Strategy and Human

Resources Planning

Human Resource Management

Managing Human Resources
SnellBohlander
Bohlander
Snell 14th edition

2007 Thomson/South-Western. PowerPoint Presentation by Charlie Cook

All rights reserved. The University of West Alabama
 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 organizations 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.

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 Objectives (contd)
After studying this chapter, you should be able to:
6. Understand the requirements of strategy
implementation.
7. Recognize the methods for assessing and
measuring the effectiveness of strategy.

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 Strategic Planning and Human Resources
Strategic Planning
Procedures for making decisions about the
organizations 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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 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
Strategy formulationproviding input as to what is
possible given the types and numbers of people
available.
Strategy implementationmaking primary resource
allocation decisions about structure, processes, and
human resources.

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 HRP and Strategic Planning
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

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 Figure 21 Linking Strategic Planning and Human Resources

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 Step One: Mission, Vision, and Values
Mission
The basic purpose of the organization as well as its
scope of operations
Strategic 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

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

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 Figure 22 Five Forces Framework

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 Step Three: Internal Analysis

Culture Competencies

Internal
Analysis

Composition

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 Scanning the Internal Environment
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?

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 Competitive Advantage through People
Core Competencies
Integrated knowledge sets within an organization
that distinguish it from its competitors and deliver
value to customers.
Sustained competitive advantage through
people is achieved if these human resources:
1. Are valuable.
2. Are rare and unavailable to competitors.
3. Are difficult to imitate.
4. Are organized for synergy.

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 Composition: The Human Capital
Architecture
Core knowledge workers
Employees who have firm-specific skills that are
directly linked to the companys 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

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 Composition: The Human Capital
Architecture (contd)
Contract labor
Employees whose skills are of less strategic value
and generally available to all firms.
Example: General electrician

Alliance/partners
Individuals and groups with unique skills, but those
skills are not directly related to a companys core
strategy.
Example: Independent product label designer

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 Figure 23 Mapping Human Capital

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 Forecasting: A Critical Element of Planning
Forecasting involves:
a. forecasting the demand for labor
b. forecasting the supply of labor
c. balancing supply and demand considerations.

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 Figure 24 Model of HR Forecasting

FORECASTING DEMAND

Considerations Techniques BALANCING

Product/service demand Trend analysis SUPPLY AND
DEMAND
Technology Managerial estimates
Financial resources Delphi technique
Absenteeism/turnover (Shortage)
Organizational growth Recruitment
Management philosophy Full-time
Part-time
Recalls
Techniques External Considerations
Staffing tables Demographic changes (Surplus)
Markov analysis Education of the workforce Reductions
Skills inventories Labor mobility Layoffs
Management inventories Government policies Terminations
Replacement charts Unemployment rate Demotions
Succession planning Retirements

FORECASTING SUPPLY

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 Forecasting Demand for Employees

Quantitative Methods

Forecasting Demand

Qualitative Methods

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 Quantitative Approach: Trend Analysis
Forecasting labor demand based on an
organizational index such as sales:
1. Select a business factor that best predicts human
resources needs.
2. Plot the business factor in relation to the number of
employees to determine the labor productivity ratio.
3. Compute the productivity ratio for the past five years.
4. Calculate human resources demand by multiplying
the business factor by the productivity ratio.
5. Project human resources demand out to the target
year(s).

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 Figure 25 Example of Trend Analysis of HR Demand

BUSINESS LABOR = HUMAN RESOURCES

FACTOR PRODUCTIVITY DEMAND
YEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES)

2000 $2,351 14.33 164

2001 $2,613 11.12 235
2002 $2,935 8.34 352
2003 $3,306 10.02 330
2004 $3,613 11.12 325
2005 $3,748 11.12 337
2006 $3,880 12.52 310
2007* $4,095 12.52 327
2008* $4,283 12.52 342
2009* $4,446 12.52 355
*Projected figures

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 Qualitative Approaches
Management Forecasts
The opinions (judgments) of supervisors, department
managers, experts, or others knowledgeable about
the organizations 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.

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 Forecasting the Supply of Employees:
Internal Labor Supply
Staffing Tables
Markov Analysis
Skill Inventories
Replacement Charts
Succession Planning

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 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.
Markov Analysis
A method for tracking the pattern of employee
movements through various jobs.

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 Figure 26 Hypothetical Markov Analysis for a Retail Company

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 Internal Demand Forecasting Tools
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.
Succession Planning
The process of identifying, developing, and tracking
key individuals for executive positions.

