HRM533- Chapter 2 - Lecture notes 2 PDF

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HRM 533CHAPTER 2: STRATEGY AND HUMAN RESOURCES PLANNING2.Strategic Planning and Human Resources PlanningStrategic planning- Procedures for making decisions about the organization’s long-term goals and strategiesHuman resources planning (HRP)- The process of anticipating and providing for the movemen...

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HRM533

2.2

CHAPTER 2: STRATEGY AND HUMAN RESOURCES PLANNING

Step One: Mission, Vision, and Values •

2.1 Strategic Planning and Human Resources Planning

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Strategic planning -

Procedures for making decisions about the organization’s long-term goals and strategies

Human resources planning (HRP) -

The process of anticipating and providing for the movement of people into, within, and out of an organization

•

Developing a Mission Statement •

Strategic human resources management -

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

7 ELEMENTS OF A STRATEGIC PLAN • • • • • • •

Mission statement Core Values SWOT Analysis Action Plans Yearly Objectives Long-Term Goals Vision Statement

•

Mission Statement

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 Core values ✓ The strong and enduring beliefs and principles that guide a firm’s decisions and are the foundation of its corporate culture

To begin crafting a business’s mission statement, one should answer the following questions: ✓ What is my organization’s reason for being? What need does the organization need to fulfill that isn’t already being met by another firm or could be better met? ✓ For whom will the firm fulfill the need? Who are its customers? ✓ Where is the firm’s market and customers? Will the firm operate locally, geographically, or globally? ✓ What core values do the people in the firm share as part of the organization’s mission? ✓ How do these values differentiate the organization from other companies?

HR’s Role in Establishing and Reinforcing a Firm’s Mission, Vision, and Values -

HR managers help embody the firm’s mission, vision, and values within the organization by doing the following: ✓ Communicating them frequently, both informally and formally, via verbal and written communications ✓ Recruiting and hiring employees whose values are consistent with the organization ✓ Translating the mission, vision, and values into job descriptions and specific behaviors and recognizing and rewarding employees based on them

2.3

2.4

Step Two: External Analysis

Step Three: Internal Analysis

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SWOT analysis – A comparison of one’s strengths, weaknesses, opportunities, and

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✓

Summarizes the major facts and forecasts derived from external and

In addition to an external analysis, organizations must also analyze their own strengths and weaknesses.

threats for strategy formulation purposes

Core Capabilities

internal analyses -

Environmental scanning – Systematic monitoring of the major external forces

•

influencing the organization ✓

Includes forces in the business environment (also called the remote

✓

Business environment – Factors in the external environment that a firm

environment) and the competitive environment

Core capabilities •

Integrated knowledge sets within an organization that distinguish it from its competitors and deliver value to customers

•

Value creation •

cannot directly control but that can affect its strategy and performance

What a 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

SWOT ANALYSIS OF AMAZON •

Core capabilities can consist of a combination of three resources:

1.

Processes – “Recipes” or standard routines for how work will be done and results

2.

Systems (technologies) – Include information systems, databases, proprietary

3.

People – Include the knowledge, skills, and abilities of employees most critical for

will be accomplished

technologies, and the like

executing the firm’s plan to create the most value for customers and whose skills are difficult to replicate or replace Sustaining a Competitive Advantage Through People Organizations can achieve a sustained competitive advantage if they have resources— particularly people—that meet the following criteria: ❖

The resources must be valuable.

❖

The resources must be rare.

❖

The resources must be difficult to imitate.

❖

The resources must be organized

Types of Talent and Their Composition in the Workforce Strategic Knowledge

Tend to have unique skills directly linked to the company’s

Workers

strategy and are difficult to replace

Core Employees

Are valuable to a company but not particularly unique or difficult

More sophisticated statistical planning

Delphi technique – Attempts to decrease

methods include modeling or multiple

the subjectivity of forecasts by soliciting

predictive techniques.

and summarizing the judgments of a preselected group of individuals

to replace Forecasting the Supply of Employees Supporting Workers

Have skills that are less central to creating customer value and Staffing Tables and Markov Analyses generally available in the labor market

Complementary

Have skills that are unique and specialized but not directly related

(External) Partners

to a company’s core strategy

•

Staffing table – A table that shows a firm’s jobs, along with the numbers of employees currently occupying those jobs and future (monthly or yearly) employment requirements

•

Corporate Culture

Markov analysis – A method for tracking the pattern of employee movements through various jobs in a firm

Cultural audits

•

•

Audits of the culture and quality of work life in an organization

•

Examine values, attitudes, beliefs, and expectations

Conducting a Cultural Audit

Skill Inventories and Management Inventories •

•

•

How is business conducted within your organization?

•

How do people communicate with one another?

•

How are conflicts and crises resolved?

