Chapter

Chapter 22

HR PLANNING AND STRTAEGY

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 Learning
Learning Objectives
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
Human Resources
Resources as
as aa Core
Core Competency
Competency
• Strategic Human Resources Management
 The use of employees to gain or keep a competitive
advantage, resulting in greater organizational
effectiveness.
• Core Competencies
 The 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
Strategic HR
HR Management
Management Process
Process

Figure 2–1
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Linkage
Linkage of
of Organizational
Organizational and
and HR
HR Strategies
Strategies
• 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
• Focus
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 Globalization
Globalization of
of Business
Business and
and HR
HR

Global
GlobalPopulation
Population
Changes
Changes

Global
Global
Globalization
Globalization Global
GlobalEconomic
Economic
Communications
Communications Forces
Forces Interdependence
Interdependence

Regional
RegionalAlliances
Alliances
NAFTA,
NAFTA,EUEU

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 Global
Global Employment
Employment

Global
Global Employee
Employee
Relations
RelationsIssues
Issues

Global
GlobalLabor-
Labor- Discrimination
Discrimination Global
GlobalHealth,
Health,
Management
Management Regulations
Regulations Safety,
Safety,and
and
Relations
Relations Globally
Globally Security
Security

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Factors
Factors Affecting
Affecting Global
Global HR
HR Management
Management

Political
Political Economic
Economic

Legal
Legal Cultural
Cultural

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 Global
Global Cultural
Cultural Factors
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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 Global
Global Economic
Economic Factors
Factors
• Sources of Economic Factors
 Differences in economic, political, legal, and cultural
systems
• Global Economic Interdependence
 Regional 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
Organizational Effectiveness
Effectiveness and
and
Strategic
Strategic HR
HR Management
Management
• Effectiveness
 The extent to which goals have been met.
• Efficiency
 The degree to which operations are done in an
economical manner.
• Dimensions of Organizational Effectiveness
 Organizational productivity
 Financial contributions
 Service and quality
 Organizational culture

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 Organizational
Organizational Productivity
Productivity and
and HR
HR Efforts
Efforts
• Productivity
 A 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 Productivity
 Organizational restructuring
 Re-designing work
 Aligning HR Activities
 Outsourcing analyses and assistance

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Approaches
Approachesto
toImproving
ImprovingOrganizational
OrganizationalProductivity
Productivity

Figure 2–3
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 Organizational
Organizational Effectiveness
Effectiveness and
and Financial
Financial
Contributions
Contributions of
of HR
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
Customer Service
Service and
and Quality
Quality Products
Products
Linked
Linked to
to HR
HR Strategies
Strategies
• High quality products and services are the
results of HR-enhancements to organizational
performance.
 Staffing
 Customer service

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 Organizational
Organizational Culture
Culture and
and
Organizational
Organizational Effectiveness
Effectiveness
• Organizational Culture
 The shared values and beliefs in an organization
 Strategy 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
Human Resource
Resource Planning
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
Purpose of
of HR
HR Planning
Planning

Figure 2–4
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 HR
HR Planning
Planning Process
Process
• HR 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 Resources
Strategic Plan

HR Activities
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HR
HR Planning
Planning Process
Process

Figure 2–6
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 Benefits
Benefits of
of HR
HR Planning
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
Scanning the
the External
External Environment
Environment
• Environmental Scanning
 The 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
Assessing the
the Internal
Internal Workforce
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
Assessing the
the Internal
Internal Workforce
Workforce (cont’d)
(cont’d)
• Organizational Capabilities Inventory
 HRIS 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
Forecasting HR
HR Supply
Supply and
and Demand
Demand
• Forecasting
 The use of information from the past and present to
identify expected future conditions.
• Forecasting Methods
 Judgmental
 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
HR Forecasting
Forecasting

