Chapter 2

Human Resources:
Strategic Planning
The Challenges of Human Resources Management
Principles of Human Resource

Management
16 e
Bohlander | Snell
1–1
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2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
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Chapter Objectives
After studying this chapter, you should be able to
LEARNING OUTCOME 1 Identify the advantages of integrating human resources planning

and strategic planning.
LEARNING OUTCOME 2 Understand how an organization’s competitive environment

influences its strategic planning.
LEARNING OUTCOME 3 Understand why it is important for an organization to do an internal

resource analysis.
LEARNING OUTCOME 4 Describe the basic tools used for human resources forecasting.
LEARNING OUTCOME 5 Explain the linkages between competitive strategies and HR.
LEARNING OUTCOME 6
Understand what is required for a firm to successfully implement a
strategy.
LEARNING OUTCOME 7
Recognize the methods for assessing and measuring the
effectiveness of a firm’s strategy.
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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.
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Linking Strategic Planning and HRP
• Strategic Analysis
 What human resources are needed and what are
available?
• Strategic Formulation
 What is required and necessary in support of human
resources?
• Strategic Implementation
 How will the human resources be allocated?
Human Resources Strategic

Planning Planning
1–4
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Strategic Planning and HR Planning
• Strategic Human Resources Management (SHRM)

 The pattern of human resources deployments and
activities that enable an organization to achieve its
strategic goals
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1–6
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Step One: Mission, Vision, and Values
• Mission
 The basic purpose of the organization as well as its
scope of operations
• 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
• Values
 The strong and enduring beliefs and principles that the
company uses as a foundation for its decisions
1–7
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Step Two: Environmental Analysis
• External Scanning
• Internal Scanning.
External Scanning
 The systematic monitoring of the major external forces influencing the
organization.
– Economic factors: general, regional, and global conditions
– Industry and competitive trends: new processes, services,
and innovations
– Technological changes: robotics and office automation
– Government and legislative issues: laws and
administrative rulings
– Social concerns: child care and educational priorities
– Demographic and labor market trends: age, composition, literacy, and immigration
1–8
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Internal Scanning
Culture Capabilities
Internal
Analysis
Composition
1–9
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Corporate Culture: Values, Assumptions,
Beliefs, and Expectations (VABEs)
• Cultural Audits
 Audits of the culture and quality of work life
in an organization.
– How do employees spend their time?
– How do they interact with each other?
– Are employees empowered?
– What is the predominant leadership style
of managers?
– How do employees advance within
the organization?
1–10
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Forecasting: A Critical Element of Planning
• Forecasting involves:
 forecasting the demand for labor
 forecasting the supply of labor
 balancing supply and demand considerations.
1–11
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Forecasting the Supply of Employees:
Internal Labor Supply
• Skill Inventories
• Replacement Charts
• Succession Planning
• Staffing Tables
• Markov Analysis
1–12
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• Skill 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.
1–13
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1–14
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• Succession Planning
 The process of identifying, developing, and tracking
key individuals for executive positions.
• Staffing Table:
 A graphic representation of all organizational
jobs, along with the numbers of employees
currently occupying those jobs and future
(monthly or yearly) employment requirements.
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Internal Labor Supply: Markov Analysis
Markov Analysis: A method for tracking the pattern of

employee movements through various jobs and turnover.
1–16
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Forecasting Demand for Employees
Quantitative Methods
Forecasting Demand
Qualitative Methods
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Forecasting labor demand
Quantitative Approach: Trend Analysis
• Forecasting labor demand based on an

organizational index such as sales:
 Select a business factor that best predicts human
resources needs i.e Sales.
 Plot the business factor in relation to the number of
employees to determine the labor productivity ratio.
 Compute the productivity ratio for the past five years.
 Calculate human resources demand by multiplying the
business factor by the productivity ratio.
 Project human resources demand out to the
target year(s).
1–18
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Forecasting Demand for Employees
1–19
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Step Four: Formulating Strategy
• Strategy Formulation
 Moving from simple analysis to devising a coherent
course of action.
• SWOT analysis
 A comparison of strengths, weaknesses, opportunities,
and threats for strategy formulation purposes.
 Use the strengths of the organization to capitalize on
opportunities, counteract threats, and alleviate internal
weaknesses.
1–20
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Step Four: Formulating Strategy
• 1. Corporate strategy
• 2. Business strategy
• 3. Functional Strategy
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Corporate strategy:
• Corporate strategy:
is primarily about the choice of direction for
a firm as a whole and the management of
its business or product portfolio
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1. Corporate strategy
Growth and Mergers and

Diversification Acquisitions
Corporate
Strategy
Strategic Alliances
and Joint Ventures
1–23
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2. Business Strategy
 Business strategy focuses on improving the competitive position of a

company’s or business unit’s products or services within the specific
industry or market segment that the company or business unit serves.
 A. Low-cost strategy: competing on productivity
and efficiency
– Keeping costs low to offer an attractive price to customers (relative to competitors).
 B. Differentiation strategy: compete on added value
– Involves providing something unique and distinctive to customers that they value.
• Value Creation
 What the firm adds to a product or service by virtue of making it; the amount of
benefits provided by the product or service once the costs of making it are
subtracted
(value = benefits - costs).
1–24
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3. Functional Strategy
• Functional Strategy: Ensuring Alignment

