2. Human Resource Management, Arab World Edition Gary Dessler, Akram Al Ariss
Chapter 3: Strategic Human Resource Management and the HR Scorecard
Lecturer:

3. After studying this chapter, you should be able to:
Outline the steps in the strategic management process.
Explain and give examples of each type of companywide and competitive strategy.
Explain what a strategy-oriented human resource management system is and why it is important.

4. 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

5. 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

6. FIGURE 3-1 The Strategic Management Process

7. FIGURE A SWOT Chart

8. FIGURE 3-3 Relationships Among Strategies in Multiple-Business Firms

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

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

11. FIGURE 3-4 The Southwest Airlines’ Activity System
Source: Michael E. Porter, “What Is Strategy?” Harvard Business Review, November–December Copyright © 1996 by the President and Fellows of Harvard College. All rights reserved.
Note: Companies like Southwest tailor all of their activities so that they fit and contribute to making their strategies a reality.

12. 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.

13. 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

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

15. 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

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

17. TABLE 3-1 Extent of HR’s Involvement in Strategic Planning (According to HR Managers)
To a Large Extent (%)
To Some Extent (%)
To No Extent (%)
HR works closely with senior management in implementing organizational strategies 68 29 3
HR works closely with senior management in creating organizational strategies 56 38 6
HR has achieved a level of respect that is comparable with other departments in the organization 49 45
Senior management realizes that investments in HR make financial sense 47
HR implements strategies and processes to drive business results 46
HR is involved in the communication of the business goals 41 14
The role of HR is increasingly more focused on strategic interests 43 8
HR is involved in the alignment of the business goals 42 10
HR involvement is essential in all major business activities and decisions 36 57 7
HR creates strategies and processes to drive business results 54
HR is involved in the development of the business goals 31 55
HR is involved in monitoring the achievement of business goals 30 21
Source: Adapted from Society for Human Resource Management, accessed May 10, 2007.
Note: Sample size is based on the actual number of respondents who answered this question using the response options provided. Percentages within each category may not total 100% due to rounding.

18. TABLE 3-2 How Often Do Human Resource Managers Measure Their Department Results?
Frequently (%)
Sometimes (%)
Rarely (%)
Recruitment and selection processes (n = 197) 59 31 10
Performance management (n = 196) 52 41 8
Compensation management/reward programs (n = 199) 51 34 15
Benefits management (n = 192)
Employee relations (n = 194) 49 20
Health, safety, and security programs (n = 193) 43 39 18
Budgeting (n = 189) 40 38 23
Retention programs (n = 191) 35 25
Employee communication programs (n = 185) 44
Diversity practices (n = 188) 32 42 26
Employee engagement initiatives (n = 180) 27
Analysis of trends and forecasting (n = 180) 29 45
Leadership development (n = 187) 28 21
Human capital measurements (n = 175) 37
Retirement planning (n = 169) 36
Talent management initiatives (n = 176)
Skills development initiatives (n = 192) 53
Work/life programs (n = 171) 33
Succession planning (n = 174) 22
Employment brand strategy/employment branding (n = 161)
Corporate social responsibility programs (n = 156) 17
Source: Adapted from Society for Human Resource Management, accessed May 10, 2007.
Note: Percentages are row percentages and may not total 100% due to rounding.

19. Creating the Strategic Human Resource Management System
Human Resource Professionals
Employee Behaviors and Competencies
Components of a Strategic HRM System
Human Resource Policies and Practices 19

20. Low-Performance Company High-Performance Company
TABLE 3-3 Comparison of HR Practices in High-Performance and
Low-Performance Companies
Sample HR Practices
Low-Performance Company
High-Performance Company
Number of qualified applicants per position (recruiting)
8.26
36.55
Percentage hired based on a validated selection test
4.26
29.67
Percentage of jobs filled from within
34.90
61.46
Percentage in a formal HR plan including recruitment, development, and succession
4.79
46.72
Number of hours of training for new employees (less than 1 year)
35.02
116.87
Number of hours of training for experienced employees
13.40
72.00
Percentage of employees receiving a regular performance appraisal
41.31
95.17
Percentage of workforce whose merit increase or incentive pay is tied to performance
23.36
87.27
Percentage of workforce who received performance feedback from multiple sources (360-degree feedback)
3.90
51.67
Target percentile for total compensation (market rate = 50%)
43.03
58.67
Percentage of the workforce eligible for incentive pay
27.83
83.56
Percentage of difference in incentive pay between a low-performing and a high-performing employee
3.62
6.21
Percentage of the workforce routinely working in a self-managed, crossfunctional, or project team
10.64
42.28
Percentage of HR budget spent on outsourced activities (e.g., recruiting, benefits, payroll)
13.46
26.24
Number of employees per HR professional
235.88
139.51
Percentage of the eligible workforce covered by a union contract
30.00
8.98
Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance, pp. 16–17.

