You are on page 1of 44

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

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 organization’s 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.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd. 2–2

Strategic Planning and Human Resources
• Strategic Planning
 Procedures for making decisions about the
organization’s 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

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd. 2–3

Strategic Planning and HR Planning
• Strategic Human Resources Management
 The pattern of human resources deployments and
activities that enable an organization to achieve its
strategic goals
 Strategy formulation—providing input as to what is
possible given the types and numbers of people
 Strategy implementation—making primary resource
allocation decisions about structure, processes, and
human resources.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd. 2–4

2–5 . 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 Copyright © 2008 by Nelson. a division of Thomson Canada Ltd.

a division of Thomson Canada Ltd.1 Copyright © 2008 by Nelson. Linking Strategic Planning and Human Resources Figure 2. 2–6 .

• Core Values  The strong and enduring beliefs and principles that the company uses as a foundation for its decisions. • Strategic Vision  A statement about where the company is going and what it can become in the future. Step One: Mission. a division of Thomson Canada Ltd. and Values • Mission  The basic purpose of the organization as well as its scope of operations. clarifies the long- term direction of the company and its strategic intent. 2–7 . Copyright © 2008 by Nelson. Vision.

Step Two: Environmental Analysis • Environmental Analysis  The systematic monitoring of the major external forces influencing the organization 1.and literacy Copyright © 2008 by Nelson. Technological changes: robotics and office automation 4. and innovations 3. services. Demographic trends: age. composition. Economic factors: general and regional conditions 2. Social concerns: child care and educational priorities 6. Political and legislative issues: laws and administrative rulings 5. Competitive trends: new processes. 2–8 . a division of Thomson Canada Ltd.

a division of Thomson Canada Ltd. 2–9 .2 Copyright © 2008 by Nelson. Five Forces Framework Figure 2.

2–10 . a division of Thomson Canada Ltd. Step Three: Internal Analysis Culture Competencies Internal Analysis Composition Copyright © 2008 by Nelson.

2–11 . 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? Copyright © 2008 by Nelson. Scanning the Internal Environment • Cultural Audits  Audits of the culture and quality of work life in an organization. a division of Thomson Canada Ltd.

Are valuable 2. Are rare and unavailable to competitors 3. 2–12 . a division of Thomson Canada Ltd. • Sustained competitive advantage through people is achieved if these human resources: 1. Competitive Advantage through People • Core Competencies  Integrated knowledge sets within an organization that distinguish it from its competitors and deliver value to customers. Are difficult to imitate 4. Are organized for synergy Copyright © 2008 by Nelson.

Composition: The Human Capital Architecture • Core knowledge workers  Employees who have firm-specific skills that are directly linked to the company’s strategy.  Example: Security guard Copyright © 2008 by Nelson. a division of Thomson Canada Ltd. 2–13 . but not unique.  Example: Senior software programmer • Traditional job-based employees  Employees with skills to perform a predefined job that are quite valuable to a company.

 Example: General electrician • Alliance/partners  Individuals and groups with unique skills. a division of Thomson Canada Ltd. 2–14 .  Example: Independent product label designer Copyright © 2008 by Nelson. but those skills are not directly related to a company’s core strategy. Composition: The Human Capital Architecture (cont’d) • Contract labour  Employees whose skills are of less strategic value and generally available to all firms.

Mapping Human Capital Figure 2.3 Copyright © 2008 by Nelson. 2–15 . a division of Thomson Canada Ltd.

2–16 . Forecasting: A Critical Element of Planning • Forecasting involves: a. forecasting the demand for labour b. balancing supply and demand considerations Copyright © 2008 by Nelson. forecasting the supply of labour c. a division of Thomson Canada Ltd.

4 Copyright © 2008 by Nelson. 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. 2–17 . a division of Thomson Canada Ltd.

Forecasting Demand for Employees Quantitative QuantitativeMethods Methods Forecasting Forecasting Demand Demand Qualitative QualitativeMethods Methods Copyright © 2008 by Nelson. 2–18 . a division of Thomson Canada Ltd.

