Bohlander15e ch02

© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–1

PowerPoint Presentation by Charlie CookThe University of West Alabama

PowerPoint Presentation by Charlie CookThe University of West Alabama

2

© 2010 South-Western, a part of Cengage LearningAll rights reserved.© 2010 South-Western, a part of Cengage LearningAll rights reserved.


Identify the advantages of integrating human resources planning and strategic planning.

Understand how an organization’s competitive environment influences its strategic planning.

Understand why it is important for an organization to do an internal resource analysis.

Describe the basic tools used for human resources forecasting.

Explain the linkages between competitive strategies and HR.

Chapter ObjectivesAfter studying this chapter, you should be able to


Understand what is required for a firm to successfully implement a strategy.

Recognize the methods for assessing and measuring the effectiveness of a firm’s strategy.

Chapter Objectives (cont’d)After studying this chapter, you should be able to


Strategic Planning and Human ResourcesStrategic Planning and Human Resources

•Strategic PlanningStrategic Planning Procedures for making decisions about the Procedures for making decisions about the

organization’s long-term goals and strategiesorganization’s long-term goals and strategies

•Human Resources Planning (HRP)Human Resources Planning (HRP) Process of anticipating and making provision Process of anticipating and making provision

for the movement (flow) of people into, within, for the movement (flow) of people into, within, and out of an organization. and out of an organization.


Strategic Planning and HR PlanningStrategic Planning and HR Planning

•Strategic Human Resources Management Strategic Human Resources Management (SHRM)(SHRM) The pattern of human resources deployments The pattern of human resources deployments

and activities that enable an organization to and activities that enable an organization to achieve its strategic goalsachieve its strategic goals Strategy formulation—providing input as to what is possible Strategy formulation—providing input as to what is possible

given the types and numbers of people available.given the types and numbers of people available.

Strategy implementation—making primary resource Strategy implementation—making primary resource allocation decisions about structure, processes, and human allocation decisions about structure, processes, and human resources.resources.


Linking Strategic Planning and HRPLinking Strategic Planning and HRP

•Strategic Analysis Strategic Analysis What human resources are needed and what What human resources are needed and what

are available?are available?

•Strategic FormulationStrategic Formulation What is required and necessary in support of What is required and necessary in support of

human resources?human resources?

•Strategic ImplementationStrategic Implementation How will the human resources be allocated?How will the human resources be allocated?

Human Resources Human Resources PlanningPlanning

Human Resources Human Resources PlanningPlanning

StrategicStrategicPlanningPlanning

StrategicStrategicPlanningPlanning


FIGURE

2.1Linking Strategic Planning and Human Resources


Step One: Mission, Vision, and ValuesStep One: Mission, Vision, and Values

•MissionMission The basic purpose of the organization as well The basic purpose of the organization as well

as its scope of operationsas its scope of operations

•Strategic VisionStrategic Vision A statement about where the company is going A statement about where the company is going

and what it can become in the future; clarifies and what it can become in the future; clarifies the long-term direction of the company and its the long-term direction of the company and its strategic intentstrategic intent

•Core ValuesCore Values The strong and enduring beliefs and principles The strong and enduring beliefs and principles

that the company uses as a foundation for its that the company uses as a foundation for its decisionsdecisions


Step Two: Environmental ScanningStep Two: Environmental Scanning

•Environmental ScanningEnvironmental Scanning The systematic monitoring of the major The systematic monitoring of the major

external forces influencing the organization.external forces influencing the organization.1.1. Economic factors: general, regional, and global conditionsEconomic factors: general, regional, and global conditions

2.2. Industry and competitive trends: new processes, services, Industry and competitive trends: new processes, services, and innovationsand innovations

3.3. Technological changes: robotics and office automation Technological changes: robotics and office automation

4.4. Government and legislative issues: laws and Government and legislative issues: laws and administrative rulings administrative rulings

