Strategic HUman resource management

1. UNIT II
ASHWINI HIREMATH

2.  Human resources planning is a process that
identifies current and future human
resources needs for an organization to
achieve its goals. Human resources
planning should serve as a link between
human resources management and the
overall strategic plan of an organization
 As defined by Bulla and Scott, human
resource planning is 'the process for
ensuring that the human resource
requirements of an organization are
identified and plans are made for satisfying
those requirements’

3.  Strategic HR planning is an important
component of strategic HR management.
 It links HR management directly to the
strategic plan of your organization.
 Most mid- to large sized organizations have a
strategic plan that guides them in
successfully meeting their missions.
 Organizations routinely complete financial
plans to ensure they achieve organizational
goals and while workforce plans are not as
common, they are just as important.

4.  Even a small organization with as few as 10
staff can develop a strategic plan to guide
decisions about the future.
 Based on the strategic plan, your
organization can develop a strategic HR
plan that will allow you to make HR
management decisions now to support the
future direction of the organization.
 Strategic HR planning is also important from
a budgetary point of view so that you can
factor the costs of recruitment, training, etc.
into your organization's operating budget.

5. The overall purpose of strategic HR planning is
to:
 Ensure adequate human resources to meet the
strategic goals and operational plans of your
organization - the right people with the right
skills at the right time
 Keep up with social, economic, legislative and
technological trends that impact on human
resources in your area and in the sector
 Remain flexible so that your organization can
manage change if the future is different than
anticipated

6.  Strategic HR planning predicts the future HR
management needs of the organization after
analyzing the organization's current human resources,
the external labour market and the future HR
environment that the organization will be operating
in.
 The analysis of HR management issues external to
the organization and developing scenarios about
the future are what distinguishes strategic planning
from operational planning.
 The basic questions to be answered for strategic
planning are:
 Where are we going?
 How will we develop HR strategies to successfully
get there, given the circumstances?
 What skill sets do we need?

7.  The strategic HR planning process has four
steps:
 Assessing the current HR capacity
 Forecasting HR requirements
 Gap analysis
 Developing HR strategies to support
organizational strategies

8.  Based on the organization's strategic plan, the first
step in the strategic HR planning process is to assess
the current HR capacity of the organization. The
knowledge, skills and abilities of your current staff
need to be identified. This can be done by developing
a skills inventory for each employee.
 The skills inventory should go beyond the skills
needed for the particular position. List all skills each
employee has demonstrated. For example,
recreational or volunteer activities may involve
special skills that could be relevant to the
organization. Education levels and certificates or
additional training should also be included.
 An employee's performance assessment form can
be reviewed to determine if the person is ready
and willing to take on more responsibility and to
look at the employee's current development plans.

9.  The next step is to forecast HR needs for
the future based on the strategic goals of
the organization. Realistic forecasting of
human resources involves estimating both
demand and supply. Questions to be
answered include:
 How many staff will be required to achieve
the strategic goals of the organization?
 What jobs will need to be filled?
 What skill sets will people need?

10.  When forecasting demands for HR, you must also
assess the challenges that you will have in
meeting your staffing need based on the
external environment. To determine external
impacts, you may want to consider some of the
following factors:
 How does the current economy affect our work
and our ability to attract new employees?
 How do current technological or cultural shifts
impact the way we work and the skilled labor we
require?
 What changes are occurring in the labor market?
 How is our community changing or expected to
change in the near future

11.  The next step is to determine the gap
between where your organization wants to
be in the future and where you are now.
 The gap analysis includes identifying the
number of staff and the skills and abilities
required in the future in comparison to the
current situation.
 You should also look at all your
organization's HR management practices to
identify practices that could be improved
or new practices needed to support the
organization's capacity to move forward.

12.  Questions to be answered include:
 What new jobs will we need?
 What new skills will be required?
 Do our present employees have the required
skills?
 Are employees currently in positions that use
their strengths?
 Do we have enough managers/supervisors?
 Are current HR management practices
adequate for future needs?

13.  There are five HR strategies for meeting your
organization's needs in the future:
 Restructuring strategies
 Training and development strategies
 Recruitment strategies
 Outsourcing strategies
 Collaboration strategies

14. Restructuring strategies: This strategy
includes:
 Reducing staff either by termination or attrition
 Regrouping tasks to create well designed jobs
 Reorganizing work units to be more efficient
Training and development strategies: This
strategy includes:
 Providing staff with training to take on new roles
 Providing current staff with development
opportunities to prepare them for future jobs in
your organization

15. Recruitment strategies: This strategy
includes:
 Recruiting new staff with the skill and abilities
that your organization will need in the future
 Considering all the available options for
strategically promoting job openings and
encouraging suitable candidates to apply
Outsourcing strategies: This strategy includes:
 Using external individuals or organizations to
complete some tasks

