MJ11eCh02Strategic HR Management and Planning

1

ROBERT L. MATHIS

JOHN H. JACKSON

Strategic HR Management

and Planning


and Planning

Chapter 2

SECTION 1Nature of

Human Resource

Management

Presented by:

Prof. Dr. Deden Mulyana, SE.,M,Si.

http://www.deden08m.wordpress.com 2–2

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.

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.


Strategic HR Management Process

Figure 2–1

3


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


Globalization of Business and HR

Global Communications

Global Population Changes

Global Economic

Interdependence

Regional Alliances

NAFTA, EU

Globalization Forces

4


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.


Transition to Global Organizations

5


Transition to Global Organizations


Global Employment

Global EmployeeRelations Issues

Global Labor-

Management

Relations

Global Health,

Safety, and

Security

Discrimination

Regulations

Globally

6


Factors Affecting Global HR Management

Political Economic

CulturalLegal


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.

7


Hourly

Compensation Costs

for Manufacturing

Production Workers

Figure 2–2

Hourly Costs (in U.S. Dollars)

Source: U.S. Bureau of Labor Statistics, www.bls.gov; and www.uschinabiz.com, 2004.


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.

8


Organizational Effectiveness and


• 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


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

9


Approaches to Improving Organizational Productivity

Figure 2–3


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”

10


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


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.

11


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


Purpose of HR Planning

Figure 2–4

12


Typical Division of HR Responsibilities: HR Planning

Figure 2–5


HR Planning Process

Figure 2–6

13


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


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

14


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


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

15


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?


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

16


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


HR Forecasting

Figure 2–7

17



(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



(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

18


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 developments and shifts

� Actions of competing employers

� Government regulations and pressures

� Other circumstances affecting the workforce


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.

19


Estimating Internal Labor Supply for a Given Unit

Figure 2–8


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

20


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.


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

21


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



(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.

22



(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


Making Downsizing More Effective

Figure 2–9

23


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


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.

24


Examples of Strategic and Operational HR Metrics

Figure 2–10


Measures of Strategic HR Effectiveness

• Return on Investment (ROI)

�Calculation showing the value of expenditures for HR

activities.

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

25


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


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

26


Costs per Employee of the HR Function

Figure 2–11Source: 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.


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

MJ11eCh02Strategic HR Management and Planning

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