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MGT 430 – Spring 2016Class 2 - Chapter 2

Organizational Demands and Environmental Influences

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Syllabus Discussion Topics

1. Form teams2. Elect officers for 1st term (Jan 20 – Mar 15)3. Essays4. Presentations

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BASIC BUSINESS 101

INCREASE REVENUE

LOWER COSTS HR

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A set of integrated and coordinated commitments and actions intended to achieve stated business goals.

Strategy answers the questions:• What is our business?• Who is the customer?• What is the value to the customer?• What should (or can) our business be?

Business Strategy

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Company Characteristics

• SizeLarge – medium- small; one division – multiple divisions

• Resources availablePlenty vs. limited; domestic vs. global

• Company life cycle stageIntroduction – Growth – Maturity - Decline

• Company success

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Organizational Culture

The mental programing of a group of people. It is comprised of the values, customs, and belief systems of that particular group

Impacted by: Industry (banking vs. construction)Geography (Miami vs. San Francisco vs. Cairo)Age (Millenials vs. Ba=by-Boomers)Diversity (Race vs. ethnic vs. age vs. income)History (Home-grown vs. start-up)

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Company Culture

• The unique pattern of shared assumptions, values, and norms that shape the socialization activities, language, symbols, and ceremonies of people in the organization, e.g.

• banking vs. construction

• teaching vs. retail sales

• accounting vs. R&D

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Employee ConcernsSome issues:• Single parents; caring for aging parents• Dual career; balancing demands of work and personal lives• Attractiveness of flexible scheduling, family-friendly benefits

and telecommuting

Some Topics of Interest• Work/Life Balance• Justice/Fairness• Engagement/Commitment

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Labor Force Trends

• Diversity in race, gender and age• Number of women expected to grow 9% from 2006 to 2016• Fastest-growing groups: Hispanics and Asians• Aging of the workforce - Size of group 55 and older

increasing dramatically• Occupational trends

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Technology

• Factories and mass production• HRIS & QR• Reducing labor costs vs. acceding to consumer demand for

electronic transactions, e.g. ATM, QR apps, self-checkout• Challenges privacy issues and potential misuse by employees• Reach – Broadens access to labor market– Enables virtual workforce

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Globalization

• Blurs country boundaries • Enables international joint ventures and

partnerships• Challenges companies with differences in

values and beliefs• Encourages offshoring—sending work to

other countries for lower costs

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Ethics and Social Responsibility

• Companies and their management being held accountable for ethical behavior

• Corporate policies and procedures spell out ethical behavior

• Social responsibility takes ethics to a new level

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HRM MARKET FOCUS STRATEGY CONSIDERATIONS

Low cost Zales vs. TiffanyMotel 6 vs. Ritz-Carlton

Differentiation Sears vs. Brooks BrothersRolls-Royce vs. Hyundai

Niche Antique car parts vs.AutoZone/Pepboys

Changes in the Labor Force

Aging Workforce

Diverse Workforce

Skill Deficiencies

AGE DISTRIBUTION OF U.S LABOR FORCE, 2010 AND 2020

HRM Implications of an Aging Workforce

• HR professionals spend much time on concerns related to retirement planning, retraining older workers, and motivating workers whose careers have reached a plateau.

• Organizations struggle to control rising costs of health care and other benefits.

• Managers will supervise employees much older than themselves.

• Organizations must find ways to attract, retain, and prepare youth labor force.

Skill Deficiencies of the Workforce

• Employers are looking for skills:

mathematical verbal interpersonal Computer STEM

Science Technology Engineering Math

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Skill Deficiencies in HRM• Silo mentality

• Knowing how the company makes money

• Basic, but strong, understanding of business finance

• Enhanced business acumen

• Linking HR work to the critical decision making factors demanded by TMT

• Making a business case for HRM initiatives.

