Strategy and Human

Resources Planning

Human Resource Management

Snell • Bohlander © 2007 Thomson/South-Western.
All rights reserved.
 Objectives
After studying this chapter, you should be able to:
1. Identify the advantages of integrating HR
planning and strategic planning.
2. Understand how an organization’s competitive
environment influences strategic planning.
3. Recognize the importance of internal resource
analysis.
4. Describe the basic tools for HR forecasting.
5. Explain the linkages between competitive
strategies and HR.
2–2
Objectives (cont’d)
After studying this chapter, you should be able to:

6. Understand the requirements of strategy

implementation.
7. Recognize the methods for assessing and
measuring the effectiveness of strategy.

2–3
 Strategy
Strategy is the direction and scope of an
organization over the long term, which
achieves advantage in a changing
environment through its configuration
of resources and competences with
the aim of fulfilling stakeholder
expectations.
 Strategic Management

Strategy Formulation Strategy Implementation Strategy Evaluation

(The strategic position) (Strategic choices) (Strategy in action)
 Strategic Planning and Human Resources

• Strategic Planning
 Procedures for making decisions about the
organization’s long-term goals and strategies

• Human Resources Planning (HRP)

 Process of anticipating and making provision for the
movement (flow) of people into, within, and out of an
organization.
 Strategic Planning and HRP:
Linking the Processes
Strategic Human Resources Management(SHRM)
 It can be thought of as the pattern of human resources
deployments and activities that enable an organization to
achieve its strategic goals.
 Two issues:
 Strategy formulation—providing input as to what is
possible, whether a firm has the types and numbers of
people available.
 Strategy implementation—making primary resource
allocation decisions about structure, processes, and
human resources.
Figure 2–1 Linking Strategic Planning and Human Resources

2–8
 Step One: Mission, Vision, and Values

• Mission
 The basic purpose of the organization as well as its
scope of operations
• Strategic Vision
 A statement about where the company is going and
what it can become in the future; clarifies the long-term
direction of the company and its strategic intent
• Core Values
 The strong and enduring beliefs and principles that the
company uses as a foundation for its decisions
 Step Two: Environmental Analysis
• Environmental Scanning
 The systematic monitoring of the major external forces
influencing the organization.
1. Economic factors: general and regional conditions
2. Competitive trends: new processes, services, and
innovations
3. Technological changes: robotics and office automation
4. Political and legislative issues: laws and administrative
rulings
5. Social concerns: child care and educational priorities
6. Demographic trends: age, composition, and literacy
The Environment
Macro Environment/ PESTEL Framework

Political Economic

Social Technological

Environmental Legal

2-13
Competitive Environment
 Step Three: Internal Analysis
• Conducting an internal analysis provides strategic
decision makers with an inventory of organizational skills
and resources as well as their performance levels.
• In the context of human resource planning,
internal analysis focuses especially on “the
three Cs”:
• Capabilities,
• Composition,
• Culture.
 Capabilities: People as a Strategic Resource

Core capabilities
• bundles of people, processes, and systems that
distinguish an organization from its competitors
and deliver value to customers.

• In many cases, people are a key resource that

underlies a firm’s core capabilities.

• Organization can achieve sustainable competitive

advantage through people.
Composition: the Human Capital Architecture
 Corporate Culture: Values, Assumptions, Beliefs,
and Expectations (VABEs)

Cultural Audits
• Audits of the culture and quality of work life in
an organization to examine values, attitudes,
beliefs, and expectations (VABEs) of employees.
Values-Based Hiring
• The process of outlining the behaviors that
exemplify a firm’s corporate culture and then
hiring people who are a fit for them.
 Forecasting: A Critical Element of Planning

• Managers must continually forecast both the needs and the

capabilities of the firm for the future in order to do an effective job at
strategic planning.
• Forecasting involves:
a. forecasting the demand for labor
b. forecasting the supply of labor
c. balancing supply and demand considerations.
Figure 2–4 Model of HR Forecasting

FORECASTING DEMAND

Considerations Techniques BALANCING

• Product/service demand • Trend analysis SUPPLY AND DEMAND
• Technology • Managerial estimates
• Financial resources
• Absenteeism/turnover
(Shortage)
• Organizational growth
Recruitment
•Business cycle • Full-time
• Part-time
• Recalls
Techniques External Considerations
• Staffing tables • Demographic changes (Surplus)
• Markov analysis • Education of the workforce Reductions
• Skills inventories • Labor mobility • Layoffs
• Management inventories • Government policies • Terminations
• Replacement charts • Unemployment rate • Demotions
• Succession planning • Retirements

FORECASTING SUPPLY

2–20
• What is the Importance of forecasting?
Forecasting Demand for Employees

Quantitative Methods

Forecasting Demand

Qualitative Methods
Obj4: Describe the
basic tools for
human resources
forecasting.

2–22
 Quantitative Approach: Trend Analysis

• Forecasting labor demand based on an

organizational index such as sales:
1. Select a business factor that best predicts human
resources needs.
2. Plot the business factor in relation to the number of
employees to determine the labor productivity ratio.
3. Compute the productivity ratio for at least the past five
years.
4. Calculate human resources demand by multiplying the
business factor by the productivity ratio.
5. Project human resources demand out to the target
year(s).
Figure 2–5 Example of Trend Analysis of HR Demand

BUSINESS  LABOR = HUMAN RESOURCES

FACTOR PRODUCTIVITY DEMAND
YEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES)

2013 $2,351 14.33 164

2014 $2,613 11.12 235
2015 $2,935 8.34 352
2016 $3,306 10.02 330
2017 $3,613 11.12 325
2018 $3,748 11.12 337
2019 $3,880 12.52 310
2020* $4,095 12.52 327
2021* $4,283 12.52 342
2022* $4,446 12.52 355

*Projected figures

2–24
 Obj4: Describe the
Qualitative Approaches basic tools for
human resources
forecasting.
• Management Forecasts
 The opinions (judgments) of supervisors, department
managers, experts, or others knowledgeable about
the organization’s future employment needs.