5.5. Social concerns: child care and educational priorities Social concerns: child care and educational priorities

6.6. Demographic and labor market trends: age, composition, Demographic and labor market trends: age, composition, literacy, and immigrationliteracy, and immigration


FIGURE

2.2Five Forces Framework


Step Three: Internal AnalysisStep Three: Internal Analysis

CultureCulture

CompositionComposition

CapabilitiesCapabilities

Internal AnalysisInternal Analysis


Culture: Auditing Values, Beliefs, and AttitudesCulture: Auditing Values, Beliefs, and Attitudes

•Cultural AuditsCultural Audits Audits of the culture and quality of work life in Audits of the culture and quality of work life in

an organization.an organization. How do employees spend their time? How do employees spend their time?

How do they interact with each other? How do they interact with each other?

Are employees empowered?Are employees empowered?

What is the predominant leadership style of managers?What is the predominant leadership style of managers?

How do employees advance within the organization?How do employees advance within the organization?


Capabilities: People as a Strategic ResourceCapabilities: People as a Strategic Resource

• Core CapabilitiesCore Capabilities Integrated knowledge sets within an Integrated knowledge sets within an

organization that distinguish it from its organization that distinguish it from its competitors and deliver value to customers.competitors and deliver value to customers.

• Sustained competitive advantage through Sustained competitive advantage through people is achieved if these human people is achieved if these human resources:resources:1.1. Are valuable.Are valuable.

2.2. Are rare and unavailable to competitors.Are rare and unavailable to competitors.

3.3. Are difficult to imitate.Are difficult to imitate.

4.4. Are organized for teamwork and cooperation.Are organized for teamwork and cooperation.


Composition: The Human Capital ArchitectureComposition: The Human Capital Architecture

•Strategic Knowledge WorkersStrategic Knowledge Workers Employees who have unique skills that are Employees who have unique skills that are

directly linked to the company’s strategy.directly linked to the company’s strategy. Example: R&D scientistsExample: R&D scientists

•Core EmployeesCore Employees Employees with skills to perform a predefined Employees with skills to perform a predefined

job that are quite valuable to a company, but job that are quite valuable to a company, but not particularly unique or difficult to replace.not particularly unique or difficult to replace. Example: salespeopleExample: salespeople


Composition: The Human Capital Architecture Composition: The Human Capital Architecture (cont’d)(cont’d)

•Supporting LaborSupporting Labor Employees whose skills are of less strategic Employees whose skills are of less strategic

value and generally available in the labor value and generally available in the labor market.market. Example: clerical workersExample: clerical workers

•Alliance PartnersAlliance Partners Individuals and groups with unique skills, but Individuals and groups with unique skills, but

those skills are not directly related to a those skills are not directly related to a company’s core strategy.company’s core strategy. Example: consultantsExample: consultants


FIGURE

2.3Mapping Human Capital


Forecasting: A Critical Element of PlanningForecasting: A Critical Element of Planning

• Forecasting involves:Forecasting involves:a.a. forecasting the demand for laborforecasting the demand for labor

b.b. forecasting the supply of laborforecasting the supply of labor

c.c. balancing supply and demand considerations.balancing supply and demand considerations.


FIGURE

2.4Model of HR Forecasting


Forecasting Demand for EmployeesForecasting Demand for Employees

Quantitative MethodsQuantitative MethodsQuantitative MethodsQuantitative Methods

Qualitative MethodsQualitative MethodsQualitative MethodsQualitative Methods

Forecasting DemandForecasting DemandForecasting DemandForecasting Demand


Quantitative Approach: Trend AnalysisQuantitative Approach: Trend Analysis

•Forecasting labor demand based on an Forecasting labor demand based on an organizational index such as sales:organizational index such as sales:

1.1. Select a business factor that best predicts human Select a business factor that best predicts human resources needs.resources needs.

2.2. Plot the business factor in relation to the number of Plot the business factor in relation to the number of employees to determine the labor productivity employees to determine the labor productivity ratio.ratio.

