Human Resource Management Strategy and Analysis 3 This chapter explains how to design and develop an HR system that supports the company’s strategic goals. We cover the strategic management process and how to develop a strategic plan. We also discuss the HR manager’s role in the process of strategy execution and formulation. Finally, we explain why metrics are essential for identifying and creating high-performance human resource policies and practices. Copyright © 2013 Pearson Education

Learning Objectives Explain why strategic planning is important to all managers. Explain with examples each of the seven steps in the strategic planning process. List with examples the main generic types of corporate strategies and competitive strategies. At the conclusion of this chapter, you will be able to: Explain why strategic planning is important to all managers. Explain with examples each of the seven steps in the strategic planning process. List with examples the main generic types of corporate strategies and competitive strategies. Copyright © 2013 Pearson Education

Learning Objectives Define strategic human resource management and give an example of strategic human resource management in practice. Briefly describe three important strategic human resource management tools. Explain with examples why metrics are essential for managing human resources.   In addition, you will be able to: Define strategic human resource management and give an example of strategic human resource management in practice. Briefly describe three important strategic human resource management tools. Explain with examples why metrics are essential for managing human resources. Copyright © 2013 Pearson Education

WhyStrategic Planning is Important to all Managers The Human Resource function today continues to play an increasingly visible role in the strategic planning and management process. The HR function requires a new level of skill and competency among HR professionals. HR managers must develop measureable strategies that convincingly showcase the impact of HR on business performance. Successful Human Resource managers have adopted a perspective that focuses on how their departments can play a central role in implementing strategy. In this chapter we look more closely at how managers formulate and implement suchplans, and how they analyze and evaluate their results. We will start with some basicplanning-related definitions. Copyright © 2013 Pearson Education

The Human Resource function today continues to play an increasingly visible role in the strategic planning and management process. The HR function requires a new level of skill and competency among HR professionals. HR managers must develop measureable strategies that convincingly showcase the impact of HR on business performance. Successful Human Resource managers have adopted a perspective that focuses on how their departments can play a central role in implementing strategy.

Goal-Setting and the Planning Process The hierarchy of goals Strategic planning Strategic planning is important because in a well-run organization the goals come from the top of the organization downward. The process forms a hierarchy of goals. These goals, in turn, should guide everyone in the organization in what they do. A strategic plan is the company’s plan for how it will match its internal strengths and weaknesses with external opportunities and threats. A successful strategic plan helps ensure a competitive advantage. Copyright © 2013 Pearson Education

Strategic planning is important because in a well-run organization the goals come from the top of the organization downward. The process forms a hierarchy of goals. These goals, in turn, should guide everyone in the organization in what they do.

The Strategic Management Process Strategy A course of action Strategic Plan How an organization intends to match its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage Strategic Management The process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment

Business Vision and Mission A general statement of an organization’s intended direction that evokes emotional feelings in its members Mission Spells out who the company is, what it does, and where it is headed

Strategic Planning Process Strategic Management Process The Seven Steps in the Strategic Planning Process Strategic Management Process The seven steps in the strategic planning process allow you to manage the process in a systematic manner. Let’s discuss them now. Copyright © 2013 Pearson Education

Strategic Planning Seven Steps Define current business Audits New directions Strategic goals Formulate strategies Implement Evaluate Define the current business and mission The logical place to start is bydefining one’s current business. What products do we sell and where? How do our products or services differ from our competitors? Perform external and internal audits The next stepis to ask, “Are we heading in the right direction?” Formulate a new direction The question now is, what should our new business be? Translate the mission into goals. Next,translate the mission into strategic objectives. Formulate strategies to achieve the strategic goal Next, the manager chooses courses of action that will enable the companyto achieve its strategic goals. Implement the strategy Strategy execution means translatingthe strategies into action and trying them out. Evaluate performance Things don’t always turn out as planned. At this point, the strategies are tested against reality. If changes are needed, the entire process may be repeated from an earlier step. Copyright © 2013 Pearson Education

