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1. © 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–1

2. 2
© 2010 South-Western, a part of Cengage Learning PowerPoint Presentation by Charlie Cook
All rights reserved. The University of West Alabama

3. Chapter Objectives
After studying this chapter, you should be able to
Identify the advantages of integrating human
resources planning and strategic planning.
Understand how an organization’s competitive
environment influences its strategic planning.
Understand why it is important for an
organization to do an internal resource analysis.
Describe the basic tools used for human
resources forecasting.
Explain the linkages between competitive
strategies and HR.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–3

4. Chapter Objectives (cont’d)
After studying this chapter, you should be able to
Understand what is required for a firm to
successfully implement a strategy.
Recognize the methods for assessing and
measuring the effectiveness of a firm’s strategy.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–4

5. 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 organization.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–5

6. 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 formulation—providing input as to what is possible
given the types and numbers of people available.
 Strategy implementation—making primary resource
allocation decisions about structure, processes, and human
resources.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–6

7. Linking Strategic Planning and HRP
• 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 Resources
Human Resources Strategic
Strategic
Planning
Planning Planning
Planning
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8. FIGURE
Linking Strategic Planning and Human Resources
2.1
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9. 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
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–9

10. Step Two: Environmental Scanning
• Environmental Scanning
 The systematic monitoring of the major external
forces influencing the organization.
1. Economic factors: general, regional, and global conditions
2. Industry and competitive trends: new processes, services,
and innovations
3. Technological changes: robotics and office automation
4. Government and legislative issues: laws and administrative
rulings
5. Social concerns: child care and educational priorities
6. Demographic and labor market trends: age, composition,
literacy, and immigration
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–10

11. FIGURE
Five Forces Framework
2.2
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12. Step Three: Internal Analysis
Culture
Culture Capabilities
Capabilities
Internal Analysis
Internal Analysis
Composition
Composition
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13. Culture: Auditing Values, Beliefs, and Attitudes
• 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?
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–13

14. Capabilities: People as a Strategic Resource
• Core Capabilities
 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 teamwork and cooperation.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–14

15. Composition: The Human Capital Architecture
• Strategic Knowledge Workers
 Employees who have unique skills that are directly
linked to the company’s strategy.
 Example: R&D scientists
• Core Employees
 Employees with skills to perform a predefined job
that are quite valuable to a company, but not
particularly unique or difficult to replace.
 Example: salespeople
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–15

16. Composition: The Human Capital Architecture
(cont’d)
• Supporting Labor
 Employees whose skills are of less strategic value
and generally available in the labor market.
 Example: clerical workers
• Alliance Partners
 Individuals and groups with unique skills, but those
skills are not directly related to a company’s core
strategy.
 Example: consultants
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–16

17. FIGURE
Mapping Human Capital
2.3
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18. Forecasting: A Critical Element of Planning
• Forecasting involves:
a. forecasting the demand for labor
b. forecasting the supply of labor
c. balancing supply and demand considerations.
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19. FIGURE
Model of HR Forecasting
2.4
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20. Forecasting Demand for Employees
Quantitative Methods
Quantitative Methods
Forecasting Demand
Forecasting Demand
Qualitative Methods
Qualitative Methods
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–20

21. Quantitative Approach: Trend Analysis
• Forecasting labor 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 labor 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).
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–21

22. FIGURE
Example of Trend Analysis of HR Demand
2.5
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23. Qualitative Approaches
• Management Forecasts
 The opinions (judgments) of supervisors,
department managers, experts, or others
knowledgeable about the organization’s 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.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–23

24. 1
HR Planning and Strategy Questions to Ask
Business Managers
Workforce planning requires that HR leaders periodically interview their managers to
gauge future workforce needs. Here are some sample questions to ask.
• What are your mission, vision, and values?
• What are your current pressing business issues?
• What are our organizational strengths?
• Who are our competitors’ organizational strengths? How do we compare?
• What core capabilities do we need to win in our markets?•
• What are the required knowledge, skills, and abilities we need to execute the winning strategy?
• What are the barriers to optimally achieving the strategy?
• What types of skills and positions will be required or no longer required?
• Which skills should we have internally versus contract with outside providers?
• What actions need to be taken to align our resources with strategy priorities?
• What recognition and rewards are needed to attract, motivate, and retain the employees we need?
• How will we know if we are effectively executing our workforce plan and staying on track?
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–24

