Chapter 2 – Strategic HRM

What is an organizational mission / mission statement

• The core reason for the existence of the organization and what makes it unique

• Mission statement is usually determined by the organizational founders or leaders and sets the
general direction

How strategic HRM aligns with business strategy

• HR can support organizational strategy by:

Hiring good employees, placing employees in the right jobs, rewarding employees fairly, providing
proper training, fostering good employer-employee communication, focusing employee efforts and
rewards toward the company’s bottom line

HR strategies for global competitiveness

• Multinational corporations need expertise to administer HR activities in a wide range of nations to

compete on an international scale

Multinational corporation (MNC): an organization that has facilities and other assets in at least one
country other than its home country

Strategic HR approaches to international staffing

• Organization use offshoring: relocation of a business process or operation from one country to
another, to respond to global labor conditions

What is HR planning

• Analyzes and identifies the need for and availability of people so that the organization can meet its
strategic objects

• Ensure the right number of people with the right capabilities at the right times and the in the right
places

Succession planning

• Process of identifying a plan for the orderly replacement of key employees

• Ensures high-quality talent will be available to carry out business strategies

Factors affecting external pool of employees

• Economic and governmental factors

 Government regulations affect labor supply ($600 extra unemployment under COVID)
 Tax legislation at local, state, and federal levels affecting HR planning

• Geographic and competitive evaluations

  Net migration
 Direct competitors
 International competition

• Changing workforce considerations

 Aging of the workforce

 Growing diversity of workers
 Female workers and work-life integration concerns
 Availability of contingent workers
 Outsourcing possibilities

HR forecasting methods

• Uses information from the past and present to predict future conditions

• Current and future jobs audit

 Type of existing jobs

 Number of individuals preforming each job
 Vital KSAs (knowledge, skills, abilities)
 Jobs needed to implement future organizational strategies
 Characteristics of anticipated jobs

• Qualitative Methods (Subjective Judgmental)

 Estimates
 The rule of thumb
 Nominal groups

• Quantitative Methods (Mathematical)

 Statistical regression analysis

 Simulation models
 Productivity ratios
 Staffing ratios

• HR forecasting should be done over three planning periods

 Short-range forecasts- less than one year

 Intermediate- up to five years
 Long-range- more than five years

Reduction in Work Hours or Compensations:

 Example: a small-owned company asked its 15 full-time workers to take a day off
without pay each week to keep all of them on the payroll and avoid layoffs
  It’s important that pay cuts start at the very top of the organization so that
employees do. Not bear all the hardships
 Uniform pay cuts can be seen as a shared sacrifice for the survival of the firm
 Organization may also reduce employee benefits, such as eliminating matching 401
(k) contributions or raising employee’s health insurance premiums

• Attrition and Hiring Freezes

 Individuals quit or retire and are not replaced

 Those who remain must handle the same workload with fewer people o Unless
turnover is high, attrition will eliminate only a relatively small number of employees
in the short run (can be viable in the long-term)

• Voluntary Separation Programs

 Offering additional severance, training, and benefit payments

 Early retirement buyouts are widely used to encourage more senior workers to
leave organizations early
 may offer expanded health coverage and additional buyout payments

• Workforce Downsizing

 Short-term solution that can result in a long-term lack of talent

 Can hurt productivity by leaving “surviving” employees overburdened and
demoralized
 Effective implementation of layoffs:
▪ Identify the work that is core to sustaining a profitable business.
▪ Identify the knowledge, skills, and competencies needed to execute the
business strategy.
▪ Protect the bottom line and the corporate brand.
▪ Constantly communicate with employees.
▪ Pay attention to the survivors.

WARN Act

• Worker Adjustment and Retraining Notification (WARN) Act

 Ensures that employees have adequate notice of plant closings or mass layoffs
 Requires private and commercial organizations that employ 100 or more full-time workers
who have worked more than six months in the previous year to give a 60-day notice before
implementing a layoff or facility closing that involves more than 50 people.