The logical place to start is by defining one’s current business The logical place to start is by defining one’s current business. What products do we sell and where? How do our products or services differ from our competitors? Perform external and internal audits The next step is to ask, “Are we heading in the right direction?” Formulate a new direction The question now is, what should our new business be? Translate the mission into goals. Next ,translate the mission into strategic objectives. Formulate strategies to achieve the strategic goal Next, the manager chooses courses of action that will enable the company to achieve its strategic goals. Implement the strategy Strategy execution means translating the strategies into action and trying them out. Evaluate performance Things don’t always turn out as planned. At this point, the strategies are tested against reality. If changes are needed, the entire process may be repeated from an earlier step.

FIGURE 3-1 The Strategic Management Process

FIGURE 3-2 A SWOT Chart

The Main Generic Types of Corporate Strategies and Competitive Strategies In practice, managers formulate three strategies. There is corporate-wide strategic planning, business unit (or competitive) strategic planning, and functional (or departmental) strategic planning. We’ll look at each. Copyright © 2013 Pearson Education

In practice, managers formulate three strategies In practice, managers formulate three strategies. There is corporate-wide strategic planning, business unit (or competitive) strategic planning, and functional (or departmental) strategic planning. We’ll look at each.

Types of Strategies Corporate strategy Competitive strategy Functional strategy Human resources as a competitive advantage Strategic fit Corporate-level strategy identifies the portfolio of businesses that comprise the company and the ways in which these businesses are related to each other. Managers endeavor to achieve competitive advantages for each of their businesses. Competitive advantages enable a company to differentiate its product or service from those of its competitors. Such differentiation allows a company to increase its market share. Functional strategies identify the basic course of action that each department will pursue in order to help the business attain its competitive goals. Human capital is one of the best competitive advantages because it is hard to duplicate a company’s personnel. “Strategicfit” sums up the idea that each department’s functional strategy should fit andsupport the company’s competitive aims.The “fit” point of view states that all of the firm’s activities must be tailored to or fit its strategy. Copyright © 2013 Pearson Education

Corporate-level strategy identifies the portfolio of businesses that comprise the company and the ways in which these businesses are related to each other. Managers endeavor to achieve competitive advantages for each of their businesses. Competitive advantages enable a company to differentiate its product or service from those of its competitors. Such differentiation allows a company to increase its market share.

Types of Strategies Corporate-Level Strategies Diversification Strategy Geographic Expansion Strategy Vertical Integration Strategy Corporate-Level Strategies Consolidation Strategy Concentration Strategy

Types of Strategies (cont) Cost Leadership Focus/Niche Business-Level/ Competitive Strategies Differentiation

Management Roles in Strategic Planning Top Managers’ Role in Strategic Planning Departmental Managers’ Strategic Planning Roles Devise Support Execution Devising a strategic plan is top management’s responsibility. Because the consequences of a poor choice can be dire, few top managers delegate total responsibility for strategic planning. The departmental managers’ strategic planning roles involve: Helping devise the strategic plan Formulating supporting, functional/departmentalstrategies Executing the plans Few people know as much about the firm’s competitive pressures, vendor capabilities, and concerns than do the company’s department managers. Copyright © 2013 Pearson Education

Devising a strategic plan is top management’s responsibility Devising a strategic plan is top management’s responsibility. Because the consequences of a poor choice can be dire, few top managers delegate total responsibility for strategic planning. The departmental managers’ strategic planning roles involve: Helping devise the strategic plan Formulating supporting, functional/departmental strategies Executing the plans Few people know as much about the firm’s competitive pressures, vendor capabilities, and concerns than do the company’s department managers.