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HR As A Strategic PartnerEarning a Seat at the Decision Making Table

• Credibility• Business & financial intelligence• Competitive intelligence• Forecasting future needs • Talent management• Transactional perfection and efficiency• Helping other functions succeed

• Linking HRM to performance drivers of TMT

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Strategic Alignment of HRM Performance Metrics

HR Metrics Corporate Metrics

Talent management Value-added outcomes

Turnover/retention Shareholder value Benefits Profitability / solvencyLabor Cost controlsCompensation Market shareCompliance – EEO / AAP Mission, vision,

valuesTraining & development Performance ratios

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HR as a Strategic Partner Core Transactional & Strategic H.R. Deliverables

DIRECT/INDIRECT LINE OF SIGHT

• Increase revenue / decrease costs• Advance the objectives of the organization• Improve profitability & productivity• Generate competitive advantages• Keep the company in business

• Other???

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Customers Owners Environment Community Gov’t

TMT

HR PROD FIN M&S LOG R&D

Line of sight

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HR Challenge Question

Production department problem - Average monthly defect rate

Actual Acceptable Goal5/100 = 5% 3/100 = 3% 1/100 = 1%

1. Who owns this problem?Production? HR? Purchasing? Other?

2. How does HR impact these numbers?

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Potential HR Responses

• Production owns the problem

• HRM provides problem solving assistance, e.g.

Adequate staffing TrainingEmployee motivation CompensationGoal setting Job analysisOther

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Possible HRM Responses

HRM partners with TMT to address these issues along with partners from other disciplines

Staffing SchedulingLeadership Job descriptionsJob analysis TechnologyPerformance mgmt. Customer response

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Linking HR Activities To Corporate Financial Performance(Direct & Indirect)

• Health/pension liab. $$$ H.R.I.S• Employee/labor costs $$$ Layoffs• Outsourcing, TPA $$$ Legal defense • Training costs $$$ Compliance• FMLA $$$ Mandatory ins.• Other ??? $$$ Part time/Temp.

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HR’s Impact on Income Statements

Income Statement• Revenue minus Expenses = Net income / net loss• $10 - $7 = $3• Profit margin (3/10)= 30%

Cost of Goods SoldHeadcountWages paid to employees (e.g. labor contracts)

Expenses e.g.Selling, general & administrative expensesFringe benefits – e.g. vacation, holidays, sick leave

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HR Calculations

1. Revenue generated per employee Revenue / # FTE Employees$82,364,000/249 = $330,779

HR Linkage (cut 25 jobs) = $82,364,000 / (249-25 or 224) = $367,696= $367,696 - $330,779 = $36,917 (10%)

increase/employee

2. Benefit costs as % of revenue (40% of payroll)Benefit costs / revenue$14,825,000/$82,364,000 = 17.9%

HR linkage - National health care increase = $2million

$16,825,000 / $82,364,000 = 20.4%

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More H.R. Calculations

4. Workers Compensation costs per covered employeeW.C. costs / # covered employees

Current: $190,045 / 249 = $763Worse safety $223,529 / 249 = $898Better safety: $154,676 / 249 = $621

6. Turnover ratio (@150% of salary)Annual # turnover / average # employees

Current: 17 /249 = 6.8%Worse: 21 / 249 = 8.4%Better: 11 / 249 = 4.4%

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HR Impact on Financial Condition

Option 1: Raise revenue

- Improve training and its deliverables- Partner with other functions to discover opportunities for

productivity and profitability improvements- Define measureable and relevant outcomes across disciplines

(job descriptions)- Enter new markets (awareness of labor costs)- Exit non-productive markets (facility closing costs)- Intensify focus on 80/20 customers (Pareto’s Law)

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HR Impact on Financial Conditions

Option 2: Lower costs

- Reduce headcount- Outsource/off-shore- Evaluate third-party administration- Employ technology (H.R.I.S.)- Aggressive management of health care & pension costs- Cost vs. benefit analysis- Part time/temporary employees

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Suggested HR Metrics

Turnover ratios ComplianceCost per hire Training costsBenefit costs Payroll costsWorker’s Comp. UnemploymentRecruiting costs e-learningOutsourcing Labor relationsH.R.I.S.