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Chapter 2:

Global Development and Strategic Management


LIM Soon Chong, Johnson (Ph.D.)
Universiti Tun Hussein Onn Malaysia (UTHM)

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Outline I
1

Global Development
HRM in Todays Marketplace
Globalization
Technological Advances
Changing Nature of Work
Workforce Diversity
Malaysian Workforce

HR Strategic Management
Corporate Strategies
HR Strategic Challenges
Strategic Management Process
Strategy Planning Process

References

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HRM in Todays Marketplace I

The roles of HRM have gradually become broader and more challenging due
to the changing environments. Among these changes are [2]:
Globalization
Technological Advances
Changing Nature of Work
Workforce Demographics

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Globalization I
Globalization here refers to the tendency of companies to extend their
sales, ownership, or manufacturing to new markets in other countries [2].
Many countries are signing free-trade agreements, e.g. the elimination of
import duties on goods traded throughout the region. Example, ASEAN
free trade agreement (AFTA).
It has strategic implications, where companies are facing competition
globally. This implies that local businesses have to cope global business
entities for survival.
Challenges to HR[1]:
Work culture issues, i.e., the notion of Achieve more with less - higher
productivity at lower cost (manpower, compensation, etc.)
Mergers and acquisition affects the motivation and sense of belonging for
employees from acquired companies
Expatriate staff in foreign country
Managing foreign workers with different demographics and work-culture
...
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Technological Advances
The Internet and information communication technology (ICT) have
enabled companies to become more competitive in global marketplace.
This also introduces new working styles such as home office (e.g.,SOHO)
and co-working.
IT Systems has greatly simplified business work-flows and process
management. For instance, less papers used, the use of integrated
management tools (e.g., CRM) or electronic communication tools
(e-mails, video conferencing), etc.
However, employees skills knowledge must be constantly updated.
Related issues [1]:
Increased training costs for employees
Changing IT policies due to changing technology
Potential loss of productivity (employees indulge in social media)
Confidentiality issues (potential leak of sensitive company information)
Privacy at workplace (monitoring of employees activity)
...
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Changing Nature of Work I

Technology is also changing the nature of work.


New job scope and titles are emerging. For instance, social media
experts, Facebook marketers, etc.
Increasingly, companies are seeking for candidates that are multi-skilled,
i.e., good soft-skills, ICT skills, etc.
There is a shift to use non-traditional workers, where they include those
who hold multiple jobs, or who are contingent or part-time workers, or
people working in alternative work arrangements.
Translated into HRM, it means lower costs, making employees more
productive, new ways to do things faster and cheaper.

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Changing Nature of Work II

Employers expectation[1]:
1
2

Multi-skilled workers to cover a variety of tasks


Able to hire workers on short term contracts and dismiss them when
required, without retrenchment benefits.
Outsourcing work to other companies (including the use of foreign workers
from other countries)
Compensate workers commensurate with performance (e.g.
performance-based system)

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Workforce Diversity I

Workforce Generations
Baby Boomers (1946-1964)
Gen-X (1965-1979)
Gen-Y or dot-com Generation (1980 onwards)
Workforce demographics are changing and becoming more diverse. There are
more women, minority-group members, younger workers and also older
workers in the workforce today. Diversity here refers to differences such as
race, nationality, gender, age and cultural values.

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Workforce Diversity II

Gen-Y are the current entry level workforce. Characteristics of Gen-Y


workers[1]:
Emphasize work-life balance. Work hard, play hard.
Interested in organizations that offers flexibility, telecommuting and
temporary, but changing assignments.
They belong to instant noodle generations.
Move from one organization to another, in search for jobs that give them
personal satisfaction.
Enjoy learning, but once the job or organization ceases to offer
opportunities for learning personal growth, they move on again.

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Malaysian Workforce I

Figure 1 : Malaysia Workforce by Education Level (Year 2009) [4]

Figure 2 : Malaysia Workforce by Education Level (Year 2012) [5]


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Malaysian Workforce II

Figure 3 : Unemployment by Education Level (Year 2009) [4]

Figure 4 : Unemployment by Education Level (Year 2012) [5]

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Malaysian Workforce III


General Observations on Malaysian Workforce:
Diverse, consist of different ethnic groups, gender, spoken language,
religion, etc.[1].
Employees are generally well-educated, aware of employment rights and
able to take legal approach towards any employement related issues[1].
Unemployment rate at 3.7%(2009)[4] and 3.0% (2012) [5].
Moving towards service-oriented economy that emphasizes high-level of
skills, creativity and innovation.
Employers generally either look for talented knowledge workers
(k-workers) where intellectual assets are emphasized, or general workers
with lower compensation packages.
However, Malaysia experienced tight labor market but with higher
turnover rates. This results in the influx of foreign workers.