Skill inventories – Files of personnel education, experience, interests, skills, and so on that allow managers to quickly match job openings with employee backgrounds.

To conduct a cultural audit, employees can be surveyed about how they feel about issues such as:

Quality of fill – A metric designed to measure how well new hires that fill positions are performing on the job

Management inventories – Data gathered on managers

Replacement Charts and Succession Planning •

Replacement charts – Listings of current jobholders and people who are potential replacements if an opening occurs

•

Forecasting

Succession planning – The process of identifying, developing, and tracking key individuals for executive positions

Quantitative Approaches

Qualitative Approaches

Trend analysis – A quantitative approach to

Management forecasts – The opinions

forecasting labor demand based on a factor

(judgments) of supervisors, department

such as sales

managers, experts, or others knowledgeable about the organization’s future employment needs

•

Succession planning and replacement charts are often developed in conjunction with talent reviews. ▪

Talent reviews – Strategic meetings to determine if a company has the human resources it needs to compete in the future

2.5

2.6

Step Four: Formulating a Strategy

Step Five: Executing a Firm’s Strategy

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Strategy formulation builds on a SWOT analysis. ▪

A SWOT analysis can help a company move from formulating a strategy, to

•

Execution is the process of combining the elements of human capital (alignment and ability) and organizational capital (agility and architecture).

devising a plan, to capitalizing on opportunities, to counteracting on threats, to alleviating internal weaknesses. Corporate Strategy •

A firm’s corporate strategy includes the markets in which it will compete, against whom, and how.

HR’s Role in Strategy Execution Remaining Agile

Reconciling Supply and Demand

HR agility can be achieved in two primary

Part of remaining agile includes

ways:

reconciling the firm’s demand for its

•

Coordination agility – The ability

products with its supply of employees.

▪

Growth and diversification

to rapidly reallocate resources to

▪

Mergers and acquisitions

new and changing needs

▪

Strategic alliances and joint ventures

Business Strategy

•

Demand considerations are

Resource agility – Having

based on forecasted trends

resources that can be used in

in business activity.

different ways and people who •

•

•

Supply considerations

Business strategy is more focused on how the company will compete against rival

can perform different functions

involve determining where

firms to create value for customers.

in different ways

and how candidates with

▪

Companies can increase the value they offer customers by decreasing the

the required qualifications

costs of their goods and services (low-cost strategy) or by increasing the

can be found to fill a firm’s

benefits their products provide (differentiation strategy).

vacancies.

2.7 Step Six: Evaluation •

To evaluate their performance, firms need to establish a set of “desired” objectives as well as the metrics they will use to monitor how well their organizations delivered against those objectives. -

The objectives can include achieving a certain level of production, revenue, profit, market share, market penetration, customer satisfaction, and so forth.

Evaluating a Firm’s Strategic Alignment •

HR policies and practices need to achieve two types of fit: 1.

Vertical fit/alignment – Focuses on the connection between the business’s

2.

Horizontal fit/alignment – Focuses on ensuring that the business’s HR

objectives and the major initiatives undertaken by HR

practices are all aligned with one another internally to establish a configuration that is mutually reinforcing •

Balanced scorecard (BSC) -

A measurement framework that helps managers translate strategic goals into operational objectives

Figure 2.2: The Five Forces Framework

Figure 2.3: Primary Stakeholders versus Secondary Stakeholders

Section 2.3b: The Competitive Environment Stakeholders are key people and groups that have an interest in a firm’s activities Section 2.3b: The Competitive Environment

and can either affect them or be affected by them. A firm’s primary stakeholders

Figure 2.2 shows that the competitive environment consists of a firm’s specific

include its investors, employees, customers, suppliers, and creditors. Primary

industry, including the industry’s customers, rival firms, new entrants, substitutes,

stakeholders have a direct stake in the firm and its success. A firm’s secondary

and suppliers.

stakeholders have less of a stake but can nonetheless affect or be affected by the company. Secondary stakeholders include the community in which the firm operates, the government, business groups, and the media. Firms have to analyze and balance the interests of their various stakeholders. One way a firm attempts to balance the interests of its shareholders is by determining how a strategic action is likely to impact each group. As Figure 2.3 shows, the firm may want to involve or at least consult primary stakeholders in major strategic actions. In contrast, secondary stakeholders can be monitored and informed. So, for example, if a firm is considering developing a new product, its suppliers, creditors, and employees should definitely be involved and consulted about the move. Secondary stakeholders, such as the community and the media, can merely be informed about the new strategy when appropriate and their responses monitored.

Figure 2.4: An Example of an HR Dashboard

shows an example of an HR “dashboard,” which is a software that tracks and graphically displays HR statistics so they can be viewed by managers at a glance.