Achieving Strategic Fit The ‘Fit’ Point of View (Porter) All of the firm’s activities must be tailored to, or fit, the chosen strategy such that the firm’s functional strategies support its corporate and competitive strategies. Leveraging (Hamel and Prahalad) ‘Stretch’ in leveraging resources – supplementing what you have and doing more with what you have – can be more important than just fitting the strategic plan to current resources.

DefiningStrategic Human Resource Management We’ve seen that once a company decides how it will compete, it turns to formulatingfunctional departmental strategies to support its competitive aims. One of thosedepartments is human resource management. Its functional strategies are humanresource management strategies. Copyright © 2013 Pearson Education

We’ve seen that once a company decides how it will compete, it turns to formulating functional departmental strategies to support its competitive aims. One of those departments is human resource management. Its functional strategies are human resource management strategies.

Strategic Human Resource Management Defining strategic human resource management Human resource strategies and policies Management formulates a strategic planand measurable strategic goals or aims. The plans imply certain workforcerequirements required to achieve thefirm’s strategic aims. Given these workforce requirements, HR management formulates strategies. These HR policies and practices (strategies) helpproduce the desiredworkforce skills, competencies, and behaviors. Copyright © 2013 Pearson Education

Management formulates a strategic planand measurable strategic goals or aims. The plans imply certain work force requirements required to achieve the firm’s strategic aims. Given these workforce requirements, HR management formulates strategies. These HR policies and practices (strategies) help produce the desired workforce skills, competencies, and behaviors.

Strategic Human Resource Management The linking of HRM with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility Involves formulating and executing HR systems – HR policies and activities – that produce the employee competencies and behaviors that the company needs to achieve its strategic aims

FIGURE 3-5 Linking Company-Wide and HR Strategies Source: © Gary Dessler, Ph.D., 2007.

Strategic Human Resource Challenges Corporate productivity and performance improvement efforts Increased HR team involvement in design of strategic plans Basic Strategic Challenges Expanded role of employees in the organization’s performance efforts

Human Resource Management’s Strategic Roles Strategic Planning Roles Strategy Execution Role Strategy Formulation Role

Three Important Strategic Human Resource Management Tools Once a company decides how it will compete, it turns to formulatingfunctional departmental strategies to support its competitive aims. One of thosedepartments is human resource management. Its functional strategies are humanresource management strategies. Copyright © 2013 Pearson Education

Once a company decides how it will compete, it turns to formulating functional departmental strategies to support its competitive aims. One of those departments is human resource management. Its functional strategies are human resource management strategies

Strategic Human Resource Management Tools Strategy map The HR scorecard Digital dashboards The strategy map shows the “big picture” of how each department’s performance contributes to achieving the company’s overall strategic goals. Many employers quantify and computerize the map’s activities. The HR Scorecard helps them to do so. The HR Scorecard is not a scorecard. It refers to a process for assigning financial and nonfinancial goals or metrics to important human resource management–related chain of activities. That chain is required in order to achievethe company’s strategic aims and for monitoring results. A digital dashboard presents the manager with desktop graphics and charts. It is a computerized picture of where the company stands on all those metrics from an HR Scorecard perspective. Copyright © 2013 Pearson Education

The strategy map shows the “big picture” of how each department’s performance contributes to achieving the company’s overall strategic goals. Many employers quantify and computerize the map’s activities. The HR Scorecard helps them to do so.

HR Metrics and Benchmarking Types of metrics Benchmarking Being able to measure what you are doing is an integral partof the HR strategy process. First, management translates its strategic planinto workforce requirements. Such requirements are tracked in terms of measurable worker competencies andbehaviors (such as outstanding service). Given these workforce requirements, the human resource manager then formulates supportive HR strategies, policies, and practices such as new training programs. Finally, the HR manager picks measures by which to gauge whether his or hernew policies and practices are producing the required employee competencies andbehaviors. Benchmarking means comparing thepractices of high-performing companies to your own, in order to understand what theydo that makes them better. Copyright © 2013 Pearson Education

Being able to measure what you are doing is an integral part of the HR strategy process.