Management Chapter 2 Human Resource Strategy And Planning Human Resource Strategy And Planning

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Chapter 2: Human Resource Strategy and Planning

Chapter 2: Human Resource Strategy

and Planning

Table of Contents

Chapter Summary

Learning Objectives

Lecture Outline

Critical Thinking Challenges

Case: Happy and Healthy Transformation at Walgreens

Supplemental Cases

Extra Teaching Video

Chapter Summary

Chapter 2 examines strategic planning for an organization and the role of the Human Resources

(HR) department in its strategic plans. First, the chapter describes the strategic planning process,

including the formulation of effective strategies. Next, it explains how HR’s strategies fit into the

organization’s strategic plans and the contributions HR can make. Human resource planning

determines and plans for the availability of employees and external workers needed to meet the

organization’s strategies. Some strategic challenges are presented: managing a talent surplus,

Learning Objectives

After students have read this chapter, they should be able to accomplish the following objectives:

• Summarize the organization’s strategic planning process.

• Outline how HR’s strategies are merged with organizational strategies and give two

examples.

Chapter 2: Human Resource Strategy and Planning

The chapter opens with a feature describing the current trends in HR strategy and planning.

Trends include the rising importance of strategic planning, emerging strategic issues, challenging

issues in globalization, new approaches needed in strategic planning, and the role that HR plays

in facilitating mergers and acquisitions.

Lecture Outline

HR Headline: HR Planning in the “Air Capital of the World”

Wichita, Kansas, is known as the “air capital of the world.” As recently as 2008, over 69,000

people worked in aviation-related jobs. However, the city has since experienced a 25 percent

reduction in aircraft manufacturing jobs. In an effort to rejuvenate the aircraft industry, private

and public organizations have banded together to make the city more attractive to skilled

workers.

• A strategy is a plan an organization follows for how to compete successfully, survive, and

grow.

o The plan may be formal or informal.

2-1. Organizational Strategic Planning

• Strategic planning is the process of defining organizational strategy, or direction, and

allocating resources toward its achievement.

Teaching Tip: Use Figure 2-1 to help students understand the strategic planning process. Ask

students to suggest actions HR can perform during each stage.

2-1a. Strategy Formulation

• An organizational mission is the core reason for the existence of the organization and

2-1b. Managing in Turbulent Conditions

• VUCA is an acronym that stands for volatile, uncertain, complex, and ambiguous.

o Leaders operating in such conditions must be more adaptable and agile than in the

2-1c. Triple Bottom Line

2-2. Human Resources and Strategy

• The HR department must demonstrate that it helps the organization.

• Strategic HR management refers to the appropriate use of HR management practices

HR Perspective: Genentech Maps Its Human Resources Possibilities

Genentech, the founder of the biotechnology industry, merged with Roche. This prompted

the HR leadership to assess the company and the industry, which led to the creation of a

“map of possibilities” for the organization. The map comprised two main segments—key

disruptors and themes for HR. Analyzing the information under these segments led to the

identification of three “super-themes.” Addressing these themes will help HR in managing

talent to ensure the goals of the organization are met. It will also ensure that employees are

in an environment that enables them to do their best work.

1. What are the pros and cons of conducting such an extensive research process before

laying out plans for managing talent in the future?

Students’ answers may vary. Advantages include (1) having a thorough

understanding of the industry and trends that may influence the industry and its

demands in the future, (2) determining where the organization stands in terms of its

current talent pool and its ability to cater to future demands of the industry, and (3)

creating strategies that will enable the organization to cater to upcoming demands.

However, while conducting an extensive research process, it is possible that the

Chapter 2: Human Resource Strategy and Planning

How can they continue to monitor external and internal conditions that might affect

the workforce?

Students’ answers may vary. Such assessments can be conducted on a regular basis,

such as at the end of a quarter, or whenever a trend is identified that may require a

different plan of action. With regard to monitoring external and internal conditions,

the identification and observation of factors that may influence these conditions

may help HR in coming up with solutions that may address future demands or

challenges.