3.3. Compute the productivity ratio for the past five Compute the productivity ratio for the past five years.years.

4.4. Calculate human resources demand by multiplying Calculate human resources demand by multiplying the business factor by the productivity ratio.the business factor by the productivity ratio.

5.5. Project human resources demand out to the target Project human resources demand out to the target year(s).year(s).


FIGURE

2.5Example of Trend Analysis of HR Demand


Qualitative ApproachesQualitative Approaches

•Management ForecastsManagement Forecasts The opinions (judgments) of supervisors, The opinions (judgments) of supervisors,

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

•Delphi TechniqueDelphi Technique An attempt to decrease the subjectivity of An attempt to decrease the subjectivity of

forecasts by soliciting and summarizing the forecasts by soliciting and summarizing the judgments of a preselected group of judgments of a preselected group of individuals.individuals.

The final forecast represents a composite The final forecast represents a composite group judgment.group judgment.


1HR Planning and Strategy Questions to Ask Business Managers

• What are your mission, vision, and values?

• What are your current pressing business issues?

• What are our organizational strengths?

• Who are our competitors’ organizational strengths? How do we compare?

• What core capabilities do we need to win in our markets?•

• What are the required knowledge, skills, and abilities we need to execute the winning strategy?

• What are the barriers to optimally achieving the strategy?

• What types of skills and positions will be required or no longer required?

• Which skills should we have internally versus contract with outside providers?

• What actions need to be taken to align our resources with strategy priorities?

• What recognition and rewards are needed to attract, motivate, and retain the employees we need?

• How will we know if we are effectively executing our workforce plan and staying on track?

Workforce planning requires that HR leaders periodically interview their managers to gauge future workforce needs. Here are some sample questions to ask.


Forecasting the Supply of Employees: Forecasting the Supply of Employees: Internal Labor SupplyInternal Labor Supply

•Staffing TablesStaffing Tables•Markov AnalysisMarkov Analysis•Skill InventoriesSkill Inventories•Replacement ChartsReplacement Charts•Succession PlanningSuccession Planning


Forecasting Internal Labor SupplyForecasting Internal Labor Supply

•Staffing TablesStaffing Tables Graphic representations of all organizational Graphic representations of all organizational

jobs, along with the numbers of employees jobs, along with the numbers of employees currently occupying those jobs and future currently occupying those jobs and future (monthly or yearly) employment requirements.(monthly or yearly) employment requirements.

•Markov AnalysisMarkov Analysis A method for tracking the pattern of employee A method for tracking the pattern of employee

movements through various jobs.movements through various jobs.


FIGURE

2.6Hypothetical Markov Analysis for a Retail Company


Internal Demand Forecasting ToolsInternal Demand Forecasting Tools

•Skill InventoriesSkill Inventories Files of personnel education, experience, Files of personnel education, experience,

interests, skills, etc., that allow managers to interests, skills, etc., that allow managers to quickly match job openings with employee quickly match job openings with employee backgrounds.backgrounds.

•Replacement ChartsReplacement Charts Listings of current jobholders and persons who Listings of current jobholders and persons who

are potential replacements if an opening are potential replacements if an opening occurs.occurs.

•Succession PlanningSuccession Planning The process of identifying, developing, and The process of identifying, developing, and

tracking key individuals for executive positions.tracking key individuals for executive positions.


FIGURE

2.7An Executive Replacement Chart


2Succession-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, compile the scores, and compare notes.


FIGURE

2.8Assessing a Firm’s Human Capital


Step Four: Formulating StrategyStep Four: Formulating Strategy

•Strategy FormulationStrategy Formulation Moving from simple analysis to devising a Moving from simple analysis to devising a

coherent course of action.coherent course of action.

•SWOT analysis SWOT analysis A comparison of A comparison of strengthsstrengths, , weaknessesweaknesses, ,

opportunitiesopportunities, and , and threatsthreats for strategy for strategy formulation purposes. formulation purposes.

