Ch. 2: Strategy and HR Management

1. Ch. 2: Strategy and HR Management • STRATEGY • Proposition organization follows to compete successfully, thus surviving and growing. • STRATEGIC HRM • Using Human Capital to gain or keep competitive advantage, leading to greater organizational effectiveness.

2. Strategic HR Management Process

3. Strategic Success with HR Consultation • Employment security • HR planning • Selective recruiting, careful selection • Competitive wages/incentives • Performance enhancement • Empowerment • Training/cross training • Promotion from within • Measurement

4. Operationalizing HR Strategy • Thinking Strategically • Know the business • Focus on key business goals • Know what to measure and measure • Be future-oriented; allow the organization to be prepared

5. Some Aspects of HR with Core Competency Potential • Excellent service • Consultation • Advocacy • Innovation • Quality • Performance • HR special skills

6. HR Consulting Contributions to Organizational Effectiveness • Maximizing individual, team and organizational performance • Customer satisfaction • Return on investment / bottom line

7. Organizational Productivity • Productivity • Measure of the quantity and quality of work done, considering the cost of the resources used. • Unit labor cost • Ratio of average cost of workers and their average levels of output.

8. Approaches to Improving Organizational Productivity

9. HR Effectiveness and Financial Performance • Effectiveness • The extent to which goals have been met. • Efficiency • The degree to which operations are done in an economical manner.

10. Hourly Compensation Costs for Manufacturing Production Workers Source: U.S. Bureau of Statistics, www.bls.gov.

11. Human Resource Planning • Human Resource (HR) Planning • Analyzing and identifying the need for and availability of human resources so that the organization can meet its objectives. • HR Planning’s Strategic Role • Obtain information from managers to develop HR projections for top management to use in strategic planning and setting organizational goals.

12. Purpose of HR Planning • Right people • Right human capital • Right place • Right time

13. Match? Strategic HR Planning Forecast HR requirements (demand) Forecast HR availability (supply) Develop programs to increase supply or reduce demand Develop programs to decrease supply or increase demand Yes No HR Forecasting

14. Example of distribution of responsibilities in HR Planning

15. Management succession between generations of owners Attracting and retaining qualified outsiders HR Planning Issues in Small Businesses Family relationships and HR policies Evolution of HR activities as the business grows Small Businesses and HR Planning

16. HR Planning Process

17. Government Influences Economic Conditions HR Planning Geographic and Competition Concerns Workforce Composition Scanning the External Environment • Environmental Scanning • Process of studying the environment of the organization to pinpoint opportunities and threats.

18. 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?

19. Assessing the Internal Workforce (cont’d) • Organizational Capabilities Inventory • HRIS databases—sources of information about employees’ knowledge, skills, and abilities (KSAs) • Components • Individual employee demographics • Individual career progression • Individual job performance data

20. Forecasting HR Supply and Demand • Forecasting • The use of information from the past and present to identify expected future conditions. • Types of Forecasts • HR Demand • Internal Supply • External Supply • Forecasting Periods • Short-term—less than one year • Intermediate—up to five years • Long-range—more than five years

21. Mathematical Judgmental Estimates Rules of thumb Delphi Technique Nominal Groups Statistical regression analysis Simulation models Productivity ratios Staffing ratios HR Forecasting Methods

22. Forecasting HR Demand • Organization-Wide Estimate for Total HR 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.

23. Forecasting HR Supply • Forecasting External HR Supply • Factors: • Net migration in area • Individuals entering and leaving the workforce • Graduation rates • Changing workforce composition and patterns • Economic forecasts • Technological developments • Competing employers • Government regs and legislation

24. Estimating Internal Labor Supply for a Given Unit

25. Forecasting HR Supply (cont’d) • Succession Planning • Process of identifying a long-term plan for the orderly replacement of key employees.

26. Workforce Realignment • Issues in Matching the Supply of Labor with the Demand for Labor • Managing a Human Resources Surplus • Outplacement Services • HR Planning in Mergers and Acquisitions

27. Workforce Reductionsand the WARN Act Workforce Downsizing Human Resource Surplus Attrition and Hiring Freezes Voluntary Separation Programs Layoffs Managing a Human Resources Surplus

28. Managing a Human Resource Surplus • Outplacement services : • Personal career counseling • Resume preparation and typing services • Interviewing workshops • Referral assistance • Severance payments • Continuance of medical benefits • Job retraining

29. Making Downsizing More Effective

30. Use overtime Add contingent workers Human Resource Shortage Bring back recent retirees Outsource work Reduce turnover Managing a Labor Shortage

31. HR Planning in Mergers and Acquisitions • Cultural Compatibility • Match in factors such as decision-making styles, levels of teamwork, information-sharing philosophies, and the formality of the two organizations • HR’s Role • Blending cultures • Revising the org structure • Merging HR activities

32. Degree of internal integration Autonomy Cultural Fitin Mergers and Acquisitions Adaptability Employee trust Diversity Key Factors in Cultural Fit

33. Measuring Effectiveness Using HR Metrics • HR Metrics = Specific measures as HR performance indicators. • Demonstrate HR’s value and track its performance. • Characteristics of good HR metrics: • Accuracy. • Linked to strategic and operational objectives. • Clear calculations. • Meet information needs. • Can be compared internally and externally • Can be used to drive HR management efforts

34. Examples of Strategic and Operational HR Metrics Note: FTE equals one employee working full-time one year.

35. 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 period

36. 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

37. Revenue and Income per FTE *Data not reliable. Source: Human Capital Benchmarking Study (Alexandria, VA: SHRM, 2006).

38. 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

39. Assessing HR Effectiveness • HR Audit Formal research effort evaluating current state of HR management in an organization • Audit areas: • Legal compliance • Administrative processes • Recordkeeping • Employee retention • Benefits • Absenteeism and turnover control • Performance management system