Copyright © 2008 by Nelson. Plot the business factor in relation to the number of employees to determine the labour productivity ratio. 4. 3. Compute the productivity ratio for the past five years. a division of Thomson Canada Ltd. Calculate human resources demand by multiplying the business factor by the productivity ratio. 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. 2–19 . 2. 5. Project human resources demand out to the target year(s).

12 337 2006 $3.52 342 2009* $4.613 11.34 352 2003 $3. Example of Trend Analysis of HR Demand BUSINESS  LABOUR = HUMAN RESOURCES FACTOR PRODUCTIVITY DEMAND YEAR (SALES IN THOUSANDS) (SALES/EMPLOYEE) (NUMBER OF EMPLOYEES) 2000 $2.613 11.5 Copyright © 2008 by Nelson.283 12.12 235 2002 $2. a division of Thomson Canada Ltd.52 355 *Projected figures Figure 2.351 14.880 12.748 11.33 164 2001 $2.446 12.306 10.52 310 2007* $4.935 8.095 12.12 325 2005 $3.02 330 2004 $3.52 327 2008* $4. 2–20 .

 The final forecast represents a composite group judgment. department managers. • Delphi Technique  An attempt to decrease the subjectivity of forecasts by soliciting and summarizing the judgments of a preselected group of individuals. Qualitative Approaches • Management Forecasts  The opinions (judgments) of supervisors. experts. 2–21 . or others knowledgeable about the organization’s future employment needs. a division of Thomson Canada Ltd. Copyright © 2008 by Nelson.

2–22 . Forecasting the Supply of Employees: Internal Labour Supply • Staffing Tables • Markov Analysis • Skill Inventories • Replacement Charts • Succession Planning Copyright © 2008 by Nelson. a division of Thomson Canada Ltd.

Copyright © 2008 by Nelson. along with the numbers of employees currently occupying those jobs and future (monthly or yearly) employment requirements. Forecasting Internal Labour Supply • Staffing Tables  Graphic representations of all organizational jobs. a division of Thomson Canada Ltd. • Markov Analysis  A method for tracking the pattern of employee movements through various jobs. 2–23 .

Hypothetical Markov Analysis for a Retail Company Figure 2. 2–24 .6 Copyright © 2008 by Nelson. a division of Thomson Canada Ltd.

Internal Demand Forecasting Tools • Skill Inventories  Files of personnel education. 2–25 .. interests. • Succession Planning  The process of identifying. developing. a division of Thomson Canada Ltd. experience. etc. Copyright © 2008 by Nelson. • Replacement Charts  Listings of current jobholders and persons who are potential replacements if an opening occurs. skills. that allow managers to quickly match job openings with employee backgrounds. and tracking key individuals for executive positions.

New York. no. Then compile the scores and compare notes.4 Source: From William J.” The Journal of Business Strategy 23. Copyright © 2008 by Nelson. a division of Thomson Canada Ltd. 3 (May/June 2002): 32–37. enter a number to the right to indicate how well you believe your organization manages that characteristic. Rothwell. One State Street. Republished with permission—Thomson Media. Ask other decision makers in your organization to complete this form individually. 2–26 . 26th Floor. “Putting Success into Your Succession Planning. NY 10004. Scores Highlights 2. 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.

2–27 . a division of Thomson Canada Ltd.7 Copyright © 2008 by Nelson. An Executive Replacement Chart Figure 2.

Step Four: Formulating Strategy • Strategy Formulation  Moving from simple analysis to devising a coherent course of action. weaknesses. Copyright © 2008 by Nelson. counteract threats.  Use the strengths of the organization to capitalize on opportunities. • SWOT analysis  A comparison of strengths. a division of Thomson Canada Ltd. 2–28 . opportunities. and threats for strategy formulation purposes. and alleviate internal weaknesses.

a division of Thomson Canada Ltd. Corporate Strategy Growth and Mergers and Diversification Acquisitions Corporate Strategy Strategic Alliances and Joint Ventures Copyright © 2008 by Nelson. 2–29 .

the amount of benefits provided by the product or service once the costs of making it are subtracted. a division of Thomson Canada Ltd. Copyright © 2008 by Nelson.  Differentiation strategy: compete on added value  Involves providing something unique and distinctive to customers that they value. 2–30 . Business Strategy • Value Creation  What the firm adds to a product or service by virtue of making it.  Low-cost strategy: competing on productivity and efficiency  Keeping costs low to offer an attractive price to customers (relative to competitors).