Due diligence

• A comprehensive assessment of all aspects of the business being acquired

• Financial, sales and marketing, operations, and human resource staffs can be involved before the
final decision is made to merge with or acquire the company
• HR should also assess what HR policies have been used in a firm, the available talent, and the
organizational culture

Effectiveness and efficiency

• Effectiveness: a measure of ability of a program, project, or task to produce a specific desired

effect or result that can be measured

• Efficiency: the degree to which operations are carried out in an economical manner

 Can be short-term measure that compares inputs and costs directly against outputs and
benefits HR metrics and analytics
• HR metrics: specific measures of HR practices
 Performance indicators of various HR issues (absenteeism and turnover rates)
 Typically used to assess HR practices and results within the organization over time
 Can be developed using cost, quantity, quality, timeliness, and other designated
goals
 Can track HR efficiency and effectiveness
• HR analytics: can be defined on the basis of quantitative tools and models
 Growing rapidly and a number of universities now offer degree
programs in data analytics and specific HR analytics courses are being
added to many graduate HR programs
• The following should be considered when developing HR metrics and
analytics:
 Accurate data can be collected.
 Measures are linked to strategic and operational objectives.
 Calculations can be clearly understood.
 Measures provide information valued by executives.
 Results can be compared both externally and internally.
 Measurement data drive HR management efforts.
Benchmarking and the balanced scorecard
• Benchmarking
 The process of comparing an organization’s business results to industry
standards or best practices o
 Focused on external practices that the organization can use to improve
its own processes and practices o
 Managers should be careful to find organizations with similar contexts,
cultures, operations, and size so that comparisons are realistic
• Balanced Scorecard
 Framework organizations use to report on a diverse set of performance
measures
 Balances financial and nonfinancial measures so that manages focus
on long-term drivers of performance and organizational sustainability.

ROI

• A calculation showing the value of investments in human capital

• Used to show how long it will take for activities to show results

• ROI = C/ (A+B)

A= operating cost for new or enhanced systems for the time period
B= one-time cost of acquisition and implementation
C= value of gains from productivity improvements for the time period

• Allows managers to choose from various investments opportunities to determine the best use
of funds

SUMMARY

 Organizational strategy focuses on how to successfully compete and how HR should be

involved in strategy decisions both at the organizational level and in making HR strategies.

• Organizational effectiveness and strategic HR management must focus on organizational

culture, as well as productivity, customer service and quality, and financial contributions.

• Organizations doing business internationally may evolve from organizations engaged in

importing and exporting, to multi-national enter-prises, to global organizations.

• Legal, political, cultural, and economic factors influence global HR management.

• One scheme for classifying national cultures considers inequality in power, individualism,
masculinity/femininity, uncertainty avoidance, and long-term orientation.

• HR planning involves analyzing and identifying the need for and availability of human
resources that the organization can meet its objectives.

• The HR unit has major responsibilities in HR planning, but managers must provide supportive
information and input.

• When developing HR plans, it is important for managers to scan the external environment to
identify the effects of government influences, economic conditions, geographic and competition
concerns, and workforce composition changes.

• Assessing internal strengths and weaknesses as apart of HR planning requires auditing and
inventorying current jobs and employee capabilities.

• The supply and demand for human resources can be forecast with a variety of methods and for
differing periods of time.

• Management of HR surpluses may require downsizing through use of attrition and hiring
freezes, early retirement buyouts, layoffs, and out placement assistance.

• Managing a workforce shortage should be multi-faceted, not just solved with hiring.

• HR plays a crucial role in mergers and acquisitions, particularly in dealing with organizational
culture issues.
• HR effectiveness must be measured using HR metrics that consider both strategic and
operational effectiveness.

• The ROI of human capital, economic value added (EVA), and the balanced scorecard are
common means for HR measurement.

• Benchmarking allows an organization to com-pare its practices against “best practices”

indifferent organizations, and HR audits can be used to get a comprehensive overview on HR
activities.