal

/eurostat/home/

http://www.bls.gov/

http://www.kormany.hu/hu

http://www.ksh.hu/

http://www.fedstats.gov/

http://www.oecd.org/statistics/


I di id l/O i ti l
http://www.ilo.org/public/english/bureau/stat/http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/http://www.bls.gov/http://www.kormany.hu/huhttp://www.ksh.hu/http://www.fedstats.gov/http://www.oecd.org/http://www.oecd.org/statistics/http://www.oecd.org/statistics/http://www.oecd.org/statistics/http://www.oecd.org/statistics/http://www.oecd.org/http://www.fedstats.gov/http://www.ksh.hu/http://www.ksh.hu/http://www.kormany.hu/huhttp://www.kormany.hu/huhttp://www.bls.gov/http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/http://www.ilo.org/public/english/bureau/stat/


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Individual/Organizational

Relationships

The Psychological ContractThe unwritten expectations employees and employers

have about the nature of their work relationships.

Affected by age of employee and changes in economic

conditions.Focuses on expectations about fairness that may not be

defined clearly by employees.

Psychological Ownership

When individuals feel that they have some control andperceived rights in the organization, they are morelikely to be committed to the organization.


C t f th P h l i l


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Components of the Psychological

Contract

Employers provide:

Competitive compensationand benefits

Flexibility to balance work

and home life

Career development

opportunities

Employees contribute:

Continuous skill improvementand increase productivity

Reasonable time with the

organization

Extra effort when needed


F Aff i J b S i f i d


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FIGURE 3-1 Factors Affecting Job Satisfaction and

Organizational Commitment

J b S ti f ti L lt d


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Job Satisfaction, Loyalty, and

CommitmentJob Satisfaction

A positive emotional state resulting from evaluatingones job experience.

Work, pay, promotion opportunities, supervision, co-workers

Organization Commitment (Loyalty)

The degree to which employees believe in andaccept organizational goals and desire to remain

with the organization.Continuance commitment: the likelihood that an

individual will stay with rather than withdraw fromthe organization.


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Individual Employee Performance

Individual Performance Factors1. Individual ability to do the work

2. Effort level expended

3. Organizational support

Performance (P) = Ability(A) x Effort (E) x Support(S)



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FIGURE 3-2 Components of Individual Performance



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Individual MotivationMotivation

The desire within a person causing that person to actto reach a goal.

Management Implications for Motivating

Individual PerformanceBroad-based strategies and tactics to address

individual employee concerns about:

Consistency in organizational rewards

Organizational support for employee efforts

Accurate measurement of employee performance

Desirability of rewards by employees



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Repetition: MotivationDefinition:

the desire within a person causing that person to

act

Content and process theories explain it



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Content theoriesAbraham Maslows need hierarchy

Clayton Alderfer ERG theory

Frederick Herzberg - motivation-hygiene

David McClelland achievement motivation

Emphasis on what motivates individuals



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Process theoriesCognitive evaluation theory

Equity theory

Expectancy theory

Goal setting theoryReinforcement theory

Focus is on the motivational



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Process theories of motivationEquity theory - Stacy Adams

Explanation of behaviour on perceptions ofsocial comparisonsThe theory is based on the perception of

inequityWe are motivated to act in situations which we

perceive to be inequitable or unfairEquity situation:

my rewards your rewardsmy effort and contrib. = your effort and contrib.

The perceived fairness of what the person does

compared with what the person receives


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Overreward vs Underreward Inequity

YouComparison

Other

Outcomes

Inputs

Outcomes

Inputs

Underreward

Inequity

Outcomes

Inputs

Outcomes

Inputs

Overreward

Inequity

OutcomesOutcomes

InputsInputs

Equity

condition


Th l h i f it th


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The causal chain of equity theory

Perception of experience motivation to

inequity of tension resolve

action to resolve

equity restored



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Strategies for Reducing Inequity

Alter outcomes (e.g. ask for pay increase)

Adjust inputs (e.g. reduce effort andperformance)

Acting on the comparison other (changing thecomparison persons inputs or outcomes)

Changing the comparison other (compare with

someone else)Changing perceptions - rationalize the inequity

Leaving the field



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Vrooms expectancy theory 1

The expectancy equation:

F = (V x I x E)

V =the strength of preference for the outcomeI =the individuals perceived likelihood that good

performance will lead to valued rewards

E =the subjective probability or expectation

that effort will lead to good performance



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Vrooms expectancy theory 2Effort - Performance Expectations

refer to employees beliefs that working harder will

lead to performance

Performance -Reward Linkage

considers individuals expectations that high

performance actually will lead to rewards

Value of Rewards

how valuable the rewards are to the employee



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Retention of Human Resources

Myths About Retention1. Money is the main reason people leave.