2-2a. Human Resource Contributions to Strategy

• HR leaders included in an organization’s strategic planning should know about the

2-2b. Human Resources Strategies for Global Competitiveness

• Globalization refers to the phenomenon of organizations operating across borders.

HR Competencies & Applications: Latin American Firms Face Staffing Problems

Key Competencies: Global & Cultural Effectiveness (Behavioral Competency) and

Organization (Technical Competency)

A survey of large Latin American firms showed that many have expanded into international

markets through mergers and acquisitions. They face problems in cultural differences and

staffing.

1. How would you focus HR leaders on the development of positive strategies for

expansion? What HR issues do you think deserve the most attention?

Answers will vary. Students should consider the role of cultural differences in many

of the issues faced after a merger or an acquisition that involves a firm in a different

country. Differences such as communication styles and attitudes toward

management can cause problems.

2-4b. Geographic and Competitive Evaluations

2-4c. Changing Workforce Considerations

2-5. Planning for Internal Workforce Availability

• HR must compare the needs of the organization with the existing labor supply and the

potential labor supply available outside the organization.

HR Highlight: Barriers to Workforce Planning

For most organizations, the workforce is the most important resource in achieving its goals.

While leaders might recognize and acknowledge this reality, too often the planning process for

human resources falls short. Fortunately, the use of big data in the HR domain and predictive

analytics are two emerging trends that may help to combat this reluctance to conduct workforce

planning.

1. How might HR professionals work to overcome issues related to managers’ need for

control and focus on the short term?

Students’ answers may vary. Meeting with managers and identifying and analyzing some

pain points associated with their everyday tasks may help in understanding the causes of

the need for control. HR professionals can also help managers understand the benefits of

keeping long-term goals in mind while performing everyday tasks.

2. What steps might HR staff take to improve the quality and availability of data regarding

human resources in the organization?

2-5a. Current and Future Jobs Audit

2-5b. Employee and Organizational Capabilities Inventory

• HR planners should conduct a detailed audit of current employees and their capabilities.

2-6. Forecasting HR Supply and Demand

• Forecasting refers to the use of information from the past and present to predict future

conditions.

2-6a. Forecasting Methods and Periods

• Forecasting methods may be either qualitative or quantitative, as shown in Figure 2-7.

2-6b. Forecasting the Demand (Need) for Human Resources

2-6c. Forecasting the Supply (Availability) of Human Resources

• Forecasting availability considers both external and internal supplies.

2-7. Workforce Imbalances

2-7a. Managing a Talent Surplus

• A talent surplus can be handled in different ways: reduction in work hours or

compensation, attrition and hiring freezes, voluntary separation programs, and

Teaching Tip: Ask students to describe scenarios in which each method would be most useful.

2-7b. Legal Considerations for Workforce Reductions

• HR’s role during workforce adjustments is to ensure that the organization does not

violate any laws governing workforce reductions.

2-7c. Managing a Talent Shortage

• Several methods can be used to handle a talent shortage: using overtime, outsourcing,

making alternate work arrangements, bringing back recent retirees, increasing

contingent workers, and reducing turnover.

Chapter 2: Human Resource Strategy and Planning

maintain a talented workforce.

Discussion Starter: Use Figure 2-10 to discuss why this order is most commonly used.

2-8. Human Resources Planning in Mergers and Acquisitions

• A merger or acquisition generates growth by combining two existing companies and

2-8a. Before the Deal

2-8b. During Integration

• During the first 60 days after the acquisition, HR provides administrative and

2-8c. Post Integration

2-9. Measuring Effectiveness of Human Resources and Human Capital

• Effectiveness is the ability of a program, project, or task to produce a specific desired

effect or result that can be measured.

• Efficiency is the degree to which operations are carried out in an economical manner.

Discussion Starter: Ask students why it is important to measure effectiveness.

