MJ11 e CH 02

ROBERT L.
MATHIS
JOHN H. JACKSON
Chapter 2
Strategic HR Management
and Planning
SECTION 1
Nature of
Human Resource
Management
Copyright 2005 Thomson Business & Professional Publishing.
All rights reserved.
PowerPoint Presentation by Charlie Cook

The University of West Alabama
Learning
Learning Objectives
Objectives
After you have read this chapter, you should be able to:
Explain strategic HR management and how it is linked to
organizational strategies.
Describe how legal, political, cultural, and economic factors
affect global HR management.
Discuss four dimensions of organizational effectiveness and how
HR contributes to each.
Define HR planning and outline the HR planning process.
Discuss several ways of managing a surplus of human
resources.
Identify why HR metrics must consider both strategic and
operational HR measures.
Copyright 2005 Thomson Business & Professional Publishing. All rights reserved.
22
Human
Human Resources
Resources as
as aa Core
Core Competency
Competency
Strategic Human Resources Management
The use of employees to gain or keep a competitive
advantage, resulting in greater organizational
effectiveness.
Core Competencies
The unique capabilities of employees in an
organization that create high value and that
differentiate the organization from its competition
The source of an organizations sustainable
competitive advantage.
23
Strategic
Strategic HR
HR Management
Management Process
Process
Figure 21
24
Linkage
Linkage of
of Organizational
Organizational and
and HR
HR
Strategies
Strategies
Differentiation
Cost Leadership
Competition on the basis of
low price and high quality
of product or service
Relies on building
employees to fit specialized
needs
Requires a longer HR
planning horizon approach
Competition on the basis of

either offering distinctively
different products or
services or establishing an
exclusive image for quality
products and services
Relies on hiring needed
skills.
Needs a shorter planning
time frame in order to be
responsive to dynamic
environments
25
Globalization
Globalization of
of Business
Business and
and HR
HR
Global
GlobalPopulation
Population
Changes
Changes
Global
Global
Communications
Communications
Globalization
Globalization
Forces
Forces
Global
GlobalEconomic
Economic
Interdependence
Interdependence
Regional
RegionalAlliances
Alliances
NAFTA,
NAFTA,EU
EU
26
Types
Types of
of Global
Global Organizations
Organizations
Importing and Exporting
Buying and selling goods and services with
organizations in other countries
Multinational Enterprise (MNE)

An organization with operating units located in foreign
countries.
Global Organization
An organization having corporate units in a number of
countries that are integrated to operate worldwide.
27
Transition
Transition to
to Global
Organizations
28
Transition
Transition to
to Global
Organizations
29
Global
Global Employment
Employment
Global
GlobalEmployee
Employee
Relations
RelationsIssues
Issues
Global
GlobalLaborLaborManagement
Management
Relations
Relations
Discrimination
Discrimination
Regulations
Regulations
Globally
Globally
Global
GlobalHealth,
Health,
Safety,
Safety,and
and
Security
Security
210
Factors
Factors Affecting
Affecting Global
Global HR
HR Management
Management
Political
Political
Economic
Economic
Legal
Legal
Cultural
Cultural
211
Global
Global Cultural
Cultural Factors
Factors
Culture
Societal forces affecting the values, beliefs, and actions of a
distinct group of people.
Geert Hofstedes Culture Dimensions

Power Distance: the inequality among the people of a nation.
Individualism: the extent to which people prefer to act as
individuals instead of members of groups.
Masculinity/Femininity: the degree to which masculine values
prevail over feminine values.
Uncertainty Avoidance: the preference of people in a country
for structured rather than unstructured situations.
Long-Term Orientation: the preference for long-term values
emphasizing the future as opposed to short-term values focusing
on the present.
212
Hourly
Hourly
Compensation
CompensationCosts
Costs
for
forManufacturing
Manufacturing
Production
ProductionWorkers
Workers
Hourly Costs (in U.S. Dollars)
Source: U.S. Bureau of Labor

Statistics, www.bls.gov; and
www.uschinabiz.com, 2004.
Figure 22
213
Global
Global Economic
Economic Factors
Factors
Sources of Economic Factors
Differences in economic, political, legal, and cultural
systems
Global Economic Interdependence

Regional trade and political alliances
NAFTA,
EU, WTO
Global Productivity and Strategic HR