16. Collaboration strategies:
 Finally, the strategic HR planning process may
lead to indirect strategies that go beyond your
organization. By collaborating with other
organizations you may have better success at
dealing with a shortage of certain skills.
 Types of collaboration could include:
 Working together to influence the types of courses
offered by educational institutions
 Working with other organizations to prepare future
leaders by sharing in the development of promising
individuals
 Sharing the costs of training for groups of
employees
 Allowing employees to visit other organizations to
gain skills and insight

17.  It is important to understand the process of strategic
management, to clearly understand the role of
human resources play in strategically directing an
organization
 Strategic management is the process of formulating
and implementing strategies that will help in aligning
the organization & its environment to achieve
organizational objectives
 Strategic management does not replace traditional
management activities such as budgeting, planning,
monitoring, marketing, reporting and controlling.
Rather it integrates them into a broader context,
taking into account the external environment,
internal organizational capabilities, and an
organization’s overall purpose and direction

18.  Strategic planning is part of the strategic
management process.
 Strategic management entails both strategic
planning & implementation,& is “the process of
identifying and executing the organizations
strategic plan, by matching the company’s
capabilities with the demands of its environment.”
 Strategic planning comprises first 5 of 7 strategic
management tasks: (1) Defining the business &
developing a mission (2) evaluating firms internal &
external strengths, weaknesses, opportunities &
threats (3) formulating a new business statement (4)
translating the mission into strategic goals & (5)
formulating strategies or courses of action

19. STEP VII: Evaluate performance
STEP VI: Implement the strategy
STEP V: Formulate strategies to achieve the strategic goals
STEP IV: Translate the mission into goals
STEP III: Formulate new business & mission statements
STEP II: Perform External & Internal audits
STEP I: Define the current business & mission statement
STRATEGICPLANNING
STRATEGIC
EXECUTION
STRATEGIC
EVALUATION

20.  Every company must choose the terrain on which
it will compete – in particular, what products it
will sell, where it will sell them, and how its
products or services will differ from its
competitors
 They ask, “where are we now in terms of
business, what business do we want to be in,
given our company’s opportunity & threats and
its Strength & weaknesses?
 Managers then choose strategies – courses of
action such as buying competitors or expanding
overseas – to get the company from where it is
today to where it wants to be tomorrow

21.  Managers sometimes use a VISION statement
as a sort of shorthand to summarize how
they see the business down the road
 The company’s VISION is a general statement
of its intended(planned/anticipated)
direction that shows, in broad terms, “what
we want to become”
 Ex. To be an integrated, global satellite
based news gathering entertainment and
multimedia firm
 One eye care company says , “our vision is
caring for your vision”

22.  Visions are usually longer term, broader
images: most managers also formulate
mission statements to – “communicate who
we are, what we do and where we are
headed”
 Whereas vision usually lay out in very broad
terms what the business should be, the
mission lays out in broad terms what our
main tasks are now

23.  Ideally, managers begin their strategic planning
by methodically analyzing their external and
internal situations.
 The strategic plan should provide a direction
for the firm that makes sense, in terms of
external opportunities and threats the firm faces
and internal strengths and weaknesses it
possesses.
 To facilitate this strategic external/internal
audit i.e SWOT analysis is done
 This involves using a SWOT chart to compile and
organize the process of identifying company
strengths, weaknesses, opportunities and threats

24. STRENGTHS
Example: strong
research group
WEAKNESSES
Example: Aging
machinery
OPPORTUNITIES
Example: Expanding
china markets
THREATS
Example: Merger of
two competitors to
form single strong one
A SWOT
Chart

25.  Analyzing the environment:
 In this second step in the strategic management
process. It includes the external environment such
as Competitors, market trends, technological
changes, government regulations, economic
policies etc.
 By analyzing the industry structure and
competitive work environment, an organization
can identify the main competitors and the
strategies that have to be framed
 Some other factors that need to be considered are
the barriers to entry, opportunities for mergers &
acquisitions and the impact on organizational
performance. This involves the local laws and
international laws, if the company is operating in
the global business environment

26.  On the technological front, organizations should get
themselves acquainted with new technologies. They
should also decide whether they plan to adopt a new
technology or invent a new technology
 While analyzing market trends, organization have to
take into account the potential customers, the
target group of customers and the marketing
strategies required for targeting new customers.
 This stage also requires analyzing the demographic,
psychographic and other aspects concerned with
the customers lifestyle.
 Economic trends include interest rates, inflation
level, fiscal and monetary policies, GNP and the
economic growth of the country.