Use the strengths of the organization to Use the strengths of the organization to capitalize on opportunities, counteract threats, capitalize on opportunities, counteract threats, and alleviate internal weaknesses.and alleviate internal weaknesses.


FIGURE

2.9An Example of a SWOT Analysis

Valero Energy Corporation (Valero) is one of the largest refiners in North America. Its core activities include refining and marketing of petroleum products. With a combined throughput capacity of approximately 3.3 million bpd, Valero is the 15th largest company on the Fortune 500 list. Valero’s large refining capacity gives it a significant competitive advantage. However, rising material and labor costs could affect the company’s margins.

Strengths Weaknesses

Large refining systemLeader in conversion capacity and feedstock flexibilityStrong revenue growth and capital expenditure

Weak performance in CanadaLitigationsHigh dependence on the United States

Opportunities Threats

Growing diesel demandStrategic refocusRising petrochemical capacity in the Middle East

Material and labor costStringent regulations


Corporate StrategyCorporate Strategy

Strategic Alliances and Joint Ventures

Strategic Alliances and Joint Ventures

Growth and Diversification

Growth and Diversification

Mergers and Acquisitions

Mergers and Acquisitions

Corporate Strategy

Corporate Strategy


Business StrategyBusiness Strategy

•Value CreationValue Creation What the firm adds to a product or service by What the firm adds to a product or service by

virtue of making it; the amount of benefits virtue of making it; the amount of benefits provided by the product or service once the provided by the product or service once the costs of making it are subtracted (value = costs of making it are subtracted (value = benefits — costs).benefits — costs).

Low-cost strategy: competing on productivity Low-cost strategy: competing on productivity and efficiencyand efficiency Keeping costs low to offer an attractive price to customers Keeping costs low to offer an attractive price to customers

(relative to competitors).(relative to competitors).

Differentiation strategy: compete on added Differentiation strategy: compete on added valuevalue Involves providing something unique and distinctive to Involves providing something unique and distinctive to

customers that they value.customers that they value.


3Key HR Activities Associated with Merger or Acquisition Phases


3Key HR Activities Associated with Merger or Acquisition Phases (cont’d)


Business Strategy (cont’d)Business Strategy (cont’d)

•Functional Strategy: Ensuring AlignmentFunctional Strategy: Ensuring Alignment External Fit/AlignmentExternal Fit/Alignment

Focuses on the connection between the business objectives Focuses on the connection between the business objectives and the major initiatives in HR.and the major initiatives in HR.

Internal Fit/AlignmentInternal Fit/Alignment Aligning HR practices with one another to establish a Aligning HR practices with one another to establish a

configuration that is mutually reinforcing.configuration that is mutually reinforcing.


Step Five: Strategy ImplementationStep Five: Strategy Implementation

•Taking Action: Reconciling Supply and Taking Action: Reconciling Supply and DemandDemand Balancing demand and supply considerationsBalancing demand and supply considerations

Forecasting business activities (trends)Forecasting business activities (trends) Locating applicantsLocating applicants

Organizational downsizing, outsourcing, Organizational downsizing, outsourcing, offshoringoffshoring Reducing “headcount”Reducing “headcount”

Making layoff decisionsMaking layoff decisions Seniority or performance?Seniority or performance? Labor agreementsLabor agreements


FIGURE

2.10The 7-S Model


Step Six: Evaluation and AssessmentStep Six: Evaluation and Assessment

•Evaluation and Assessment IssuesEvaluation and Assessment Issues Benchmarking: The process of comparing the Benchmarking: The process of comparing the

organization’s processes and practices with organization’s processes and practices with those of other companiesthose of other companies

Human capital metricsHuman capital metrics Assess aspects of the workforceAssess aspects of the workforce

HR metricsHR metrics Assess the performance of the HR function itselfAssess the performance of the HR function itself


