Download Human Resource Management 11e.

ROBERT L. MATHIS
JOHN H. JACKSON
Chapter 2
Strategic HR Management
and Planning
SECTION 1
Nature of
Human Resource
Management
Copyright © 2005 Thomson Business & Professional Publishing.
All rights reserved.
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Learning 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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2–2
Human Resources as a Core 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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2–3
Strategic HR Management Process
Figure 2–1
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2–4
Linkage of Organizational and HR 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
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2–5
Globalization of Business and HR
Global Population
Changes
Global
Communications
Globalization
Forces
Global Economic
Interdependence
Regional Alliances
NAFTA, EU
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2–6
Types of Global Organizations
• Importing and Exporting
 Buying and selling goods and services with
organizations in other countries
• Multinational Enterprise (MNE)
 An organization with operating units located in foreign
countries.
• Global Organization
 An organization having corporate units in a number of
countries that are integrated to operate worldwide.
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2–7
Transition to Global Organizations
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2–8
Transition to Global Organizations
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2–9
Global Employment
Global Employee
Relations Issues
Global LaborManagement
Relations
Discrimination
Regulations
Globally
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Global Health,
Safety, and
Security
2–10
Factors Affecting Global HR Management
Political
Economic
Legal
Cultural
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2–11
Global Cultural 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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2–12
Hourly
Compensation Costs
for Manufacturing
Production Workers
Hourly Costs (in U.S. Dollars)
Source: U.S. Bureau of Labor
Statistics, www.bls.gov; and
www.uschinabiz.com, 2004.
Figure 2–2
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2–13
Global Economic 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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2–14
Organizational Effectiveness and
Strategic HR 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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2–15
Organizational Productivity and HR 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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2–16
Approaches to Improving Organizational Productivity
Figure 2–3
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2–17
Organizational Effectiveness and Financial
Contributions of 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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2–18
Customer Service and Quality Products
Linked to HR Strategies
• High quality products and services are the
results of HR-enhancements to organizational
performance.
 Staffing
 Customer service
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2–19
Organizational Culture and
Organizational 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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2–20
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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2–21
Purpose of HR Planning
Figure 2–4
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2–22
Typical Division of HR Responsibilities:
HR Planning
Figure 2–5
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2–23
HR Planning Process
Figure 2–6
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2–24
Human Resource Planning (cont’d)
• Small Business and HR Planning Issues
 Attracting and retaining qualified outsiders
 Management succession between generations of
owners
 Evolution of HR activities as business grows
 Family relationships and HR policies
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2–25
HR Planning 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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2–26
Benefits of HR 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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2–27
Scanning the External 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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2–28
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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2–29
Assessing the Internal Workforce (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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2–30
Forecasting HR Supply and 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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2–31
HR Forecasting
Figure 2–7
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2–32
Forecasting HR Supply and Demand
(cont’d)
• Forecasting Methods (cont’d)
 Mathematical
 Statistical
regression 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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2–33
Forecasting HR Supply and Demand
(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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2–34
Forecasting HR Supply (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
 Actions
of competing employers
 Government
 Other
developments and shifts
regulations and pressures
circumstances affecting the workforce
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2–35
Forecasting HR 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.
Source: U.S. Office of Personnel Management, www.opm.gov.
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2–36
Estimating Internal Labor Supply for a Given Unit
Figure 2–8
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2–37
Developing and Using a Strategic HR 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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2–38
Managing a Human Resources Surplus
• Workforce Reductions and the Worker
Adjustment and Retraining Notification (WARN
Act)
 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.
 Does
not cover part-time or seasonal workers.
 Imposes
fines for not following notification procedure.
 Has
hardship clauses for unanticipated closures or lack of
business continuance capabilities.
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2–39
Managing a Human Resources Surplus
(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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2–40
Managing a Human Resource Surplus
(cont’d)
• Workforce Realignment (cont’d)
 Positive consequences
 Increase
competitiveness
 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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2–41
Managing a Human Resource Surplus
(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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2–42
Managing a Human Resource Surplus
(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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2–43
Making Downsizing More Effective
Figure 2–9
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2–44
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
 Communicating decisions
 Revising the organization structure
 Merging HR activities
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2–45
Measuring HR 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:
 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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2–46
Examples of Strategic and Operational
HR Metrics
Figure 2–10
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2–47
Measures of Strategic HR 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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2–48
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
 Financial
 Internal business processes
 Customer
 Learning and growth
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2–49
HR Measurement and 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
 Dollar sales per employee
 Benefits as a percentage of payroll cost
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2–50
Costs per Employee of the HR Function
Source: Adapted from HR Department Benchmarks and Analysis (Washington, DC: Bureau of National Affairs, 131, 140. 2004) To purchase
this publication and find out more about other BNA HR solutions visit http://hrcenter.bna.com or call 800-372-1033. Used with permission.
Copyright © 2005 Thomson Business & Professional Publishing. All rights reserved.
Figure 2–11
2–51
Assessing HR Effectiveness
• HR Audit
 A formal research effort that evaluates the current
state of HR management in an organization
 Audit areas:
 Legal
compliance (e.g., EEO, OSHA, ERISA, and FMLA)
 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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2–52