21. FIGURE 3-7 Basic Model of How to Align HR Strategy and Actions with Business Strategy
Source: Adapted from Garrett Walker and J. Randal MacDonald, “Designing and Implementing an HR Scorecard,” Human Resources Management 40, no. 4, 2001, p. 370.

22. FIGURE 3-A1 Simple Value Chain for Southwest Airlines

23. FIGURE 3-A2 Strategy Map for Southwest Airlines
Source: Adapted from Ravi Tangri, “Creating a Strategy Map,”

24. FIGURE 3-A3 Simple Value Chain for KAMCO
Source: Dr. Dmytro Roman Kulchitsky, Ph.D. the American University of Kuwait.

25. TABLE 3–A1 HR Scorecard: Strategic Activity Metrics
Chapter
HR Activity Metrics
3. Strategic Human Resource Management and the HR Scorecard
Percentage of employees who can quote company strategy/vision
Percentage in a formal HR plan including recruitment, development, and succession
4. Job Analysis
Percentage of employees with updated job descriptions
5. Personnel Planning and Recruiting
Number of applicants per recruiting source
Number of qualified applicants per position
Number of jobs filled from within
Cost per hire
6. Employee Testing and Selection
Percentage of employees hired based on validated employee tests
Job offers versus high-performance players rejected (or accepted)
Time taken to fill an open position
7. Interviewing Candidates
Percentage of applicants receiving a structured interview
8. Training and Developing Employees
Number of hours’ training per employee per year (experienced)
Number of hours’ training per new employee
Number of hours’ training per experienced employee per year
Competency development per employee
Cost per trainee hour
Number of training days and programs per year
Percentage of employee development plans completed
Percentage of employees with access to appropriate training and development opportunities
9. Performance Management and Appraisal
Number of employees getting feedback
Percentage of appraisals completed on time
Percentage of employees receiving a regular performance appraisal
Number and quality of performance appraisal discussions per year
Sources: HRM Management, Dessler’s Global Edition; Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance; Mark A. Husselid, Brian E. Becker, and Richard W. Beatty, The Workforce Scorecard, Boston, MA: Harvard Business Press, 2005. 25

26. TABLE 3–A1 HR Scorecard: Strategic Activity Metrics (cont)
Chapter
HR Activity Metrics
10. Managing Careers
Percentage of employees with formal development plan
11. Compensation, Incentives, and Benefits
Total compensation expense per employee
Target percentile for total compensation (pay in top 25 percent)
Percentage of employees satisfied with their benefits
Percentage of workforce with merit increase or incentive pay tied to performance
Percentage of workforce eligible for merit pay
Percentage of workforce eligible for incentive pay
Percentage difference in incentive pay between low- and high-performing employees
Average merit increase granted by job classification and job performance
Range in merit increase granted by classification
Ratio of company’s salaries to competitors’ salaries
12. Ethics and Fair Treatment in HR Management
Number of grievances per year
quality of employee feedback systems
Percentage of employees able to quote ethics code
13. Employee Safety and Health
Accident costs per year (US$)
Hours lost due to accidents
Number of safety training and awareness activities
14. Managing Global Human Resources
Percentage of expatriates receiving predeparture screening and/or counseling
Sources: HRM Management, Dessler’s Global Edition; Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance; Mark A. Husselid, Brian E. Becker, and Richard W. Beatty, The Workforce Scorecard, Boston, MA: Harvard Business Press, 2005. 26

27. FIGURE 3-A4 HR Scorecard for KAMCO: Strategic HR Management
Source: Prepared by Dr. Dmytro Roman Kulchitsky, Ph.D. the American University of Kuwait.

28. Key Terms competitive advantage leveraging metrics mission
strategic control
strategic human resource management
strategic management
strategic plan
strategy
strategy map
SWOT analysis
value chain
vision