Figure 2–7
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 Forecasting
Forecasting HR
HR Supply
Supply and
and Demand
Demand
(cont’d)
(cont’d)
• Forecasting Methods (cont’d)
 Mathematical
 Statisticalregression analysis
 Simulation models
 Productivity ratios—units produced per employee
 Staffing ratios—estimates of indirect labor needs

• Forecasting Periods
 Short-term—less than one year
 Intermediate—up to five years
 Long-range—more than five years

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 Forecasting
Forecasting HR
HR Supply
Supply and
and Demand
Demand
(cont’d)
(cont’d)
• Forecasting the Demand for Human Resources
 Organization-wide estimate for total demand
 Unit 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 Resources
 External Supply
 Internal Supply

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 Forecasting
Forecasting HR
HR Supply
Supply (cont’d)
(cont’d)
• Forecasting External HR Supply
 Factors 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
Forecasting HR
HR Supply
Supply
• Forecasting Internal HR Supply
 Effects of promotions, lateral moves, and terminations
• Succession analysis
 Replacement charts
 Succession planning
 The process of identifying
a longer-term plan for the
orderly replacement of key
employees.

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Estimating
Estimating Internal
Internal Labor
Labor Supply
Supply for
for aa Given
Given Unit
Unit

Figure 2–8
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 Developing
Developing and
and Using
Using aa Strategic
Strategic HR
HR Plan
Plan
• Issues in Matching the Supply of Labor with the
Demand for Labor
 Succession Planning
 Managing a Human Resources Surplus
 Outplacement Services
 HR Planning in Mergers and Acquisitions

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 Managing
Managing aa Human
Human Resources
Resources Surplus
Surplus
• Workforce Reductions and the Worker
Adjustment and Retraining Notification
 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.
– This is an example of involuntary layoff
 Imposes fines for not following notification procedure.
 Has hardship clauses for unanticipated closures or lack of
business continuance capabilities. Some kind of
compensation is prescribed during the layoff period

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 Managing
Managing aa Human
Human Resources
Resources Surplus
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
Managing aa Human
Human Resource
Resource Surplus
Surplus
(cont’d)
(cont’d)
• Workforce Realignment (cont’d)
 Positive consequences
 Increasecompetitiveness
 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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 Managing
Managing aa Human
Human Resource
Resource Surplus
Surplus
(cont’d)
(cont’d)
• Downsizing Approaches
 Attrition 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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 Managing
Managing aa Human
Human Resource
Resource Surplus
Surplus
(cont’d)
(cont’d)
• 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
Making Downsizing
Downsizing More
More Effective
Effective

Figure 2–9
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 HR
HR Planning
Planning in
in Mergers
Mergers and
and Acquisitions
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
 Communicating decisions
 Revising the organization structure
 Merging HR activities

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 Measuring
Measuring HR
HR Effectiveness
Effectiveness
Using
Using HR
HR Metrics
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:
 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
Examples of
of Strategic
Strategic and
and Operational
Operational
HR
HR Metrics
Metrics

Figure 2–10
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 Measures
Measures of
of Strategic
Strategic HR
HR Effectiveness
Effectiveness
• Return on Investment (ROI)
 Calculation showing the value of expenditures for HR
activities.

C
ROI 
A B
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

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 Measures
Measures of
of Strategic
Strategic HR
HR Effectiveness
Effectiveness
(cont’d)
(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
 Financial
 Internal business processes
 Customer
 Learning and growth

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 HR
HR Measurement
Measurement and
and Benchmarking
Benchmarking
• Benchmarking
 Comparing specific measures of performance against
data on those measures in other “best practice”
organizations
• Common Benchmarks
 Total compensation as a percentage of net income
before taxes
 Percent of management positions filled internally
 Rupee sales per employee
 Benefits as a percentage of payroll cost

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 Assessing
Assessing HR
HR Effectiveness
Effectiveness
• HR Audit
 A formal research effort that evaluates the current state
of HR management in an organization
 Audit areas:
 Legal compliance
 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

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