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Malaysian Workforce IV

Employees, on the other hand, expected better income package to cope


with rising living costs and work-life balance.
Work-life balance expectations:
How many hours of working per day?
on-call during weekends and public holiday?
lengthy absences for personal reasons, e.g. ill parents, looking after
children, etc.?
...

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Corporate Strategies
A company may consist of several businesses. For instance, PepsiCo includes
Pepsi, Frito-Lay, and Pizza Hut. A companys corporate-level identifies the
portfolio of businesses that, in total, comprise the company and the ways in
which these businesses relate to one another. Different types of corporate
strategies[2]:
Diversification corporate strategy implies that the company will expand by
adding new product lines
Vertical Integration strategy means the company expands by producing its own
raw materials, or selling its products directly
Consolidation means reducing the companys size
Geographical Expansion means taking the business abroad
Cost Leadership implies that a company aims to become the low-cost leader in
the industry.
Differentiation strategy means a company seeks to be unique in its products or
services.
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HR Strategic Challenges I

Definition
A strategic plan is the companys plan for how it will match its internal
strengths and weaknesses with external opportunities and threats in order to
maintain a competitive advantage. [2].
A strategy is a course of action. In formulating HR strategies, HR Managers
deal with three basic challenges [2]:
1

The need to support corporate productivity and performance


improvement efforts. With global competition, there is a need to
continually improve the companys performance. Thus, HR departments
strategies, policies, and activities must support the companys corporate
strategies.

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HR Strategic Challenges II

Employees play a bigger role in employers performance


improvement efforts. HRs attention increasingly focuses on boosting
competitiveness, managing employee performance, and in general, on
building high-performing organizations and being measured on its ability
to do so.

HR must be more involved in designing - not just executing - the


companys strategic plan. HR plays a crucial role in strategic
formulation in various ways, including supplying competitive information
that may be useful in the strategic planning process, details about
competitors incentive plans, opinion survey data and customer
complaints, information about labour laws and mandatory health
insurance, etc.

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Strategic Management Process I


Strategic Management includes the process of identifying and executing the
companys mission by matching the companys capabilities with the demands
of its environment.
Strategic management process includes the following [2]:
1

Step 1: Define the Business and Its Mission


Where are we now in terms of business were in, and what business do we
want to be in, given our companys opportunities and threats and its
strengths and weaknesses?. Such thing can be translated in terms of
companys vision and mission.
Vision states what a business should be in a much broader sense and
more future oriented.
Mission is a more specific business goal and states what the company is
supposed to be now.

Step 2: Perform External and Internal Audits


Managers use SWOT(Strengths, Weaknesses, Opportunities and Threats)
Analysis to perform external and internal audits, aimed at analyzing both
external and internal situations.
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Strategic Management Process II


3

Step 3: Translate the Mission into Actionable, Strategic Goals


Translating the meaning of mission for the next five years, in terms of how
many and what specific types of partnerships to form, with whom, and
when?

Step 4: Formulate a Strategy to Achieve the Strategic Goals


A strategy is a course of action.
Action that is able to move the business it is in now to the business it wants
to be in (as stated in its vision, mission and strategic goals), given its
opportunities and threats and its internal strengths and weaknesses.

Step 5: Implement the Strategy


Implementation means putting the strategies into action and getting results
- by actually hiring (or firing) people, building (or closing) plants, and adding
(or removing) product lines.
Employees cannot implement strategies that they do not understand.

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Strategic Management Process III

Step 6: Evaluate Performance


Strategies do not always succeed. Managing strategy is an ongoing
process.
Challenges include new product by competitors, technological innovations,
obsolete production process, changing social trends, etc.
Strategic control keeps the companys strategy up to date by assessing
progress towards goal and taking corrective actions as needed.
Are all resources of our company contributing as planned towards achieving
our strategic goals?
What is the reason for any discrepancies?
Do changes in our situation suggest that we should revise our strategic
planning?