4Ten 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


Measuring a Firm’s Strategic AlignmentMeasuring a Firm’s Strategic Alignment

•Strategy Mapping and the Balanced Strategy Mapping and the Balanced ScorecardScorecard Balanced Scorecard (BSC)Balanced Scorecard (BSC)

A measurement framework that helps managers translate A measurement framework that helps managers translate strategic goals into operational objectivesstrategic goals into operational objectives– financialfinancial– customercustomer– processesprocesses– learninglearning


FIGURE

2.11Building the Metrics Model


FIGURE

2.12Assessing Internal Fit

5 = Strongly supports the priority, 0= Neutral, –5 = Strongly counterproductive


Ensuring Strategic Flexibility for the FutureEnsuring Strategic Flexibility for the Future

•Organizational CapabilityOrganizational Capability Capacity of the organization to act and change Capacity of the organization to act and change

in pursuit of sustainable competitive in pursuit of sustainable competitive advantage.advantage.

Coordination flexibilityCoordination flexibility The ability to rapidly reallocate resources to new or changing The ability to rapidly reallocate resources to new or changing

needs.needs.

Resource flexibilityResource flexibility Having human resources who can do many different things Having human resources who can do many different things

in different ways.in different ways.


Balanced Scorecard (BSC)

benchmarking

core capabilities

core values

cultural audits

environmental scanning

human capital readiness

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



Employee Turnover RatesEmployee Turnover Rates

•Computing Turnover Rates:Computing Turnover Rates: The U.S. Department of Labor suggests the The U.S. Department of Labor suggests the

following formula for computing turnover rates:following formula for computing turnover rates:

Thus, if there were 25 separations during a Thus, if there were 25 separations during a month and the total number of employees at month and the total number of employees at mid month was 500, the turnover rate would mid month was 500, the turnover rate would be:be:


Employee Turnover Rates (cont’d)Employee Turnover Rates (cont’d)

• Computing Turnover Rates (cont’d):Computing Turnover Rates (cont’d): Another method of computing the turnover rate is one Another method of computing the turnover rate is one

that reflects only the avoidable separations (S). This that reflects only the avoidable separations (S). This rate is computed by subtracting unavoidable rate is computed by subtracting unavoidable separations (US) from all separations. The formula for separations (US) from all separations. The formula for this method is as follows:this method is as follows:

where M represents the total number of employees at where M represents the total number of employees at mid month. For example, if there were 25 separations mid month. For example, if there were 25 separations during a month, 5 of which were US, and the total during a month, 5 of which were US, and the total number of employees at mid month (M) was 500, the number of employees at mid month (M) was 500, the turnover rate would be:turnover rate would be:


Employee Absenteeism RatesEmployee Absenteeism Rates

•Computing Absenteeism RatesComputing Absenteeism Rates


5Costs Associated with the Turnover of One Computer Programmer

(Turnover costs = Separation costs + Replacement costs + Training costs)Separation costs1. Exit interview cost for salary and benefits of both interviewer and departing employee during the exit

interview = $30+$30 = $602. Administrative and record-keeping action = $30

Total separation costs = $60 + $30 = $90

Replacement costs1. Advertising for job opening = $2,5002. Preemployment administrative functions and record-keeping action = $1003. Selection interview = $2504. Employment tests = $405. 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 costs1. Booklets, manuals, and reports = $502. Education = $240/day for new employee’s salary and benefits x 10 days of workshops, seminars, or

courses = $2,4003. One-to-one coaching = ($240/day/new employee + $240/day/staff coach or job expert) x 20 days of one-to-

one coaching = $9,6004. Salary and benefits of new employee until he or she gets “up to par” = $240/day for salary and benefits x

20 days = $4,800Training costs = $50 + $2,400 + $9,600 + $4,800 = $16,850

Total turnover costs= $90 + $3,140 + $16,850 = $20,080