PowerPoint Presentation by Charlie Cook The University of West Alabama Managing Human Resources Bohlander Snell 14 th edition © 2007 Thomson/South-Western. All rights reserved. Strategy and Human Resources Planning

© 2007 Thomson/South-Western. All rights reserved.2–2 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 organization’s 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.

© 2007 Thomson/South-Western. All rights reserved.2–3 Objectives (cont’d) 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.

© 2007 Thomson/South-Western. All rights reserved.2–4 Strategic Planning and Human Resources Strategic Planning  Procedures for making decisions about the organization’s 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.

© 2007 Thomson/South-Western. All rights reserved.2–5 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 formulation—providing input as to what is possible given the types and numbers of people available.  Strategy implementation—making primary resource allocation decisions about structure, processes, and human resources.

© 2007 Thomson/South-Western. All rights reserved.2–6 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 Planning Strategic Planning

© 2007 Thomson/South-Western. All rights reserved.2–7 Figure 2–1 Linking Strategic Planning and Human Resources

© 2007 Thomson/South-Western. All rights reserved.2–8 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

© 2007 Thomson/South-Western. All rights reserved.2–9 Sample mission statements Studio67 is a great place to eat, combining an intriguing atmosphere with excellent, interesting food that is also very good for the people who eat there. We want fair profit for the owners, and a rewarding place to work for the employees. As the popularity of the Internet continues to grow at an exponential rate, easy and affordable access is quickly becoming a necessity of life. JavaNet provides communities with the ability to access the Internet, enjoy a cup of coffee, and share Internet experiences in a comfortable environment. People of all ages and backgrounds will come to enjoy the unique, upscale, educational, and innovative environment that JavaNet provides

© 2007 Thomson/South-Western. All rights reserved.2–10 Vision Statements “I have a dream that one day this nation will rise up and live out the true meaning of it’s creed: We hold these truths to be self-evident: that men are created equal.” Martin Luther King, Jr.

© 2007 Thomson/South-Western. All rights reserved.2–11 L.A. County Vision Our purpose is to inspire public trust in County government by safeguarding the County's financial integrity and ensuring compliance with fiduciary responsibilities and professional mandates. As a partner to County agencies we: Lead by example. Maintain credible public records that inspire public trust. Encourage and support the efficiency and effectiveness of County programs. Share knowledge of policies, procedures and practices by training County departments.

© 2007 Thomson/South-Western. All rights reserved.2–12 Values – L.A. County OUR VALUES We will adhere to the highest standards of conduct relying on the character, ability, strength, and integrity of our employees. To this end, we will fulfill our responsibilities and provide service to our customers by: Providing guidance and vision that encourages adherence to the highest standard of conduct in financial operations and reporting. Performing our duties in a manner that exhibits independence and objectivity in fact and appearance. Consistently exhibiting the highest moral principles in all decisions and activities. Inspiring confidence, understanding, and acceptance for Auditor-Controller policies, procedures, and financial and administrative control standards. Protecting, representing, and advocating the public's interest in all aspects of our operations and in all areas of influence. Advocating and modeling personal and organizational accountability at all times. Achieving desired results through the influence, strength, and unity of our employees. Continuously seeking opportunities to improve the effectiveness of our services and providing service in a courteous and responsive manner. Celebrating the strength and richness that diversity provides; and standing ready to meet the challenges and needs of the County's diverse employees and citizenry.

© 2007 Thomson/South-Western. All rights reserved.2–13 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

© 2007 Thomson/South-Western. All rights reserved.2–14 Figure 2–2 Five Forces Framework

© 2007 Thomson/South-Western. All rights reserved.2–15 Step Three: Internal Analysis Composition Culture Competencies Internal Analysis

© 2007 Thomson/South-Western. All rights reserved.2–16 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?

© 2007 Thomson/South-Western. All rights reserved.2–17 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.

© 2007 Thomson/South-Western. All rights reserved.2–18 Figure 2–3 Mapping Human Capital

© 2007 Thomson/South-Western. All rights reserved.2–19 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.

© 2007 Thomson/South-Western. All rights reserved.2–20 Figure 2–4 Model of HR Forecasting FORECASTING DEMAND Considerations Product/service demand Product/service demand Technology Technology Financial resources Financial resources Absenteeism/turnover Absenteeism/turnover Organizational growth Organizational growth Management philosophy Management philosophyConsiderations Product/service demand Product/service demand Technology Technology Financial resources Financial resources Absenteeism/turnover Absenteeism/turnover Organizational growth Organizational growth Management philosophy Management philosophyTechniques Trend analysis Trend analysis Managerial estimates Managerial estimates Delphi technique Delphi techniqueTechniques Trend analysis Trend analysis Managerial estimates Managerial estimates Delphi technique Delphi technique Techniques Staffing tables Staffing tables Markov analysis Markov analysis Skills inventories Skills inventories Management inventories Management inventories Replacement charts Replacement charts Succession planning Succession planningTechniques Staffing tables Staffing tables Markov analysis Markov analysis Skills inventories Skills inventories Management inventories Management inventories Replacement charts Replacement charts Succession planning Succession planning External Considerations Demographic changes Demographic changes Education of the workforce Education of the workforce Labor mobility Labor mobility Government policies Government policies Unemployment rate Unemployment rate External Considerations Demographic changes Demographic changes Education of the workforce Education of the workforce Labor mobility Labor mobility Government policies Government policies Unemployment rate Unemployment rate FORECASTING SUPPLY BALANCING SUPPLY AND DEMAND (Shortage) Recruitment Full-time Full-time Part-time Part-time Recalls Recalls (Shortage) Recruitment Full-time Full-time Part-time Part-time Recalls Recalls (Surplus) Reductions Layoffs Layoffs Terminations Terminations Demotions Demotions Retirements Retirements (Surplus) Reductions Layoffs Layoffs Terminations Terminations Demotions Demotions Retirements Retirements

© 2007 Thomson/South-Western. All rights reserved.2–21 Forecasting Demand for Employees Quantitative Methods Qualitative Methods Forecasting Demand

© 2007 Thomson/South-Western. All rights reserved.2–22 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).

