STRATEGY AND
HUMAN RESOURCES PLANNING
This chapter discussed strategic human resource management (SHRM), including scanning the
competitive environment and conducting an internal analysis to gauge the firm’s strengths and
weaknesses. This involves looking at the firm’s “three Cs”—its culture, competencies, and
composition. When employees’ talents are valuable, rare, difficult to imitate, and organized, an
CHAPTER LEARNING OUTCOMES
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Identify the advantages of integrating human resources planning
and strategic planning.
LEARNING OUTCOME 1
Describe the basic tools used for human resources forecasting.
LEARNING OUTCOME 4
LECTURE OUTLINE
Note: Figure 2.1 can be useful to provide students with both an overview and a review of the
entire chapter.
I. STRATEGIC PLANNING AND HUMAN RESOURCES
Human resources planning (HRP) is the process of anticipating and providing for the
movement of people into, within, and out of the organization. HRP is done to achieve the
A. Strategic Planning and HR Planning: Linking the Processes
• Ideally, HRP and strategic organizational planning should coincide. On the front end,
human resource planning provides a set of inputs into the strategic formulation process
II. STEP ONE: MISSION, VISION, AND VALUES
As James Walker put it, because all business issues have people implications, all human
resources have business implications. As a result, HR managers need to engage in strategic
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planning alongside other top managers. The firm’s mission is the basic purpose of the
organization. It is the reason for the organization’s existence. The firm’s strategic vision is
III. STEP TWO: ENVIRONMENTAL ANALYSIS
Successful strategic management depends on an accurate and thorough evaluation of the
environment. Environmental scanning is the systematic monitoring of the major external
forces influencing the organization. The firm’s competitive environment includes rival
firms, buyers, suppliers, new entrants and substitutes.
A. Competitive Environment
By monitoring the external environment, organizations can identify those trends that
may affect the organization and its HR programs.
1. Customers
One of the most important environmental assessments a firm can make is
2. Rival Firms
Examining the nature of one’s competitors seems obvious, but often it is not. For
3. New Entrants
Sometimes new entrants can compete with established firms and sometimes they
4. Substitutes
5. Suppliers
Organizations rarely create everything on their own but instead have suppliers
that provide them with inputs, including money, information and people.
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IV. STEP THREE: INTERNAL ANALYSIS
Note to students that in addition to scanning the external environment, organizations
should also scan their internal environments by taking an inventory of the firm’s skills,
particularly its intellectual capabilities.
A. The Three Cs: Capabilities, Composition and Culture
1. Capabilities: People as a Strategic Resource
The success of organizations increasingly depends on people-embodied know-
how—the knowledge, skills, and abilities of an organization’s members. This
knowledge base is the foundation of an organization’s core capabilities
• Valuable—People are a source of competitive advantage when they
improve the efficiency or effectiveness of the company. Value is increased
• Rare—People are a source of competitive advantage when their skills,
knowledge, and abilities are not equally available to all competitors.
2. Composition: The Human Capital Architecture
Figure 2.3 will be useful in your discussion of this portion of the chapter.
The composition of the firm’s workforce is the result of the firm’s decisions about
whom to employ externally and internally and how to manage different types of
employees. Different employees occupy different segments in the firm’s
architecture, or employment matrix.
a. Strategic Knowledge Workers—Employees linked directly to the firm’s
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c. Supporting Workers—People who have skills that are less strategic in
value to firms and are generally available to all firms (clerical workers,
3. Corporate Culture: Values, Assumptions, Beliefs, and Expectations (VABES)
Cultural audits help companies examine the attitudes and activities of the
workforce. Employee surveys can be used to measure how employees feel about
B. Forecasting: A Critical Element of Planning
Figures 2.4 – 5 and Highlights in HRM 1 will be useful in your discussion of
forecasting. Forecasting involves estimating in advance the number and types of
people needed to meet the organization’s objectives (demand), forecasting the supply
of labor, and then balancing the two.
1. Forecasting a Firm’s Demand for Employees
There are two approaches to forecasting:
a. Quantitative Approaches—Quantitative, or top–down approaches, use
b. Qualitative Approaches—The second forecasting technique is the
• Considerations: When forecasting the demand for employees, managers
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2. Forecasting the Supply of Employees
Figure 2.5 will be useful in your discussion of employee supply forecasting.
Supply analysis is concerned with determining if the numbers and types of
employees needed are available to staff projected vacancies. Supply analysis starts
with an internal evaluation of the firm’s existing supply of employees. If
employees are not currently available, an external evaluation of the human
resources supply will be made.
a. Staffing Tables and Markov Analysis—Staffing tables are pictorial
representations of all the organization’s jobs, along with the numbers of
c. Replacement Charts and Succession Planning— Both skill and
C. Assessing a Firm’s Human Capital Readiness: Gap Analysis
Any difference between the quantity and quality of employees required versus the
quantity and quality of those available represents a gap that needs to be remedied.
V. STEP FOUR: FORMULATING STRATEGY
Figures 2.9 will be useful in your discussion of strategy.