Management
Issue: How to increase organizational effectiveness
and performance (productivity) in the face of global
influences and foreign competition.
214
Organizational
Organizational Effectiveness
Effectiveness and
and
Strategic
Strategic HR
HR Management
Management
Effectiveness
The extent to which goals have been met.
Efficiency
The degree to which operations are done in an
economical manner.
Dimensions of Organizational Effectiveness

Organizational productivity
Financial contributions
Service and quality
Organizational culture
215
Organizational
Organizational Productivity
Productivity and
and HR
HR Efforts
Efforts
Productivity
A measure of the quantity and quality of work done,
considering the cost of the resources used.
A ratio of the inputs and outputs that indicates the value
added by an organization.
Unit
labor cost: computed by dividing the average cost of

workers by their average levels of output.
Improving Organizational Productivity

Organizational restructuring
Re-designing work
Aligning HR Activities
Outsourcing analyses and assistance
216
Approaches
Approachesto
toImproving
ImprovingOrganizational
OrganizationalProductivity
Productivity
Figure 23
217
Organizational
Effectiveness and
and Financial
Financial
Contributions
Contributions of
of HR
HR
Return on Investment (ROI)
Difficult to determine returns for
HR contributions which affect
many facets of the business
Former view of HR as a cost
center
218
Customer
Customer Service
Service and
and Quality
Quality Products
Products
Linked
Linked to
to HR
HR Strategies
Strategies
High quality products and services are the
results of HR-enhancements to organizational
performance.
Staffing
Customer service
219
Organizational
Organizational Culture
Culture and
and
Organizational
Effectiveness
Organizational Culture
The shared values and beliefs in an organization
Strategy and culture must be compatible and aligned
for the organization to be effective.
Culture affects recruitment and retention of
employees.
Culture can enhance or constrain organizational
performance.
Culture is the climate of an organization.
220
Human
Human Resource
Resource Planning
Planning
Human Resource (HR) Planning
The process of analyzing and identifying the need for
and availability of human resources so that the
organization can meet its objectives.
HR Planning Responsibilities
Top HR executive and subordinates gather
information from other managers to use in the
development of HR projections for top management
to use in strategic planning and setting organizational
goals
221
Purpose
Purpose of
of HR
HR Planning
Planning
Figure 24
222
Typical
Typical Division
Division of
of HR
HR Responsibilities:
Responsibilities:
HR
HR Planning
Planning
Figure 25
223
HR
HR Planning
Planning Process
Process
Figure 26
224
Human
Human Resource
Resource Planning
Planning (contd)
(contd)
Small Business and HR Planning Issues
Attracting and retaining qualified outsiders
Management succession between generations of
owners
Evolution of HR activities as business grows
Family relationships and HR policies
225
HR
HR Planning
Planning Process
Process
HR Strategies
The means used to anticipate and manage the supply
of and demand for human resources.
Provide
overall direction for the way in which HR activities

will be developed and managed.
Overall
Strategic Plan
Human Resources
Strategic Plan
HR Activities
226
Benefits
Benefits of
of HR
HR Planning
Planning
Better view of the HR dimensions of business
decisions
Lower HR costs through better HR
management.
More timely recruitment for anticipate HR needs
More inclusion of protected groups through
planned increases in workforce diversity.
Better development of managerial talent
227
Scanning
Scanning the
the External
External Environment
Environment
Environmental Scanning
The process of studying the environment of the
organization to pinpoint opportunities and threats.
Environmental Changes Impacting HR

Governmental Influences
Economic conditions
Geographic and competitive concerns
Workforce composition
228
Assessing
Assessing the
the Internal
Internal Workforce
Workforce
Jobs and Skills Audit
What jobs exist now?
How many individuals are performing each job?
What are the reporting relationships of jobs?
How essential is each job?
What jobs will be needed to implement future
organizational strategies?
What are the characteristics of anticipated jobs?
229
Assessing
Assessing the
the Internal
Internal Workforce
Workforce (contd)
(contd)
Organizational Capabilities Inventory
HRIS databasessources of information about
employees knowledge, skills, and abilities (KSAs)
Components of an organizational capabilities
inventory
Individual
employee demographics
Individual employee career progression
Individual job performance data
230
Forecasting
Forecasting HR
HR Supply
Supply and
and Demand
Demand
Forecasting
The use of information from the past and present to
identify expected future conditions.
Forecasting Methods
Judgmental
Estimatesasking
managers opinions, top-down or
bottom-up
Rules of thumbusing general guidelines
Delphi techniqueasking a group of experts
Nominal groupsreaching a group consensus in open
discussion
231
HR
HR Forecasting
Forecasting
Figure 27
232
Forecasting
Forecasting HR
HR Supply
Supply and
and Demand
Demand
(contd)
(contd)
Forecasting Methods (contd)
Mathematical
Statistical
regression analysis
Simulation models
Productivity ratiosunits produced per employee
Staffing ratiosestimates of indirect labor needs
Forecasting Periods
Short-termless than one year
Intermediateup to five years
Long-rangemore than five years
233
Forecasting
Forecasting HR
HR Supply
Supply and
and Demand
Demand
(contd)
(contd)
Forecasting the Demand for Human Resources
Organization-wide estimate for total demand
Unit breakdown for specific skill needs by number and
type of employee
Develop
decision rules (fill rates) for positions to be filled

