Human resrouce management 12th mathis jacson chapter 002

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CHAPTER 2

Strategic HR Management and Planning

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Chapter Objectives Chapter Objectives

■ Explain strategic HR management and how it is linked

to organizational strategies

■ Discuss two possible contributors to competitive

advantage and how HR contributes to each

■ Describe how legal, political, cultural, and economic

factors affect global HR management

■ Define HR planning and outline the HR planning

process

■ Describe the means for assessing the external and

internal environments of HR management

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

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Chapter Objectives (cont’d) Chapter Objectives (cont’d)

■ Discuss several ways of managing a surplus and a

shortage of human resources

■ Identify why HR metrics must consider both strategic

and operational HR measures

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

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Nature of Strategy and HR Management

Strategy

The proposition an organization follows for how

to compete successfully and

thereby survive and grow.

Strategic HR Management

The use of employees to gain

or keep a competitive advantage, resulting in greater organizational

effectiveness.

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FIGURE 2-1 Strategic HR Management Process

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Strategic Success with HR Practices

• Recognized HR Best Practices

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FIGURE 2-2 Common Areas for HR Strategies

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Operationalizing HR Strategy

Thinking Strategically

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 to Organization Effectiveness

Organization

productivity

Customer service and quality

Financial contributions

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Organizational Productivity

• Productivity

 Measure of the quantity and quality of work done,

considering the cost of the resources used

• Unit labor cost

 Computed by dividing the average cost of workers by their average levels of output

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FIGURE 2-4 Approaches to Improving Organizational Productivity

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HR Effectiveness and Financial Performance

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Global Competitiveness and Strategic HR

Types of Global Organizations

Importing and

exporting

Multi-national enterprise

Global organization

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Hofstede’s Dimensions of Culture

Inequality

of Power

Individualism/ Group Orientation

Masculinity/ Femininity

Long-term/

Short-term Orientation

Uncertainty Avoidance

Culture

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FIGURE 2-5 Hourly Compensation Costs for Manufacturing Production Workers

Source: U.S Bureau of Statistics, www.bls.gov.

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Human Resource Planning

• Human 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 top management

to use in strategic planning and setting organizational goals

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Purpose of HR Planning

Effective HR Planning

Right

people

Right capabilities

Right time

Right place

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Develop programs to decrease supply or increase demand

No Match?

Forecast HR

requirements (demand)

Forecast HR availability (supply)

Strategic HR Planning

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FIGURE 2-6 Typical Division of HR Responsibilities: HR Planning

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Small Businesses and HR Planning

HR Planning Issues in Small Businesses

Attracting and retaining qualified

outsiders

Management succession between generations of owners

Family relationships and HR policies

Evolution of HR activities as the business grows

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FIGURE 2-7 HR Planning Process

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Scanning the External Environment

• Environmental Scanning

 The process of studying the environment of the organization to pinpoint opportunities and threats

HR Planning

Government Influences

Economic Conditions

Geographic and Competition 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 (cont’d)

• Organizational Capabilities Inventory

employees’ knowledge, skills, and abilities (KSAs)

 Components of an organizational capabilities

inventory

Individual employee demographics

Individual career progression

Individual job performance data

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Forecasting HR Supply and Demand

 Short-term—less than one year

 Intermediate—up to five years

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Statistical regression analysis Simulation models

Productivity ratios Staffing ratios

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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

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Forecasting HR Supply

• Forecasting External HR Supply

 Factors affecting external supply:

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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FIGURE 2-8 Estimating Internal Labor Supply for a Given Unit

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Forecasting HR Supply (cont’d)

• Succession Planning

 The process of identifying a long-term plan for the orderly replacement of key employees

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Workforce Realignment

• Issues in Matching the Supply of Labor with the

Demand for Labor

 HR Planning in Mergers and Acquisitions

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Managing a Human Resources Surplus

Workforce Reductions and the WARN Act

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Managing a Human Resource Surplus

(cont’d)

• Outplacement services are provided to displaced

employees to give them support and assistance:

 Personal career counseling

 Resume preparation and typing services

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FIGURE 2-9 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

Human Resource Shortage

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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 two

organizations are similar

• HR’s Role in Mergers and Acquisitions

 Revising the organization structure

 Merging HR activities

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Key Factors in Cultural Fit

Degree of internal integration

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Measuring Effectiveness Using HR Metrics

• HR Metrics

 Specific 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:

Are accurate

Are linked to strategic and operational objectives

Have clearly understood calculations

Meet information needs

Can be compared internally and internally

Can be used to drive HR management efforts

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FIGURE 2-10 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

• Annual turnover rate

• Benefits costs as percentage of payroll

• Training expenditures per FTE

• Average time to fi ll 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 one year.

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Measures 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 period

B = One-time cost of acquisition and implementation

C = 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)

• 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 Scorecard

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FIGURE 2-11

Revenue and

Income per FTE

*Data not reliable.

Source: Human Capital Benchmarking Study

(Alexandria, VA: SHRM, 2006).

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HR Measurement and Benchmarking

 Percent of management positions filled internally

 Dollar sales per employee

 Benefits as a percentage of payroll cost

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Absenteeism and turnover control

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