After the firm’s managers have analyzed the internal and external strengths and
A. Corporate Strategy
Firms have to decide about how and where they will complete. These decisions
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1. Growth and Diversification
Firms that plan to grow are more likely to hire more employees. Globalization
2. Mergers and Acquisitions
By contrast, firms that plan to merge or acquire other firms are more likely to
3. Strategic Alliances and Joint Ventures
Downsizing is a less of a threat with strategic alliances, but many of the “people
B. Business Strategy
Whereas corporate strategy can be thought of the domain in which the company
competes, the firm’s business strategy focuses on how the firm can create more value
for customers than its rivals. The strategies below are among those the firm can use:
1. Low-Cost Strategy: Compete on Productivity and Efficiency
This is the strategy pursued by firms such as Wal-Mart and Southwest Airlines. A
2. Differentiation Strategy: Compete on Unique Value Added
Competing on the basis of better products, innovative features, speed to market,
and superior service allows a company to offer something unique and distinctive
C. Functional Strategy: Ensuring Alignment
HR managers must translate the firm’s overall corporate and business strategies into
HR strategies that functional managers can pursue. HR managers do this by focusing
on two types of “fit”: external and internal fit.
1. Vertical Fit/Alignment
Vertical fit focuses on the connection between the firm’s business strategy and
how it goes about achieving it. A firm that focuses on a low-cost strategy is likely
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2. Horizontal Fit/Alignment
Horizontal fit means that HR practices are all aligned with one another to establish
a configuration that is mutually reinforcing.
VI. STEP FIVE: STRATEGY IMPLEMENTATION
Formulating and HR strategy is only half of the battle, however. The strategy must also be
implemented. Point out that this is easier said than done in light of a recent survey that
revealed that about half of managers say there is a gap between their organization’s ability
to develop a vision and strategy and actually execute it.
A. Taking Action: Reconciling Supply and Demand
VII. STEP SIX: EVALUATION AND ASSESSMENT
A. Evaluation and Assessment Issues
Benchmarking is the process of identifying best practices in a given area, and then
comparing the practices against those of competitors. There are two kinds of
B. Measuring a Firm’s Strategic Alignment
1. Strategy Mapping and the Balanced Scorecard
The Balanced Scorecard (BSC) developed by Harvard professors Robert Kaplan
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2. Measuring Horizontal Fit
Recall that internal fit means that the firm’s HR practices are all aligned with one
C. Ensuring Strategic Flexibility for the Future
In addition to achieving fit, HRP focuses on organizational capability—the capacity of
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ANSWERS TO END–OF-CHAPTER DISCUSSION QUESTIONS
1. The three key elements of the HRP model are (1) employment forecasting, (2) supply
analysis, and (3) balancing supply and demand considerations. Employment forecasting
2. The “five forces” are customers, rival firms, new entrants, substitutes, and suppliers, as
outlined in Figure 2.2.
3. The human capital must be valuable, rare, difficult to imitate, and organized in a way that
adds more value to the product than can be added by competitors.
6. HR managers first gauge demand based on forecasted trends in business activity using both
quantitative and qualitative methods. The Monthly Labor Review and Occupational Outlook
Handbook, published by the Bureau of Labor Statistics (BLS) of the U.S. Department of
Labor, as well as local chambers of commerce and individual state development and planning
7. Organizational capability helps firms adjust to changes in employee supply and demand and
changes in its competitive situation. HR managers can help with this endeavor by being
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ANSWERS TO USING THE INTERNET ACTIVITIES
Internet Exercise #1, page 56
Question:
Beacon Hill Staffing Group provides employment services to job seekers and employers. Visit
the Beacon Hill website and search for company resources on contract employee benefits.
Describe the benefits that are offered to contract employees. How do these benefits compare to
those typically offered to permanent employees? In your opinion, are they adequate?
Answer:
Beacon Hill Staffing offers Medical, Dental, and Vision insurance, an ADP 401(k) Plan and an
Internet Exercise #2, page 75
Question:
HR Metrics Service provides tailored benchmarking reports to help organizations assess their
performance within their respective industries. Visit the HR Metrics Service web site and search
for benchmarking standards that the company identifies in its reports. List and describe at least
five benchmarking standards.
Answer:
HR Metrics Service provides seven categories of metrics in its benchmarking reports. Below are
some example metrics for each category:
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Chapter 2: Strategy and Human Resources Planning
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VIDEO CASE DISCUSSION GUIDE
1. Guide students to giving thorough support to their opinions when they answer these
2. Most students will get the message that a company’s ability to effectively communicate
NOTES FOR END–OF-CHAPTER CASE STUDIES
Case Study 1: Small Company Uses HR as a Strategic Tool for Growth
1. The case does not give any data regarding business growth in terms of sales but it would
seem likely that the reduced turnover and increased attendance would increase productivity
2. “Basic” HR functions are sometimes difficult for small firms to execute because they do not
have (and cannot afford) full time experts in specialized areas. They must focus their limited
3. It often takes time to see the results of at least some HR activities because they involve such
things as growth in skills and attitudes. One does not plant a seed in the garden and a
Case Study 2: Staffing, Down to a Science at Capital One
1. No amount of quantitative HR planning is likely to be on target if a firm doesn’t have a grip
2. Breaking the planning process down to the lowest level business manager is ideal because in
complex organizations such as Capital One, these managers are likely to have a better idea of
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Calculating Turnover and
Absenteeism
This appendix shows students how to measure employee turnover and absenteeism to manage
their impact on the firm.
I. EMPLOYEE TURNOVER RATES
The turnover rate can be calculated as follows:
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II. EMPLOYEE ABSENTEEISM RATES
The cost of each person-hour lost to absenteeism is based on the hourly weighted average
salary, costs of employee benefits, supervisory costs, and incidental costs. If XYZ
attendance.
• Show students how to calculate absenteeism rates based on the U.S. Department of
Labor’s formula shown in this section in the appendix. Then show them a copy of
the absenteeism statistics in the Monthly Labor Review. Do the statistics surprise