2. Hiring has nothing to do with retention.

3. If you train people, you are only trainingthem for another employer.

4. Do not be concerned about retention

during a merger.

5. If solid performers want to leave, the

company cannot hold them.



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Retention of Human ResourcesWhy People Stay or LeaveLinks, Fit, and

Sacrifice

Culture and values

Positive, distinctive company that is well-managed, andoffers exciting challenges.

Attractive job

Freedom and autonomy, exciting challenges, andcareer advancement and growth

Compensation and lifestyleDifferentiated pay package, high total compensation,

geographic location, and respect for lifestyle


Drivers of Retention


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FIGURE 3-3 Drivers of Retention


FIGURE 3 4 Some Characteristics of People and Jobs


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FIGURE 3-4 Some Characteristics of People and Jobs



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Employee AbsenteeismAbsenteeism

Any failure to report for work asscheduled or to stay at work whenscheduled.

Involuntary absenteeism

Unavoidable with understandable cause(e.g., actual illness)

Voluntary absenteeismAvoidable without justifiable

cause (e.g., feigning illness)


FIGURE 3 5 Reasons for Unscheduled Absences


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FIGURE 3-5 Reasons for Unscheduled Absences

Source: Based on data from 2006 CCH Unscheduled Absence

Survey, CCH, Inc., October 26, 2006,

www.cch.com/press/news/2006. All Rights Reserved. Reprinted

with permission.



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Controlling Absenteeism

Disciplinaryapproach

Positivereinforcement

Combinationapproach

Paid time-off(PTO)

No fault

policy

ControllingAbsenteeism


FIGURE 3 6 Employee Absenteeism Control Actions


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FIGURE 3-6 Employee Absenteeism Control Actions



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Employee TurnoverTurnover

The process in which employees leave an

organization and have to be replaced.

Impact of TurnoverInability to achieve business goals

Loss of image to attract other individuals

High costs of turnover and replacement

Churnhiring new workers while laying off others



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Types of Turnover

Turnover

Involuntary

Voluntary

Functional

Dysfunctional

Uncontrollable

Controllable


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HR Metrics: Measuring Absenteeism

Measuring Absenteeism

U.S. Department of Labor formula:

100days)workof(Numberemployees)ofnumber(Average

periodduringabsencejobghlost throusperson-dayofNumber

Other Measures of Absenteeism:

Incidence rateabsences per 100 employees each day

Inactivity ratepercentage of time lost to absenteeism

Severity rateaverage time lost per absent employee during

a specified period of time



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HR Metrics: Measuring TurnoverComputing the Turnover Rate:

100midmonthatemployeesofnumberTotal

monththeduringsseparationemployeeofNumber

Costs of TurnoverSeparation costs

Replacement costs

Training costs

Hidden costs


HR Metrics: Measuring Turnover


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HR Metrics: Measuring Turnover

(contd)Ways to Measure Turnover:

Job and job levels

Department, units, and location

Reason for leaving

Length of service

Demographic characteristics

Education and training

Knowledge, skills and abilities

Performance ratings/levels


FIGURE 3-7 Simplified Turnover Costing


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Model

20,000

8,000(40%)

28,000

20

3

3,500

70,000

Teller


FIGURE 3-8


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Managing

Retention


FIGURE 3-9 Possible Retention Interventions


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FIGURE 3 9 Possible Retention Interventions

Spot cash awards for good work

Develop profiles of successfulemployees and hire to the profile

Learning bonuses

Focus groups on employee issues

Voluntary job sharing

Realist job avenues

Excellent employee development

Payback agreement for moving

expenses

Clear goals

Accurate performance appraisals

Competitive benefits

Career counseling

Mentoring

Diverse workplace

Sabbatical leaves

Facilitate promotion/transfer

Reward managers with low turnover

Fair pay

Fulfilling work

Avoid hiring those with a history of

turnover

Tuition reimbursement and

promotion for education

Retention bonuses

Subsidized child/elder care

Retrain for promotion/transfer

Pay tied to performance

Telecommuting

Recognize good work

Good working conditions

Friendly work culture/co-workers

Considerate supervisors

Improved Retention


Summary and implications for future


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Summary and implications for future

HR specialists

HR planning should be tied closely with the overallprocess of strategic planning of the organization

HR planning involves analyzing and identifying thefuture needs for and availability of human resources ofthe organization

Individual performance components include individualability, effort expended and organizational support

Absenteeism and turnover are expensive but they can

be controlled with various interventions.Handling the retention management process well pays

off the organization.

hr m class 2 strategy and retention

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