• Internal Fit (or Internal Alignment)  Aligning HR practices with one another to establish a configuration that is mutually reinforcing. 2–31 . Functional Strategy: Ensuring Alignment • External Fit (or External Alignment)  Focuses on the connection between the business objectives and the major initiatives in HR. Copyright © 2008 by Nelson. a division of Thomson Canada Ltd.

2–32 . The 7-S Model Figure 2. a division of Thomson Canada Ltd.8 Source: McKinsey & Company Copyright © 2008 by Nelson.

a division of Thomson Canada Ltd. 2–33 . 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 Copyright © 2008 by Nelson.

2–34 . Step Six: Evaluation and Assessment • Evaluation and Assessment Issues  Benchmarking: The process of comparing the organization’s 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 Copyright © 2008 by Nelson. a division of Thomson Canada Ltd.

a division of Thomson Canada Ltd. 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 Copyright © 2008 by Nelson. 2–35 .

a division of Thomson Canada Ltd.9 Copyright © 2008 by Nelson. Balanced Scorecard Figure 2. 2–36 .

Assessing Internal Fit Figure 2. 2–37 . a division of Thomson Canada Ltd.10 Copyright © 2008 by Nelson.

Copyright © 2008 by Nelson. 2–38 .  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. a division of Thomson Canada Ltd. Ensuring Strategic Flexibility for the Future • Organizational Capability  Capacity of the organization to act and change in pursuit of sustainable competitive advantage.

2–39 . a division of Thomson Canada Ltd. 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 Copyright © 2008 by Nelson.

2–40 . Calculating Turnover and Absenteeism Copyright © 2008 by Nelson. a division of Thomson Canada Ltd.

a division of Thomson Canada Ltd. Employee Turnover Rates • Computing Turnover Rates: Number of separations during the month X 100 Total number of employees at midmonth Copyright © 2008 by Nelson. 2–41 .

Employee Turnover Rates (cont’d) • Computing Turnover Rates (cont’d): Copyright © 2008 by Nelson. 2–42 . a division of Thomson Canada Ltd.

080 Highlights 2.140 Training costs 1. Highlights in HRM Costs Associated With The Turnover Of One Computer Programmer (Turnover costs = Separation costs + Replacement costs + Training costs) Separation costs 1.800 Training costs = $50 + $2. Exit interview cost for salary and benefits of both interviewer and departing employee during the exit interview = $30+$30 = $60 2.500 2. seminars. Barrington. Booklets. Advertising for job opening = $2.400 + $9. or courses = $2. (Castlegate Publishers. Selection interview = $250 4. Ph. Inc. a division of Thomson Canada Ltd.140 + $16. Employment tests = $40 5.. Illinois). Reproduced with permission from Michael Mercer.A1 Source: Adapted from the book Turning Your Human Resources Department into a Profit CenterTM by Michael Mercer.600 4. Meetings to discuss candidates (salary and benefits of managers while participating in meetings )= $250 Total replacement costs = $2. manuals. Administrative and record-keeping action = $30 Total separation costs = $60 + $30 = $90 Replacement costs 1. and reports = $50 2. Preemployment administrative functions and record-keeping action = $100 3. www. Salary and benefits of new employee until he or she gets “up to par” = $240/day for salary and benefits x 20 days = $4.850 Total turnover costs= $90 + $3.800 = $16.500 + $100 + $250 + $40 + $250 = $3.400 3.D. Education = $240/day for new employee’s salary and benefits x 10 days of workshops.850 = $20. Copyright © 2008 by Nelson. 2–43 . Copyright 2002 Michael Mercer. + $4.DrMercer.. One-to-one coaching = ($240/day/new employee + $240/day/staff coach or job expert) x 20 days of one-to-one coaching = $9.

a division of Thomson Canada Ltd. Employee Absenteeism Rates Number of worker days lost through job absence during period X100 Average number of employees X number of work days Copyright © 2008 by Nelson. 2–44 .