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 Highlights in HRM 2
Succession-
Planning Checklist
RATE THE SUCCESS OF YOUR
SUCCESSION PLANNING
For each characteristic of a
best-practice succession-
planning and management
program appearing in the left
column below, enter a number
to the right to indicate how
well you believe your
organization manages that
characteristic. Ask other
decision makers in your
organization to complete this
form individually. Then compile
the scores and compare notes.

Scores

Source: From William J. Rothwell, Putting Success into Your Succession Planning,
The Journal of Business Strategy 23, no. 3 (May/June 2002): 3237. Republished with
permissionThomson Media, One State Street, 26th Floor, New York, NY 10004.
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 Figure 27 An Executive Replacement Chart

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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.

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 Corporate Strategy

Growth and Mergers and

Diversification Acquisitions

Corporate
Strategy

Strategic Alliances
and Joint Ventures

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 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.

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 Functional Strategy: Ensuring Alignment
External Fit (or External Alignment)
Focuses on the connection between the business
objectives and the major initiatives in HR.
Internal Fit (or Internal Alignment)
Aligning HR practices with one another to establish a
configuration that is mutually reinforcing.

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 Highlights in HRM 4

Source: Company document.

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 Figure 28 The 7-S Model

Source: McKinsey & Company

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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
Reducing headcount
Making layoff decisions
Seniority or performance?
Labor agreements

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 Step Six: Evaluation and Assessment
Evaluation and Assessment Issues
Benchmarking: The process of comparing the
organizations 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

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 Highlights in HRM 5

The Top Ten Measures Of Human Capital

1. Your most important issues
2. Human capital value added
3. Human capital ROI
4. Separation cost
5. Voluntary separation rate
6. Total labor-cost/revenue percentage
7. Total compensation/revenue percentage
8. Training investment factor
9. Time to start
10. Revenue factor
Source: The Top 10 Measures of Human Capital Management, HRFocus 78, no. 5 (May 2001): 8.
Copyright 2001. Reprinted by permission of the publisher via Copyright Clearance Center.
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 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

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 Figure 29 Balanced Scorecard

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 Figure 210 Assessing Internal Fit

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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.

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 Key Terms
Balanced Scorecard (BSC) replacement charts
benchmarking skill inventories
core competencies staffing tables
core values strategic human resources
cultural audits management (SHRM)
environmental scanning strategic planning
human resources planning strategic vision
(HRP) succession planning
management forecasts SWOT analysis
Markov analysis trend analysis
mission value creation
organizational capability

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 Calculating Turnover
and Absenteeism

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 Employee Turnover Rates
Computing Turnover Rates:

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 Employee Turnover Rates (contd)
Computing Turnover Rates (contd):

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 Highlights in HRM 6
Costs Associated With The Turnover Of One Computer Programmer
(Turnover costs = Separation costs + Replacement costs + Training costs)

Separation costs
1. Exit interview cost for salary and benefits of both interviewer and departing employee
during the exit interview = $30+$30 = $60
2. Administrative and record-keeping action = $30
Total separation costs = $60 + $30 = $90
Replacement costs
1. Advertising for job opening = $2,500
2. Preemployment administrative functions and record-keeping action = $100
3. Selection interview = $250
4. Employment tests = $40
5. Meetings to discuss candidates (salary and benefits of managers while participating in
meetings )= $250
Total replacement costs = $2,500 + $100 + $250 + $40 + $250 = $3,140
Training costs
1. Booklets, manuals, and reports = $50
2. Education = $240/day for new employees salary and benefits x 10 days of workshops,
seminars, or courses = $2,400
3. One-to-one coaching = ($240/day/new employee + $240/day/staff coach or job expert) x 20
days of one-to-one coaching = $9,600
4. Salary and benefits of new employee until he or she gets up to par = $240/day for salary
and benefits x 20 days = $4,800
Training costs = $50 + $2,400 + $9,600 + $4,800 = $16,850
Total turnover costs= $90 + $3,140 + $16,850 = $20,080
Source: Adapted from the book Turning Your Human Resources Department into a Profit CenterTM by Michael Mercer, Ph.D. (Castlegate Publishers, Inc.,
Barrington, Illinois). Copyright 2002 Michael Mercer. Reproduced with permission from Michael Mercer, Ph.D., www.DrMercer.com.
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 Employee Absenteeism Rates
Computing Absenteeism Rates

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