Section 2.3c: HR’s External Analysis Because strategic management is ultimately aimed at creating a competitive advantage, many firms also evaluate their performance against other firms. Benchmarking is the process of looking at your practices and performance in a given area and then comparing them with those of other companies. To accomplish this, a benchmarking team collects metrics on its own company’s performance and those of other firms to uncover any gaps. The gaps help determine the causes of performance differences the team can use to map out a set of best practices. The HR benchmarks, or metrics, a firm collects fall into two basic categories: human capital metrics and HR metrics. Human capital metrics assess aspects of the workforce, whereas HR metrics assess the performance of the HR function itself. Most larger companies use software to track their HR metrics over time. Figure 2.4

Figure 2.5: Mapping Human Capital

Section 2.4d: Corporate Culture Figure 2.6 shows four distinct types of corporate cultures as identified by the Organizational Culture Assessment Instrument cultural audit questionnaire. Section 2.4c: Types of Talent and Their Composition in the Workforce

concern for one another and their customers, and loyalty and cohesion are highly valued. Starbucks’s culture can be categorized as a clan culture.

Figure 2.5 shows the different skill groups in any given organization can be classified

Many small- and midsize businesses fall into this category, too. Their HR

according to the degree to which they create strategic value and are unique to the

strategies are more informal and focused on creating a family-type feel

organization. This figure shows the departments for an Australian biotechnology

that binds employees emotionally to the organization.

firm and the quadrants those groups fall into, as well as their gradual migration given a strategic organizational shift to one that focuses on customer service.

The “clan” culture in which employees are closely knit and exhibit great

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The “adhocracy” culture, which is a culture characterized by risk-taking, innovation, and a spirit of entrepreneurship. Google clearly fits into this category.

Figure 2.6: Four Basic Types of Organizational Culture

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The “market” culture, which encourages competitive, results-oriented behaviors. Investment banks that closely focus on achieving their financial

numbers are an example of firms with market cultures. The investment

Figure 2.7: Model of HR Forecasting

bank Goldman Sachs falls into this category. -

The “hierarchical” culture, which is characterized by formal structures and procedures and in which efficiency and stability are greatly valued. Utilitytype companies and well-established companies such as railroads fall into this category.

Section 2.4e: Forecasting Managers must continually forecast both the needs and the capabilities of the firm for the future to do an effective job at strategic planning. As Figure 2.7 shows, managers focus on (at least) three key elements: (1) forecasting the demand for labor, (2) forecasting the supply of labor, and (3) balancing supply and demand considerations.

Figure 2.8: Hypothetical Markov Analysis for a Retail Company

Figure 2.9: An Executive Replacement Chart

Section 2.4e: Forecasting Figure 2.8 shows a hypothetical Markov analysis for a retail company. A Markov analysis can be used to track the pattern of employee movements through various jobs and to develop a transition matrix for forecasting labor supply.

Section 2.4e: Forecasting Skill and management inventories can be used to develop employee replacement charts, which list current jobholders and identify possible replacements should openings occur. Figure 2.9 shows an example of how an organization might develop a replacement chart for the managers in one of its divisions. The chart provides information on the current performance and promotability of possible replacements.

Figure 2.10: Assessing a Firm’s Human Capital

these positions, as well as the number who are currently qualified. As the lower portion of the figure shows, the company’s human capital readiness ranged between 63 percent for bioscientists and 100 percent for chemical and mechanical engineers.

Figure 2.11: An Example of a SWOT Analysis for Liz Claiborne

Section 2.4f: Assessing a Firm’s Human Capital Readiness: Gap Analysis

Section 2.5: Step Four: Formulating a Strategy

Once a company has assessed both the supply and demand for employee skills,

Figure 2.11 is an example of a SWOT analysis done for the women’s clothing brand

talent, and knowhow, it can begin to understand its human capital readiness. Any

Liz Claiborne.

difference between the quantity and quality of employees required versus the quantity and quality of employees available represents a gap that needs to be fixed. Figure 2.10 shows how a pharmaceutical company approached its assessment of human capital readiness. Managers begin by identifying a company’s core capabilities and the key people and processes critical to those capabilities. The company identified nine key job “families.” For each of these critical job families, managers identified the critical knowledge, skills, and behaviors necessary to build the core capabilities. They then determined the number of people required for

Figure 2.12: The 4As Framework of Execution Capability

•

Architecture. A firm’s architecture consists of its structures, processes, and systems. Ideally, they should be simple and streamlined so as to propel the firm to success. But too often a firm’s architecture can end up being complicated and entangle a firm like a straightjacket.

•

Ability. Products and processes are easy to duplicate. Talent is not. Strategy execution (and, ultimately, growth and profitability) depend on a firm’s talent capacity—a talented group of leaders, managers, and employees working together in an engaged and collaborative way.

As Figure 2.12 sh...