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Strategy and Human

Resources Planning

Managing Human Resources


Belcourt * Bohlander * Snell 5th Canadian edition
PowerPoint Presentation by
2008 by Nelson, a division of Thomson Canada
Limited Monica Belcourt, York University, and
All rights reserved Charlie Cook, The University of West Alabama
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 organizations 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.
6. Understand the requirements of strategy implementation.
7. Recognize the methods for assessing and measuring the
effectiveness of strategy.

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Strategic Planning and Human Resources
Strategic Planning
Procedures for making decisions about the
organizations 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.

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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 formulationproviding input as to what is
possible given the types and numbers of people
available.
Strategy implementationmaking primary resource
allocation decisions about structure, processes, and
human resources.

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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
HumanResources
Resources Strategic
Strategic
Planning
Planning Planning
Planning

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Linking Strategic Planning and Human Resources

Figure 2.1

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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.

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Step Two: Environmental Analysis
Environmental Analysis
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

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Five Forces Framework

Figure 2.2

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Step Three: Internal Analysis

Culture Competencies

Internal
Analysis

Composition

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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?

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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

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Composition: The Human Capital
Architecture
Core knowledge workers
Employees who have firm-specific skills that are
directly linked to the companys 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

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Composition: The Human Capital
Architecture (contd)
Contract labour
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 companys core
strategy.
Example: Independent product label designer

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Mapping Human Capital

Figure 2.3

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Forecasting: A Critical Element of Planning
Forecasting involves:
a. forecasting the demand for labour
b. forecasting the supply of labour
c. balancing supply and demand considerations

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Model of HR Forecasting

FORECASTING
FORECASTINGDEMAND
DEMAND
Considerations
Considerations Techniques
Techniques BALANCING
BALANCING
Product/service Trend SUPPLY
SUPPLYAND
Product/servicedemand
demand Trendanalysis
analysis DEMAND
AND
Technology Managerial DEMAND
Technology Managerialestimates
estimates
Financial
Financialresources
resources Delphi technique
Delphi technique
Absenteeism/turnover
Absenteeism/turnover (Shortage)
(Shortage)
Organizational
Organizationalgrowth
growth Recruitment
Recruitment
Management philosophy
Management philosophy Full-time
Full-time
Part-time
Part-time
Recalls
Recalls
Techniques
Techniques External
ExternalConsiderations
Considerations
Staffing
Staffingtables
tables Demographic
Demographicchanges
changes
(Surplus)
(Surplus)
Markov Education Reductions
Markovanalysis
analysis Educationof
ofthe
theworkforce
workforce Reductions
Skills inventories Labour mobility Layoffs
Layoffs
Skills inventories Labour mobility
Management Government Terminations
Managementinventories
inventories Governmentpolicies
policies Terminations
Replacement charts Unemployment Demotions
Replacement charts Unemploymentraterate Demotions
Succession Retirements
Successionplanning
planning Retirements
FORECASTING
FORECASTINGSUPPLY
SUPPLY
Figure 2.4

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Forecasting Demand for Employees

Quantitative
QuantitativeMethods
Methods

Forecasting
Forecasting Demand
Demand

Qualitative
QualitativeMethods
Methods

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Quantitative Approach: Trend Analysis
Forecasting labour 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 labour 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).
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Example of Trend Analysis of HR Demand

BUSINESS LABOUR = HUMAN RESOURCES


FACTOR PRODUCTIVITY DEMAND
YEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES)

2000 $2,351 14.33 164


2001 $2,613 11.12 235
2002 $2,935 8.34 352
2003 $3,306 10.02 330
2004 $3,613 11.12 325
2005 $3,748 11.12 337
2006 $3,880 12.52 310
2007* $4,095 12.52 327
2008* $4,283 12.52 342
2009* $4,446 12.52 355
*Projected figures
Figure 2.5

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Qualitative Approaches
Management Forecasts
The opinions (judgments) of supervisors, department
managers, experts, or others knowledgeable about
the organizations 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.

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Forecasting the Supply of Employees:
Internal Labour Supply
Staffing Tables
Markov Analysis
Skill Inventories
Replacement Charts
Succession Planning

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Forecasting Internal Labour 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.

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Hypothetical Markov Analysis for a Retail Company

Figure 2.6

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Internal Demand Forecasting Tools
Skill Inventories
Files of personnel education, experience, interests,
skills, etc., that allow managers to quickly match job
openings with employee backgrounds.
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.

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Highlights in HRM
Succession-
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. Then
compile the scores and
compare notes.

Scores

Highlights 2.4

Source: From William J. Rothwell, Putting Success into Your Succession Planning,
The Journal of Business Strategy 23, no. 3 (May/June 2002): 3237. Republished with
permissionThomson Media, One State Street, 26th Floor, New York, NY 10004.
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An Executive Replacement Chart

Figure 2.7

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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.

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Corporate Strategy

Growth and Mergers and


Diversification Acquisitions

Corporate
Strategy

Strategic Alliances
and Joint Ventures

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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.

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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.

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The 7-S Model

Figure 2.8
Source: McKinsey & Company
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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?
Attrition strategies
Termination strategies

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Step Six: Evaluation and Assessment
Evaluation and Assessment Issues
Benchmarking: The process of comparing the
organizations 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

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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

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Balanced Scorecard

Figure 2.9

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Assessing Internal Fit

Figure 2.10

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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.

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Key Terms
attrition replacement charts
Balanced Scorecard (BSC) severance pay
benchmarking skill inventories
core competencies staffing tables
core values strategic human resources
cultural audits management (SHRM)
environmental scanning strategic planning
hiring freeze strategic vision
human resources planning succession planning
(HRP) SWOT analysis
management forecasts termination
Markov analysis trend analysis
mission value creation
organizational capability

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Calculating Turnover
and Absenteeism

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Employee Turnover Rates
Computing Turnover Rates:

Number of separations during the month


X 100
Total number of employees at midmonth

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Employee Turnover Rates (contd)
Computing Turnover Rates (contd):

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Highlights in HRM
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 employees 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 Highlights 2.A1

Source: Adapted from the book Turning Your Human Resources Department into a Profit CenterTM by Michael Mercer, Ph.D. (Castlegate Publishers, Inc.,
Barrington, Illinois). Copyright 2002 Michael Mercer. Reproduced with permission from Michael Mercer, Ph.D., www.DrMercer.com.
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Employee Absenteeism Rates

Number of worker days lost through job absence during period


X100
Average number of employees X number of work days

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