Northern Arizona University
College of Business Administration

MGT 310--Human Resource Management

Ch 2: Strategy & HR Planning

• Strategic Planning & HR

  • Strategic planning--procedures for making decisions about long-term goals, especially how the organization will position itself relative to competitors

  • HR planning--effective deployment of human resources to accomplish organizational goals

  • Strategic HR management--the pattern of HR activities that enable an organization to achieve its strategic goals

    • Strategy formulation--what is possible, human resources available to pursue a given strategy

    • Implementation--resource allocation to achieve goals

    • See Fig 2.1, p. 51

    • James Walker--"Today, virtually all business issues have people implications; all human resource issues have business implications."

• Step One: Mission, Vision & Values

  • Mission--purpose & scope ... reason for being ["What business are we in?"--Peter Drucker]

  • Vision--long-term direction and strategic intent [overarching goal]

  • Values

    • Starbucks example, p. 52

    • IBM example, pp. 53-54

• Step 2: Environmental analysis--external opportunities & threats

  • General environment--environmental scanning of major forces influencing the organization

    • Economic factors, technological changes, government and legislative issues, social concerns, demographic and labor market trends

  • Competitive environment--Michael Porter's 5-Forces model

    • Customers--needs, perceived value ... "one size does not fit all" (examples p. 55)

    • Rival firms--Who is the competition? What is the degree of rivalry?

      • Levels

        • Most direct--compact autos

        • Similar alternatives--all autos

        • General need--transportation

        • Most general--disposable income

    • New entrants--protect position, entry barriers vs. new or better way to provide value to customers (change the "rules of the game")

    • Substitutes--other products/services that meet the same need (land line phones, cell phones, internet phones, walkie-talkies

    • Suppliers--raw materials, money, information, people ... access, availability, "substitutes", etc.

      • Labor supply

        • Demographic changes, economics, education, demand for specific skills, mobility, government policies, unemployment rates (see examples p. 57)

        • Sources of information--Monthly Labor Review, Occupational Outlook Handbook, Bureau of Labor Statistics (US Dept of Labor), local chambers of commerce, state development & planning agencies

        • Impact on ability to implement a particular strategy

• Step 3: Internal analysis--strengths & weaknesses--organizational skills, resources, performance levels; James Brian Quinn--"With rare exceptions, the economic and producing power of firms lies more in its intellectual and service capabilities than in its hard assets..."

  • Culture--values, beliefs & attitudes [behaviors]

    • Cultural audits--employee surveys, in-depth interviews, observation; how do employees view issues at work?

    • Sears example--positive employee attitudes are directly related to customer satisfaction and revenue increases

  • Core competencies--skills and knowledge (KSAs) that distinguish an organization from its competitors ... and deliver value to customers

    • Must be of value

    • Must be rare

    • Must be difficult to imitate
    • Must be organized--combined and deployed as needed (synergy)
  • Composition of the workforce--availability of people internally or externally
    • Core knowledge workers--firm-specific skills related to the strategy
    • Traditional job-based workers--valuable but not unique
    • Contract labor--generally available
    • Alliance partners--unique skills but not related to core strategy (attorneys, consultants, etc.)
  • Forecasting
    • Demand--need for employees (KSAs)
      • Quantitative approaches
        • Trend analysis--most commonly used
          • Select one business factor, e.g., sales
          • Determine the values for that factor and number of employees for 5 years
          • Compute the ratio of employees to that factor (use regression analysis to determine the a and b coefficients)
          • Project the demand for employees for future years (see example Figure 2.5)
        • Multiple-regression analysis permits use of multiple factors, e.g., interest rates, GDP, disposable income, sales, unemployment rates, etc.
      • Qualitative approaches
        • Management forecasts--summarize opinions
        • Delphi technique--expert panel, reiterative opinions to arrive at a consensus
      • Best to use some mix of both quantitative and qualitative
    • Supply--availability of employees (KSAs)
      • Markov analysis--percentage and actual number who remain, move, exit (see p. 65)
      • Skill inventories (database)--education, experience, skills & abilities, compensation history, job tenure; match with needs
      • Replacement charts--current employees and possible replacements (see p. 66; promotability & performance)
      • Succession planning--identifying, developing and tracking key individuals for promotional opportunities

• Step 4: Formulating strategy--don't lose sight of the big picture, the strategy

  • SWOT Analysis--summarize external (opportunities & threats) and internal (strengths & weaknesses) analyses

    • Capitalize on relevant opportunities

    • Counteract relevant threats

    • Build on relevant strengths

    • Minimize relevant weaknesses

  • Corporate-level strategy

    • Growth & diversification--geographic, volume, product expansion

      • HR needs?

    • Mergers & acquisitions (15% succeed)--corporate culture and management conflicts

      • HR planning

    • Strategic alliances & joint ventures--cooperation, culture, outsourcing, offshoring

      • HR planning and implementation

  • Business-level strategy

    • Low-cost--productivity and efficiency, economies of scale

      • Gordon Bethune--"You can make a pizza so cheap that no one will buy it."

      • Value (perception) to customers

      • Productivity--"bang for the buck" (output/input)

      • Outsourcing--beware of cost alone

    • Differentiation--something unique (quality, features, speed to market, superior service)

      • Flexibility--bend the rules

      • Empowerment

      • Customization

  • Functional strategy--marketing, manufacturing, HR...fit

    • External (to HR) fit--connection between business objectives and HR initiatives

      • Low cost example--reinforce efficient and reliable behavior, productivity

      • Innovation example--reinforce creativity, taking chances, flexibility

    • Internal (to HR) fit--aligning HR practices with each other (job design, staffing, training, performance appraisal, compensation)

      • Teamwork example--compensation for individual achievement

      • Mixed signals

• Step 5: Strategy Implementation--thoroughness & discipline of execution

  • 7-S Framework

    • Strategy--roadmap

    • Structure--framework

    • Systems--workflow, interactions

    • Shared values--corporate culture

    • Style--leadership & employee

    • Skills--hiring, training

    • Staff--hiring

  • Supply vs. demand

    • Adding--hiring, overtime, recalling laid-off workers, using temps

    • Reducing--restrict hiring, reduce hours, work sharing, layoffs, attrition, early retirements

      • Downsizing--economic or competitive pressures; wrong skills

      • Layoff decisions--seniority vs. performance

        • Union agreements or personnel policies

      • Recalls--rights, skill requirements

    • Chapter VIDEO(S)

• Step 6: Evaluation and assessment

  • Benchmarking--"best practices"

    • Human capital metrics--standard or statistical measures

      • Saratoga Institute--Human Capital Benchmarking Report (see p. 79)

  • Balanced scorecard--broad framework

    • Financial, customer, process, & learning standards

    • See hypothetical Starbucks example p. 80

  • Internal (to HR) fit--see example p. 81

    • Key workforce objectives--loyalty, customer service, productivity...

    • HR practices to support--job design, staffing, traing, appraisal, compensation...

    • Evaluation of each--degree of supportiveness (-5 to +5)

    • Use multiple sources

  • Strategic flexibility

    • Organizational capability--capacity to continuously act and change in pursuit of sustainable competitive advantage

    • Coordination flexibility--rapid reallocation of resources

      • Proactive--anticipate changes

        • Move people, retrain, modify incentives, use temps, external partners...

      • Reactive--respond to unanticipated changes

    • Resource flexibility--people who can do different things

      • Cross training, job rotation, teams...