27.  Organization self assessment:
 After analyzing the external environment, the
next step for an organization would be to assess
the internal environment. This involves
identifying the strengths and weaknesses of
the organization, and working on strengths to
overcome the weaknesses
 It also entails analysing the financial, physical,
human, technological and capital resources
 Organization self assessment is also about
understanding the various components of
change like culture, structure, power, the
decision making process and past strategy and
work systems

28.  Lets discuss about various resources:
 As financial assets are the main assets through which
other resources can be acquired, they have a direct
impact on the organizations competitive advantage
 Physical resources include the assets owned by the
organization, such as lands, machinery etc. the
requirement of physical assets vary from industry to
industry
 Human resources include the skill, knowledge, and
capability of employees that can help organizations
gain competitive advantage
 Technological resources are the processes the
organization employs to produce goods
 Organizations should clearly identify the type of
technology required for manufacturing the goods,
irrelevant technology may add up costs for the
organization
 Intangible resources include brand name, and goodwill

29.  Apart from the above resources, organizations
also need to understand the management
systems that guide the day to day functioning of
the organization. They include culture,
organizational structure, power dynamics,
decision making process, analysis of the
organizations past strategy and present mode
of functioning and work systems
 While assessing culture, an organization clearly needs
to articulate core values and philosophies that
guide day to day activities. Hence, for a strategic
planning process to be successful, an organization
needs to clearly communicate the elements of
culture to the employees. Employees should clearly
understand the core values that guide the culture
of an organization as this can have an impact on
their performance

30.  Organizational structures also have a major impact on the
performance. This process through which the groups and
departments interact for accomplishment of the organizational
goals can have impact on the performance of the employees.
Effective organization structures can achieve strategic objectives
and if poorly structured can act as an important for the
organization
 Power dynamics and politics in the organization can hinder
work, if people at any level misuse their power and authority
 Decision making constitutes an important process in an
organization that looks into aspects like the people who are
involved in the decision making process, the method of
information collection, the time span of the decision making
process, and the credibility of the sources of information. By
analyzing the results of the decision making process, an
organization can decide whether it is contributing to the
overall performance or whether it is inhibiting performance

31.  An important part of the organizational self assessment
is analysis of past strategy that helps identify the
loopholes and find out why a particular strategy was not
successful
 Work system design is an other important part of
internal assessment. Work systems are concerned with
the design of the jobs and responsibilities that have to
be assigned to the employees. When designing work
systems, an organization has to decide whether the job
is suitable for the employee or not
All the above mentioned components of management
systems are important for the assessment of an
organizations internal environment

32.  Based on the situation analysis, what should our
new business be, in terms of what products it
will sell them, and how its products or services
will differ from its competitors?
 What is our new mission and vision?
 It has to set its goals and objectives, these G’s &
O’s should be specific, flexible & measurable,
because the changing business environments and
the influences of the external environment
 Setting goals under strict regulations is
impractical, especially when a business is
operating in highly volatile conditions

33.  Saying the mission is “to make quality job” is
one thing; operationalzing that mission for your
managers is another. The firms managers need
strategic goals
 What exactly does that mission mean, for each
department, in terms of how we’ll boost quality?
 To guide managerial action, it needs goals in
terms of things like building shareholder value,
maintaining superior rates of return, building a
strong balance sheet, and balancing the
business by customer, product and geography

34.  Again, a strategy is a course of action. It shows
how the enterprise will move from the business
it is now to the business it wants to be in (as
laid out by its vision, mission and strategic
goals), given the firms opportunities, threats,
strengths and weaknesses
 The strategies bridge where the company is
now, with where it wants to be tomorrow
 The best strategies are concise enough for
managers to express in an easily communicated
phrase that resonate with employees
 For example, the essence of Dell’s strategy is
“be direct”. Wal-Mart’s strategy boils down to
“low prices, every day”

35.  Keeping the strategy clear & concise helps ensure
that employees all share that strategy and so make
decisions that are consistent with it
 Strategy formulation usually takes place with the
involvement of the top management.
 HR & strategic management process can be linked in
four ways – administrative linkages, one way
linkages, two way linkages and integrative
linkages
 Administrative linkages is the linkage where the HR
executive has very little time in the strategic
planning process. Therefore there exists very little
alignment between the HR department and strategic
management. The HR department in this linkage
handles mostly administrative work that is restricted
to the company’s core business needs. The strategic
goals of the organization are not included at this
level

36.  In one way linkage, the HR department is given the
plan after it has been developed by the firms
strategic business planning function. The HR
department does not form a part of the plan design
team
 Two way linkages make HR a part of the strategic
formulation plan team. There are three steps in two
way linkages:
 First, the strategic planning department brings to the
notice of the HR department the various strategies that
the company plans to consider
 Second, the HR department analyses the stratgies and
presents the results of the analysis to the strategic
planning department
 Finally, the HR department develops programmes and
implements these strategies. In two way linkages the
strategic planning units and HR are interdependent

