Chapter Two

Strategy and Human

Resources Planning
Objectives
After studying this chapter, you should be able to:
1. Identify the advantages of integrating human resources 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 human resources forecasting.
5. Explain the linkages between competitive strategies and HR.
6. Understand the requirements of strategy implementation.

2–2
What is strategy?
What is strategic planning
What is HR planning
what is strategic human resource planning?

2–3
 Strategic Planning

Procedures for making decisions about the

organization’s long-term goals and strategies

 focus on how the organization will position

itself relative to its competitors in order to ensure its long-
term survival, create value, and grow.

2–4
Human Resources Planning (HRP)

Process of anticipating and making provision for

the movement (flow) of people into, within, and
out of an organization.

 its purpose is to help managers organize their human

resources as effectively as possible, where and when they
are needed, to accomplish the organization's goals.

2–5
Strategic Human Resources Management

combines strategic planning and HR planning-

linking process
The pattern of human resources deployments and
activities that enable an organization to achieve its
strategic goals

2–6
Strategic Human Resources Management
strategic planning affects or is affected by Human resources
planning in strategic formulation process:

1 In development of Mission, Vision, and Values

2 In environmental scanning
3 In strategic formulation
4 In strategic implementation
5 In strategic performance evaluation

The following figure show the integration( linkage)

2–7
Step One: Mission, Vision, and Values
• Mission
 The basic purpose of the organization as well as its scope
of operations
 is a statement of the organization's reason for existing.
• 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

2–9
Step Two: Environmental Scanning
• Macro Environment Scanning
 The systematic monitoring of the major external
forces influencing the organization.
1. Economic factors: general and regional conditions
2. Technological changes: robotics and office automation
3. Political and legislative issues: laws and administrative
rulings
4. Social concerns: child care and educational priorities
5. Demographic trends: age, composition, and literacy

2–10
 Environmental Scanning---------
Micro factors: Five Forces Framework of competitive analysis
 Environmental Scanning---------

Internal environment Analysis

• Focus on the three Cs (capabilities, composition, and
culture) of the organization
• It can reveal a great deal about where it stands today.
Culture Competencies

Internal
Analysis

Composition

2–13
Scanning the Internal Environment
1. 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?

2–14
Scanning the Internal Environment
2. Competency scanning
 Scanning Knowledge, skill and Ability
Core Competencies
 Integrated knowledge, skills, and ability sets within
an organization that distinguish it from its
competitors and deliver value to customers.
 Resulted in sustained competitive advantage
 sustained competitive advantage is realized when
human resources are:
1. Valuable.
2. Rare and unavailable to competitors.
3. Difficult to imitate.
4. Organized for synergy.
2–15
 Scanning the Internal Environment
3. Scanning HR Composition:
 HR Composition is the Human Capital Architecture
 Core knowledge workers
 Employees who have firm-specific skills that are directly
linked to the company’s strategy.
 Example: Senior software programmer

 Traditional job-based employees

 Employees with skills to perform a predefined job that are
quite valuable to a company, but not unique.
 Example: Security guard

2–16
Scanning the Internal Environment: Composition

3. Contract labor
 Employees whose skills are of less strategic value and
generally available to all firms.
 Example: General electrician

4. Alliance/partners
 Individuals and groups with unique skills, but those skills
are not directly related to a company’s core strategy.
 Example: Independent product label designer

2–17
 Forecasting: A Critical Element of Planning

• Managers must continually forecast both the future

needs and the capabilities of the firm in order to do
an effective job at strategic planning.
• Forecasting involves:
1. Forecasting the demand for labor
2. Forecasting the supply of labor
3. Balancing supply and demand considerations.
Forecasting Demand for Employees

Quantitative
QuantitativeMethods
Methods

Forecasting
Forecasting Demand
Demand

Qualitative
QualitativeMethods
Methods
Forecasting Demand for Employees
Quantitative Approach
Nave method
Waiting average method
Exponential smoothing
Regression method

2–20
Forecasting Demand for Employees
• Qualitative Approaches
• Management Forecasts
 The opinions (judgments) of supervisors, department
managers, experts, or others knowledgeable about the
organization’s future employment needs.
• Delphi Technique
 An attempt to decrease the subjectivity of forecasts by
soliciting and summarizing the judgments of a preselected
group of individuals.
 The final forecast represents a composite group judgment.

2–21
Forecasting the Supply of Employees
Internal Labor Supply
• Staffing Tables
• Skill Inventories
• Replacement Charts
• Succession Planning

2–22
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.
. Skill Inventories
 Files of personnel education, experience, interests,
skills, etc., that allow managers to quickly match job
openings with employee backgrounds.

2–23
Internal Demand Forecasting Tools
• Replacement Charts
 Listings of current jobholders and persons who are
potential replacements if an opening occurs.
• Succession Planning
 The process of identifying, developing, and tracking
key individuals for executive positions.

2–24
Step Four: Formulating Strategy
• Strategy Formulation
 Moving from simple analysis to devising a coherent course
of action.
 is categorized as corporate strategy, business level
strategy, and functional strategy

2–25
Formulating Strategy: corporate strategy
• Diversification • Expansion
Strategic Alliances Strategic Alliances
and Joint Ventures and Joint Ventures
Mergers and Acquisitions Mergers and Acquisitions

2–26
Formulating Strategy: Business Strategy
• 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.
 Low-cost strategy: competing on productivity and
efficiency
 Keeping costs low to offer an attractive price to
customers (relative to competitors).
 Differentiation strategy: compete on added value
 Involves providing something unique and distinctive to
customers that they value.

2–27
Formulating Strategy: Functional Strategy
• Ensuring Alignment
Vertical Fit/Alignment
• focuses on the connection between the business's
objectives and the major initiatives undertaken by
HR.
For example, if a company's strategy focuses on
achieving low cost, its HR policies and practices need
to reinforce this idea by reinforcing efficient and
reliable behavior on the part of employees, enhanced
productivity, and so on.

2–28
Formulating Strategy: Functional Strategy
Horizontal Fit/Alignment
• HR practices are all aligned with one another
internally to establish a configuration that is mutually
reinforcing.
• Example: the entire range of the firm's HR practices-
from its job design, staffing, training, performance
appraisal, and compensation-need focus on the
to

same objectives.

2–29
Step Five: Strategy Implementation
• Taking Action: Reconciling Supply and Demand
 Balancing demand and supply considerations
 Forecasting business activities (trends)
 Locating applicants
 Organizational downsizing
 Reducing “headcount”
 Making layoff decisions
 Seniority or performance?
 Labor agreements

2–30
 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
 To accomplish this, a benchmarking team would collect
metrics on its own company's performance and those of
other firms to uncover any gaps.
• The HR metrics a firm collects fall into two basic
categories
1. Human capital metrics:
 Assess aspects of the workforce
2. HR metrics
 Assess the performance of the HR function itself

2–31
Measuring 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

2–32
2–33