internally and externally.
Develop additional decision rules for positions impacted by the
chain effects of internal promotions and transfers.
Forecasting the Supply for Human Resources

External Supply
Internal Supply
234
Forecasting
Forecasting HR
HR Supply
Supply (contd)
(contd)
Forecasting External HR Supply
Factors affecting external
Net
migration for an area
Individuals
entering and leaving the workforce
Individuals
graduating from schools and colleges
Changing
workforce composition and patterns
Economic
forecasts
Technological
Actions
of competing employers
Government
Other
developments and shifts
regulations and pressures
circumstances affecting the workforce
235
Forecasting
Forecasting HR
HR Supply
Supply
Forecasting Internal HR Supply
Effects of promotions, lateral moves, and terminations
Succession analysis
Replacement charts
Succession planning
The
process of identifying
a longer-term plan for the
orderly replacement of key
employees.
Source: U.S. Office of Personnel Management, www.opm.gov.
236
Estimating
Estimating Internal
Internal Labor
Labor Supply
Supply for
for aa Given
Given Unit
Unit
Figure 28
237
Developing
Developing and
and Using
Using aa Strategic
Strategic HR
HR Plan
Plan
Issues in Matching the Supply of Labor with the
Demand for Labor
Succession Planning
Managing a Human Resources Surplus
Outplacement Services
HR Planning in Mergers and Acquisitions
238
Managing
Managing aa Human
Human Resources
Resources Surplus
Surplus
Workforce Reductions and the Worker
Adjustment and Retraining Notification (WARN
Act)
Sets out employer requirements for advance notice of
a layoff or facility closing.
60-day
notice to employees and the local community before

a layoff or facility closing involving more than 50 people.
Does
not cover part-time or seasonal workers.
Imposes
fines for not following notification procedure.
Has
hardship clauses for unanticipated closures or lack of

business continuance capabilities.
239
Managing
Managing aa Human
Human Resources
Resources Surplus
Surplus
(contd)
(contd)
Workforce Realignment
Downsizing, Rightsizing, and Reduction in Force
(RIF) all mean reducing the number of employees in
an organization.
Causes
Economicweak
product demand, loss of market share to
competitors
Structuraltechnological change, mergers and acquisitions
240
Managing
Managing aa Human
Human Resource
Resource Surplus
Surplus
(contd)
(contd)
Workforce Realignment (contd)
Positive consequences
Increase
competitiveness
Increased productivity
Negative consequences
Cannibalization
of HR resources
Loss of specialized skills and experience
Loss of growth and innovation skills
Managing survivors
Provide
explanations for actions and the future

Involve survivors in transition/regrouping activities
241
Managing
Managing aa Human
Human Resource
Resource Surplus
Surplus
(contd)
(contd)
Downsizing Approaches
Attrition and hiring freezes
Not
replacing departing employees and not hiring new

employees
Voluntary Separation Programs

Early
retirement buyouts offer incentives to encourage senior

employees to leave the organization early.
Layoffs
Employees
are placed on unpaid leave until called back to

work when business conditions improve.
Employees are selected for layoff on the basis of their seniority
or performance or a combination of both.
242
Managing
Managing aa Human
Human Resource
Resource Surplus
Surplus
(contd)
(contd)
Downsizing Approaches (contd)
Outplacement services provided to displaced
employees to give them support and assistance:
Personal
career counseling
Resume preparation and typing services
Interviewing workshops
Referral assistance
Severance payments
Continuance of medical benefits
Job retraining
243
Making
Making Downsizing
Downsizing More
More Effective
Effective
Figure 29
244
HR
HR Planning
Planning in
in Mergers
Mergers and
and Acquisitions
Acquisitions
Cultural Compatibility
The extent to which such factors as decision-making
styles, levels of teamwork, information-sharing
philosophies, and the formality of the two
organizations are similar.
HRs Role in Mergers and Acquisitions