37.  Integrative linkage is most effective in
strategy formulation and involves the HR
manager in the formulation and
implementation of the strategy.
 In this linkage, HR functions are integrated
into the formulation and implementation of
the strategy
 This is the enterprising link as compared to
the other linkages as it incorporates people
related issues in strategy formulation

38.  Strategy implementation means translating
the strategies into actions and results – by
actually hiring (or firing) people, building (or
closing) plants, and adding (or eliminating)
products and product lines
 Strategy implementation involves drawing on
and applying all the management functions:
planning, organizing, staffing, leading and
controlling

39.  There are five important variables that determine the
success of strategy. They are organizational structure, task
design, employee training, rewards system and information
system
 These five factors highlights the importance of HR in
strategy implementation. Therefore it becomes more
important to align HR with strategic goals of an
organization
 Another important change in the HR perspective is the
trend towards customer orientation. Employees are
trained to provide effective customer services
 The Hr function has to ensure that the company has a large
number of employees with the desired skills
 effective control systems should be developed to align
employee goals with the goals of the organization.
 Tasks have to be grouped into jobs so that performance is
more effective and strategy is more successful

40.  Strategies don’t always succeed. For example – Procter &
Gamble announced it was selling its remaining food
businesses – Jif, Crisco, and Folger’s coffee – because
management wants to concentrate on household and
cosmetics products
 Managing strategy is an ongoing process. Competitors
introduce new products, technological innovations make
production processes obsolete, and social trends reduce
demand for some products or services while boosting
demand for others
 Strategic control keeps the company’s strategy up to date.
 It is the process of assessing progress towards strategic
goals and taking corrective action as needed
 Management monitors the extent to which the firm is
meeting its strategic goals and asks why deviation exist

41.  Management simultaneously scans the firms
strategic situation (competitors, technical
advances, customer demographics and so
on) to see if it should make any adjustments
 Strategic evaluation addresses several
important questions: for example, “are all
the resources of our firm contributing as
planned to achieving our strategic goals?”
 What is the reason for any discrepancies?”
and “ do changes in our situation suggest
that we should revise our strategic plan?”

42.  Competitive advantage of an organization depends
on the way the orgnization performs as a unit and
the way in which the various functions of the
organization are integrated
 Value chain analysis helps in studying the various
activities – direct and support activities of an
organization
 The value chain developed by MICHAEL PORTER has
five primary activities – inbound logistics, operations,
outbound logistics, marketing and sales and services
 These activities are linked to four support activities –
Procurement, technology development, firms
infrastructue and human resource management.
 All the above mentioned primary & support activities
incur costs and hence, the organization must ensure
that they add value to the company’s product or
service

43.  PRIMARY ACTIVITIES:
 Inbound logistics are activities related to receiving,
storing and distributing raw materials required for
manufacturing of the products, internally. Inbound
logistics includes warehousing, internal stock control
and internal transportation
 Operations refers to the directive and control of the
processes that transforms inputs into financial goods
and services
 Outbound logistics relate to the distribution of
finished goods and services to the customers.
 Marketing & Sales are about advertising, promotion
and sales force activities
 Finally; service means providing the necessary after-
sales service of the product or training related to the
use of the product

44.  Procurement means purchasing the inputs
required for manufacturing of the products
and making sure that all the departments
receive the products at the right time
 Technology development refers to the
utilization of the right technologies and
methods for manufacturing the products
 The next support activity is human resource
management that involves recruiting,
training and motivating employees to
accomplish the goals of the organization

45.  Finally infrastructure includes the structure of
the organization, planning, financial controls and
quality management designed to support the
whole of the value chain
 Porter’s value chain activities do not act
independently
 They are inter-linked and actions in one
department can affect the activities of the
organization as a whole.
 If the firm wants to gain a competitive
advantage, it has to have a good understanding
of linkages and has to align all these activities
properly

46.  Human resources as a support function of the value
chain has gained considerable significance because of
the inter-relationship with the other departments of
the organization
 All HR activities including recruitment, training,
development and rewarding ate now linked to the
strategic goals of the organization.
 Strategy to be successful needs the full support of
employees
 Particularly during mergers and acquisitions, if
people are not ready to accept the changes then the
organization may not be able to implement the
strategies effectively. As a support function I the
value chain, HRM will provide for the integration of
all management work by creating equal opportunities
for employees

47.  New organizational structures are emerging
with greater flexibility and responsiveness to
changes
 Work teams have emerged and the focus now
is more on empowerment, autonomy of work
processes and the ability of an individual to
adjust to the changing business environment
 Thus, the HR department plays an important
role in the value chain, as it integrates itself
with technology, infrastructure and other
function of the value chain