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Strategic Planning Process using Scorecard Approach I

Managers often use an HR Scorecard approach as a


tool to measure the HR functions effectiveness and efficiency in value
creation towards achieving the companys strategic goals.
Value creation refers to measurable contribution
HR Scorecard is a concise measurement system that shows the
quantitative standards or metrics the company uses to measure HR
activities.

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Strategic Planning Process using Scorecard Approach II

In creating a HR Scorecard, the managers need three types of


information[2]:
1

They must know what the companys strategy is, because this strategy will
determine what the important employee behaviors and organizational
outcomes are, and how the company will measure organizational
performance.
Managers must understand the causal links between the HR activities, the
employee behaviors, the organizational outcomes, and the organizations
performance.
Managers must have metrics that they can use to measure all the activities
and results, specifically the HR activities, the emergent employee
behaviors, the strategically relevant organizational outcomes, and the
organizational performance.

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Strategic Planning Process using Scorecard Approach III


Seven steps in using the HR Scorecard Approach[2]:
1

Define Business Strategy: Defining what the companys strategic plans


are (For instance, one of the plans for KPJ Healthcare is to increase the
number of specialist hospitals and develop new hospitals, local and
overseas[3]). Management need to translate its broad strategic plans into
specific, actionable strategic goals.
Outline the Companys Value Chain: Value chain analysis to identify
strategically relevant outcomes that create values for customers. Every
business consists of a chain of activities, which may include bringing
supplies and materials into companys warehouse, designing the product to
customers specifications, etc. Its more than just a tool of identifying and
analyzing the companys core activities and costs. These questions are
also asked:
How do our costs for this activity compare with our competitors?
Is there some way we can gain a competitive advantage with this activity?
Is there a more efficient way for us to deliver these services?
Do we have to perform these services in-house?
...

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Strategic Planning Process using Scorecard Approach IV

Figure 5 : Sample primary activities in a hotel operation [2]

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Strategic Planning Process using Scorecard Approach V


3

Identify the Required Organizational Outcomes: Corresponding to


identified chain of activities, this stage determine whether the activities
contribute to the required organizational outcomes. Managers identify and
specify the strategically relevant organizational outcomes that should be
achieved.
Identify the Required Workforce Competencies and Behaviors: This
stage identifies the important competencies and behaviors that a
companys employee must possess in order to achieve required
organizational outcomes. These includes personal accountability, working
proactively, motivation, courteous behavior and commitment.
Identify Relevant HR System Policies and Activities: Once required
competencies and behaviors are identified, managers will identify HR
activities and policies that are able to produce these behaviors. These
include special training programs, revised compensation plan, attractive
remuneration packages etc.

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Strategic Planning Process using Scorecard Approach VI

Design the HR Scorecard Measurement System: The key question is on


a suitable measurement system for revised strategically relevant
organizational outcomes, employee competencies and behaviors and
specific HR system policies and activities. All these measurable goals need
to be specifically written down to form a HR scorecard. The scorecard will
answers these questions:
How do we measure employees morale? (e.g. discipline level)
What is the effectiveness of a special training program? (e.g. productivity)
How does revised compensation plan improves productivity? (e.g. sales)
...

Evaluate the Measurement System: HR Scorecard should be


continuously revised and improved. HR managers should periodically
evaluate measures and links to make sure they are still valid in line with the
organizational strategic planning.

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References I
[1] A MINUDDIN , M. Human Resource Management: Principles and Practices, first ed.
Oxford University Press, Malaysia, 2008.
[2] D ESSLER , G., AND TAN , C. H. Human Resource Management: An Asian
Perspective, 10th ed. Pearson Prentice Hall, Singapore, 2005.
[3] KPJ. Kpj future developments, 2013. Online:
http://www.kpjhealth.com.my/future-development.php.
[4] S TATISTICS D EPT., M. Labour force survey report malaysia 2009. Tech. rep.,
Department of Statistics Malaysia, 2011.
[5] S TATISTICS D EPT., M. Labour force survey report malaysia 2012. Tech. rep.,
Department of Statistics Malaysia, 2014.

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The End

Thank You.

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