Communicating decisions
Revising the organization structure
Merging HR activities
245
Measuring
Measuring HR
HR Effectiveness
Effectiveness
Using
Using HR
HR Metrics
Metrics
HR Metrics
Specific measures tied to HR performance indicators.
Development
and use of metrics that can better demonstrate

HRs value and track its performance.
Characteristics of good HR metrics:

Accurate
data can be collected.

Measures are linked to strategic and operational objectives.
Calculations can be clearly understood.
Measures provide information expected by executives.
Results can be compared both externally and internally.
Measurement data drives HR management efforts.
246
Examples
Examples of
of Strategic
Strategic and
and Operational
Operational
HR
HR Metrics
Metrics
Figure 210
247
Measures
Measures of
of Strategic
Strategic HR
HR Effectiveness
Effectiveness
Return on Investment (ROI)
Calculation showing the value of expenditures for HR
activities.
C
ROI
A B
A = Operating costs for a new or enhance system for the time period
B = One-time cost of acquisition and implementation
C = Value of gains from productivity improvements for the time period
248
Measures
Measures of
of Strategic
Strategic HR
HR Effectiveness
Effectiveness
(contd)
(contd)
Economic Value Added (EVA)
A firms net operating profit after the cost of capital
(required return) is deducted.
Cost of capital is the benchmark for returns for all HR
activities.
HR and the Balanced Scorecard

Financial
Internal business processes
Customer
Learning and growth
249
HR
HR Measurement
Measurement and
and Benchmarking
Benchmarking
Benchmarking
Comparing specific measures of performance against
data on those measures in other best practice
organizations
Common Benchmarks
Total compensation as a percentage of net income
before taxes
Percent of management positions filled internally
Dollar sales per employee
Benefits as a percentage of payroll cost
250
Costs
Costs per
per Employee
Employee of
of the
the HR
HR Function
Function
Source: Adapted from HR Department Benchmarks and Analysis (Washington, DC: Bureau of National Affairs, 131, 140. 2004) To purchase
this publication and find out more about other BNA HR solutions visit http://hrcenter.bna.com or call 800-372-1033. Used with permission.
Figure 211
251
Assessing
Assessing HR
HR Effectiveness
Effectiveness
HR Audit
A formal research effort that evaluates the current state
of HR management in an organization
Audit areas:
Legal
compliance (e.g., EEO, OSHA, ERISA, and FMLA)

Current job specifications and descriptions
Valid recruiting and selection process
Formal wage and salary system Benefits
Employee handbook
Absenteeism and turnover control
Grievance resolution process
Orientation program Training and development
Performance management system
252

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ROBERT L.

PowerPoint Presentation by Charlie Cook

Competition on the basis of

Multinational Enterprise (MNE)

Geert Hofstedes Culture Dimensions

Hourly Costs (in U.S. Dollars)

Source: U.S. Bureau of Labor

Global Economic Interdependence

Global Productivity and Strategic HR

Dimensions of Organizational Effectiveness

labor cost: computed by dividing the average cost of

Improving Organizational Productivity

overall direction for the way in which HR activities

Environmental Changes Impacting HR

managers opinions, top-down or

decision rules (fill rates) for positions to be filled

Forecasting the Supply for Human Resources

migration for an area

entering and leaving the workforce

graduating from schools and colleges

workforce composition and patterns

developments and shifts

regulations and pressures

circumstances affecting the workforce

Source: U.S. Office of Personnel Management, www.opm.gov.

notice to employees and the local community before

not cover part-time or seasonal workers.

fines for not following notification procedure.

hardship clauses for unanticipated closures or lack of

product demand, loss of market share to

explanations for actions and the future

replacing departing employees and not hiring new

Voluntary Separation Programs

retirement buyouts offer incentives to encourage senior

are placed on unpaid leave until called back to

HRs Role in Mergers and Acquisitions

and use of metrics that can better demonstrate

Characteristics of good HR metrics:

data can be collected.

HR and the Balanced Scorecard

compliance (e.g., EEO, OSHA, ERISA, and FMLA)

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