 External Fit/Alignment
– Focuses on the connection between the business
objectives and the major initiatives in HR.
 Internal Fit/Alignment
– Aligning HR practices with one another to establish
a configuration that is mutually reinforcing.
1–25
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Step Five: Strategy Implementation
• Taking Action: Reconciling Supply and Demand

 Balancing demand and supply considerations
– Forecasting business activities (trends)
– Locating applicants
 Organizational downsizing, outsourcing, offshoring

– Reducing “headcount”
 Making layoff decisions

– Seniority or performance?
– Labor agreements
1–26
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Step Six: Evaluation and Assessment
• Evaluation and Assessment Issues

 Benchmarking: The process of comparing the
organization’s processes and practices with those of
other companies
 Human capital metrics
– Assess aspects of the workforce
 HR metrics
– Assess the performance of the HR function itself
1–27
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Measuring a Firm’s Strategic Alignment
• Strategy Mapping and the Balanced

Scorecard
 Balanced Scorecard (BSC)
– A measurement framework that helps managers
translate strategic goals into operational objectives
• financial
• customer
• processes
• learning
1–28
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Ensuring Strategic Flexibility for the Future
• Organizational Capability
 Capacity of the organization to act and change in
pursuit of sustainable competitive advantage.
 Coordination flexibility
– The ability to rapidly reallocate resources to new or
changing needs.
 Resource flexibility
– Having human resources who can do many different
things in different ways.
1–29
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Key Terms
Balanced Scorecard (BSC) replacement charts

benchmarking skill inventories
core capabilities staffing tables
core values strategic human resources
cultural audits management (SHRM)
environmental scanning strategic planning
human capital readiness strategic vision
human resources planning (HRP) succession planning
management forecasts SWOT analysis
Markov analysis trend analysis
mission value creation
organizational capability
1–30
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Chapter 2 - Learning Outcomes
Learning Outcome Statements Related Outcomes from Body of the Text
1 Identify the advantages of integrating human Why is HR planning integral to a firm’s strategic planning? As an HR professional, what
resources planning and strategic planning. do you think you could do to tie the two functions together?
2 Understand how an organization’s competitive

What external factors in the environment do you think firms are most likely to overlook
when formulating their business strategies? How can an HR manager help its executive
environment influences its strategic planning.
team get a fuller picture of the competitive environment in which it operates?
Think back to the discussion in Chapter 1 about the auto-parts makers that had to
3 Understand why it is important for an look for new business lines when GM, Ford, ad Chrysler sales plummeted in the
organization to do an internal resource last recession. How do you think the auto-parts makers assessed their ability to
analysis. enter their new markets? Do you think they looked first at new markets and then
the capabilities of their employees and external partners or vice versa?
4 Describe the basic tools used for human

resources forecasting.
If you are currently employed, ask your manager how your firm goes about
forecasting
Think about a firm you enjoy doing business with or one you don’t. What
5 Explain the linkages between competitive
competitive strategy does it pursue? Do you think its employees have the right
strategies and HR.
skills given the strategy? Do you detect any mismatches?
6 Understand what is required for a firm to

Why is it difficult to translate a firm’s strategy into HR deliverables that actually get
the job done? What part of this endeavor do you think HR managers struggle with
successfully implement a strategy.
the most?
7 Recognize the methods for assessing and

measuring the effectiveness of a firm’s
Why do some organizations rely more on some HR metrics than others? Think
about the businesses on or near your campus. Which metrics do you think they
strategy. are most likely to track?
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Employee Turnover Rates
• Computing Turnover Rates:

 The U.S. Department of Labor suggests the following
formula for computing turnover rates:
Thus, if there were 25 separations during a month and the

total number of employees at mid month was 500, the
turnover rate would be:
1–32
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Human Resources:

The Challenges of Human Resources Management

Principles of Human Resource

LEARNING OUTCOME 1 Identify the advantages of integrating human resources planning

LEARNING OUTCOME 2 Understand how an organization’s competitive environment

LEARNING OUTCOME 3 Understand why it is important for an organization to do an internal

• Human Resources Planning (HRP)

Human Resources Strategic

• Strategic Human Resources Management (SHRM)

Markov Analysis: A method for tracking the pattern of

• Forecasting labor demand based on an

Growth and Mergers and

 Business strategy focuses on improving the competitive position of a

• Functional Strategy: Ensuring Alignment

• Taking Action: Reconciling Supply and Demand

 Organizational downsizing, outsourcing, offshoring

 Making layoff decisions

• Evaluation and Assessment Issues

• Strategy Mapping and the Balanced

Balanced Scorecard (BSC) replacement charts

Learning Outcome Statements Related Outcomes from Body of the Text

2 Understand how an organization’s competitive

4 Describe the basic tools used for human

6 Understand what is required for a firm to

7 Recognize the methods for assessing and

• Computing Turnover Rates:

Thus, if there were 25 separations during a month and the

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