Ideally, forecasting should include the use of both

quantitative and qualitative approaches.

2–25
Forecasting the Supply of Employees:
Internal Labor Supply
• Staffing Tables Obj4: Describe the
basic tools for
• Markov Analysis human resources
forecasting.
• Skill Inventories
• Replacement Charts
• Succession Planning

2–26
Forecasting Internal Labor Supply
• Staffing Tables
 Graphic representations of all organizational jobs,
along with the numbers of employees currently
occupying those jobs and future (monthly or yearly)
employment requirements.
• Markov Analysis
 A method for tracking the pattern of employee
movements through various jobs.

Obj4: Describe the

basic tools for
human resources
forecasting.

2–27
© 2007 Thomson/South-Western. All rights reserved. 2–28
Forecasting Internal Labor Supply..Cont

Skill Inventories & management inventories (talent

inventories)
 Files of personnel education, experience, interests, skills,
etc., that allow managers to quickly match job openings
with employee backgrounds.

Replacement Charts
 Listings of current jobholders and persons who are
potential replacements if an opening occurs.

Succession Planning Obj4: Describe the

 The process of identifying, developing,basic
andtools
tracking
for key
human resources
individuals for executive positions. forecasting. 2–29
© 2007 Thomson/South-Western. All rights reserved. 2–30
 Assessing firm’s human capital readiness: gap
analysis

• Once a company has assessed both the supply and

demand for employee skills, talent and know how it can
begin to understand it is human capital readiness. Any
difference between employees required versus the
employees available represent a gap that need to be
remedied.

© 2007 Thomson/South-Western. All rights reserved. 2–31

 Step Four: Formulating Strategy
• After managers have analyzed the internal strengths and
weaknesses of the firm as well as external opportunities
and threats, they have the information they need to
formulate corporate, business and HR strategies for the
organization.

• A comparison of strengths, weaknesses, opportunities,

and threats normally is referred to as SWOT analysis.

© 2007 Thomson/South-Western. All rights reserved. 2–32

 Step Four: Formulating Strategy
• Corporate strategy
• A firm corporate strategy include the
market in which it will compete, against
whom. Some firms choose a concentration
strategy that focuses on only limited
portion of the industry.

© 2007 Thomson/South-Western. All rights reserved. 2–33

Corporate Strategy

Growth and Mergers and

Diversification Acquisitions

Corporate
Strategy

Strategic Alliances
and Joint Ventures

2–34
 Growth and Diversification
• As companies grow, their strategic choices tend to focus
on geographic, volume, and product expansion.

• Growth centers on three related elements:

(a) increased employee productivity,
(b) a greater number of employees, and
(c) employees developing or acquiring new skills.

• Thus, a firm’s staffing, training, employee motivation

efforts, and the like can either enable the company to
grow or limit its potential

© 2007 Thomson/South-Western. All rights reserved. 2–35

 Growth and Diversification
• As companies diversify into new businesses,
managers inevitably are faced with a “make or buy”
decision.

• Diversification can be related or unrelated.

© 2007 Thomson/South-Western. All rights reserved. 2–36

 Corporate Strategy
• Mergers and Acquisitions
• When companies merge, they can often streamline their
costs by eliminating duplicate functions, such as
duplicate accounting, finance, and HR departments, for
example.
• However, despite some of the savings realized as a
result of acquisitions and mergers, many of them do not
go well (measured by ROI, shareholder value, and the
like).
• Often the failure is due to cultural inconsistencies, as
well as conflicts among the managers of each firm.

© 2007 Thomson/South-Western. All rights reserved. 2–37

 Corporate Strategy
Strategic Alliances and Joint Ventures
• Sometimes firms do not acquire or merge with another
firm but instead pursue strategies such as a strategic
alliance or joint venture.

• Especially when firms enter into international joint

ventures, the issues of culture become paramount.

• On the front end, HR plays a vital role in assessing the

compatibility of cultures and potential problems.

© 2007 Thomson/South-Western. All rights reserved. 2–38

Business Strategy
• Is focused on how the company will compete against
rival firms in order to create value for customers.

• We can think of value creation in a cost/benefit

scenario (value 5 benefits – costs).

• Companies can increase the value they offer

customers by decreasing the costs of their goods and
services or by increasing the benefits their products
provide (or some combination of the two).
Generic Competitive Strategies
Functional Strategy: Ensuring Alignment
• Managers need to translate strategic priorities into
functional areas of the organization. (marketing,
human resources, manufacturing).

Vertical Fit/Alignment
• Focuses on the connection between the business
objectives and the major initiatives in HR.
Horizontal Fit/Alignment Obj5: Explain the
linkages between
• Aligning HR practices with one another tocompetitive
establish a
strategies and HR.
configuration that is mutually reinforcing.

2–41
 Step Five: Strategy Implementation

“well begun is half done”

© 2007 Thomson/South-Western. All rights reserved. 2–42

© 2007 Thomson/South-Western. All rights reserved. 2–43
Step Six: Evaluation and Assessment

• To evaluate performance, firms need to establish a set of

parameters that focus on the desired outcomes of strategic
planning, as well as the metrics they will use to monitor how well the
firm delivers against those outcomes
 Benchmarking
 Human capital metrics
 HR metrics

Obj6: Understand
the requiremes of
strategy
implementation

2–44