© 2007 Thomson/South-Western. All rights reserved.2–23 Figure 2–5 Example of Trend Analysis of HR Demand 2000$2, $2, $2, $3, $3, $3, $3, *$4, *$4, *$4, BUSINESS  LABOR = HUMAN RESOURCES FACTORPRODUCTIVITYDEMAND YEAR (SALES IN THOUSANDS)(SALES/EMPLOYEE)(NUMBER OF EMPLOYEES) *Projected figures

© 2007 Thomson/South-Western. All rights reserved.2–24 Qualitative Approaches Management Forecasts  The opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organization’s 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.

© 2007 Thomson/South-Western. All rights reserved.2–25 Forecasting the Supply of Employees: Internal Labor Supply Staffing Tables Markov Analysis Skill Inventories Replacement Charts Succession Planning

© 2007 Thomson/South-Western. All rights reserved.2–26 What would influence supply? Promotions Demotions Terminations Lateral moves

© 2007 Thomson/South-Western. All rights reserved.2–27 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.

© 2007 Thomson/South-Western. All rights reserved.2–28 Figure 2–6 Hypothetical Markov Analysis for a Retail Company

© 2007 Thomson/South-Western. All rights reserved.2–29 Internal Demand Forecasting Tools 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.

© 2007 Thomson/South-Western. All rights reserved.2–30 Figure 2–7 An Executive Replacement Chart

© 2007 Thomson/South-Western. All rights reserved.2–31 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.

© 2007 Thomson/South-Western. All rights reserved.2–32 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.

© 2007 Thomson/South-Western. All rights reserved.2–33 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.

© 2007 Thomson/South-Western. All rights reserved.2–34 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

© 2007 Thomson/South-Western. All rights reserved.2–35 Step Six: Evaluation and Assessment Evaluation and Assessment Issues  Benchmarking: The process of comparing the organization’s 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

© 2007 Thomson/South-Western. All rights reserved.2–36 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 © Reprinted by permission of the publisher via Copyright Clearance Center.

© 2007 Thomson/South-Western. All rights reserved.2–37 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

© 2007 Thomson/South-Western. All rights reserved.2–38 Figure 2–9 Balanced Scorecard

© 2007 Thomson/South-Western. All rights reserved.2–39 Figure 2–10 Assessing Internal Fit

© 2007 Thomson/South-Western. All rights reserved.2–40 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.

© 2007 Thomson/South-Western. All rights reserved.2–41 Key Terms Balanced Scorecard (BSC) benchmarking core competencies core values cultural audits environmental scanning human resources planning (HRP) management forecasts Markov analysis mission organizational capability replacement charts skill inventories staffing tables strategic human resources management (SHRM) strategic planning strategic vision succession planning SWOT analysis trend analysis value creation

© 2007 Thomson/South-Western. All rights reserved.2–42 Calculating Turnover and Absenteeism

© 2007 Thomson/South-Western. All rights reserved.2–43 Employee Turnover Rates Computing Turnover Rates:

© 2007 Thomson/South-Western. All rights reserved.2–44 Employee Turnover Rates (cont’d) Computing Turnover Rates (cont’d):

© 2007 Thomson/South-Western. All rights reserved.2–45 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 employee’s 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 Center TM by Michael Mercer, Ph.D. (Castlegate Publishers, Inc., Barrington, Illinois). Copyright 2002 Michael Mercer. Reproduced with permission from Michael Mercer, Ph.D.,

© 2007 Thomson/South-Western. All rights reserved.2–46 Employee Absenteeism Rates Computing Absenteeism Rates

© 2007 Thomson/South-Western. All rights reserved.2–47 Composition: The Human Capital Architecture Core knowledge workers  Employees who have firm-specific skills that are directly linked to the company’s 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

© 2007 Thomson/South-Western. All rights reserved.2–48 Composition: The Human Capital Architecture (cont’d) 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 company’s core strategy.  Example: Independent product label designer

© 2007 Thomson/South-Western. All rights reserved.2–49 Highlights in HRM 2 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. Succession- Planning Checklist Scores Source: From William J. Rothwell, “Putting Success into Your Succession Planning,” The Journal of Business Strategy 23, no. 3 (May/June 2002): 32–37. Republished with permission—Thomson Media, One State Street, 26th Floor, New York, NY

© 2007 Thomson/South-Western. All rights reserved.2–50 Highlights in HRM 4 Source: Company document.

© 2007 Thomson/South-Western. All rights reserved.2–51 Figure 2–8 The 7-S Model Source: McKinsey & Company

© 2007 Thomson/South-Western. All rights reserved.2–52 Corporate Strategy Strategic Alliances and Joint Ventures Growth and Diversification Mergers and Acquisitions Corporate Strategy