25. Forecasting the Supply of Employees:
Internal Labor Supply
• Staffing Tables
• Markov Analysis
• Skill Inventories
• Replacement Charts
• Succession Planning
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–25

26. Forecasting Internal Labor 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.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–26

27. FIGURE
Hypothetical Markov Analysis for a Retail Company
2.6
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28. 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.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–28

29. FIGURE
An Executive Replacement Chart
2.7
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30. 2
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, compile
the scores, and compare notes.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–30

31. FIGURE
Assessing a Firm’s Human Capital
2.8
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32. 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.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–32

33. FIGURE
An Example of a SWOT Analysis
2.9
Valero Energy Corporation (Valero) is one of the largest refiners in North America.
Its core activities include refining and marketing of petroleum products. With a
combined throughput capacity of approximately 3.3 million bpd, Valero is the 15th
largest company on the Fortune 500 list. Valero’s large refining capacity gives it a
significant competitive advantage. However, rising material and labor costs could
affect the company’s margins.
Strengths Weaknesses
Large refining system Weak performance in Canada
Leader in conversion capacity and Litigations
feedstock flexibility High dependence on the United States
Strong revenue growth and capital expenditure
Opportunities Threats
Growing diesel demand Material and labor cost
Strategic refocus Stringent regulations
Rising petrochemical capacity in
the Middle East
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–33

34. Corporate Strategy
Growth and
Growth and Mergers and
Mergers and
Diversification
Diversification Acquisitions
Acquisitions
Corporate
Corporate
Strategy
Strategy
Strategic Alliances
Strategic Alliances
and Joint Ventures
and Joint Ventures
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–34

35. 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 (value = benefits — costs).
 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.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–35

36. 3
Key HR Activities Associated with Merger or Acquisition
Phases
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–36

37. 3
Key HR Activities Associated with Merger or Acquisition
Phases (cont’d)
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38. Business Strategy (cont’d)
• Functional Strategy: Ensuring Alignment
 External Fit/Alignment
 Focuses on the connection between the business objectives
and the major initiatives in HR.
 Internal Fit/Alignment
 Aligning HR practices with one another to establish a
configuration that is mutually reinforcing.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–38

39. Step Five: Strategy Implementation
• Taking Action: Reconciling Supply and Demand
 Balancing demand and supply considerations
Forecasting business activities (trends)

 Locating applicants
 Organizational downsizing, outsourcing, offshoring
 Reducing “headcount”
 Making layoff decisions
 Seniority or performance?
 Labor agreements
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–39

40. FIGURE
The 7-S Model
2.10
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41. 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
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–41

42. 4
Ten Measures of Human Capital
1. Your most important issues
2. Human capital value added
3. Human capital ROI
4. Separation cost
5. Voluntary separation rate
6. Total labor-cost/revenue percentage
7. Total compensation/revenue percentage
8. Training investment factor
9. Time to start
10. Revenue factor
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–42

43. Measuring a Firm’s 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
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–43

44. FIGURE
Building the Metrics Model
2.11
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45. FIGURE
Assessing Internal Fit
2.12
5 = Strongly supports the priority, 0= Neutral, –5 = Strongly counterproductive
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–45

46. 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.
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–46

47. Balanced Scorecard (BSC) replacement charts
benchmarking skill inventories
core capabilities staffing tables
core values strategic human
cultural audits resources management
(SHRM)
environmental scanning
strategic planning
human capital readiness
strategic vision
human resources planning
(HRP) succession planning
management forecasts SWOT analysis
Markov analysis trend analysis
mission value creation
organizational capability
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–47

48. © 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–48

49. Employee Turnover Rates
• Computing Turnover Rates:
 The U.S. Department of Labor suggests the
following formula for computing turnover rates:
 Thus, if there were 25 separations during a month
and the total number of employees at mid month
was 500, the turnover rate would be:
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–49

50. Employee Turnover Rates (cont’d)
• Computing Turnover Rates (cont’d):
 Another method of computing the turnover rate is one that
reflects only the avoidable separations (S). This rate is
computed by subtracting unavoidable separations (US) from
all separations. The formula for this method is as follows:
 where M represents the total number of employees at mid
month. For example, if there were 25 separations during a
month, 5 of which were US, and the total number of
employees at mid month (M) was 500, the turnover rate
would be:
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51. Employee Absenteeism Rates
• Computing Absenteeism Rates
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52. 5
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 employee’s 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
© 2010 South-Western, a part of Cengage Learning. All rights reserved. 2–52