• The benefits of HR practices are not always immediately visible, which is what makes

measuring HR’s impact such a challenge.

Chapter 2: Human Resource Strategy and Planning

o However, successful efforts can usually be made to assess HR practices.

• HR managers should understand financial and operational measures that drive the

business and relate decisions to key performance indicators (KPIs).

• Metrics, benchmarking, balanced scorecards, and audits can help firms track HR

performance.

2-9a. HR Metrics and Analytics

• HR metrics are specific measures of HR practices.

• A metric can be developed using costs, quantity, quality, timeliness, and performance

Teaching Tip: Use Figure 2-12 to highlight metrics that can be used in different areas. Ask

students to suggest additional data that can be used as metrics.

HR Competencies & Applications: Talking Numbers with Organization Leaders

Key Competencies: Business Acumen (Behavioral Competency), Critical Evaluation

(Behavioral Competency), Strategy (Technical Competency), and Organization/Technology

& Data (Technical Competency)

CEOs are interested in knowing how HR practices impact key organization performance

indicators. The CEO and other leaders are focused on the strategic goals of the organization rather

than measures of activity. If HR professionals don’t provide relevant metrics to leaders, there is

little chance of gaining a seat at the strategic planning table or demonstrating the value of

effective HR practices. The following strategic metrics will get the attention of the CEO and

demonstrate the value of investing in human capital:

• Revenue per employee

• Quality of hire improvement

• Performance turnover in key jobs

• Revenue lost due to position vacancies

• HR program contribution to productivity improvements

• Percentage of HR strategic goals that were met.

1. What data would be necessary to track and report on each of the metrics listed? What

Chapter 2: Human Resource Strategy and Planning

• Revenue per employee: Data may be sourced from the financial department. A

report on the revenue earned by the organization for a certain period of time

versus the strength of the organization for the same period will provide this

information.

• Quality of hire improvement: This information may be available from the

managers to whom new recruits report. Managers may maintain profiles on the

quality and productivity of employees who work under them.

• Performance turnover in key jobs: This information may be available from project

managers.

• Revenue lost due to position vacancies: This information can be sourced from the

HR department and the sales department. An example of such information may be

a report on the contracts lost due to a lack of skilled employees or inadequate

manpower.

• HR program contribution to productivity improvements: The HR department may

possess this information. Each program that is initiated will need to have a

benchmark to assess its outcome.

• Percentage of HR strategic goals that were met: The HR department may possess

this information. This information can be available in reports that contain the

strategic goals set by the department, the milestones for each goal, and the status

of each milestone, along with any associated learnings and improvements

2. What resources would you recommend to HR professionals who are not skilled in

creating these sophisticated metrics?

Students’ answers may vary. The Society of Human Resource Management may have

resources that HR professionals can use to create HR metrics.

2-9b. Human Resources and Benchmarking

Chapter 2: Human Resource Strategy and Planning

• Human capital often provides both the biggest value and the biggest cost to

organizations.

Teaching Tip: Remind students that, as stated in Chapter 1, human capital is the collective value

of the capabilities, knowledge, skills, life experiences, and motivation of an organizational

workforce.

• The total cost of workforce (TCOW) is a comprehensive measure that takes into

account the full cost for all people who contribute work to the organization.

• Human capital value added (HCVA) is an adjusted operating profitability figure

calculated by subtracting all operating expenses except labor expenses from revenue and

dividing by the total full-time head count.

• Human capital return on investment (HCROI) directly shows the amount of profit

derived from investments in labor.

• Human economic value added (HEVA) is the wealth created per employee.

o The following formula calculates HEVA:

2-9e. Human Resources Audit

• An HR audit is a formal research effort to assess the current state of an organization’s

HR practices.

Critical Thinking Challenges

1. Discuss how globalization has changed jobs in an organization where you have worked.

What are some HR responses to those changes?

2. What steps can HR professionals take to ensure that mergers and acquisitions are

successful? How can HR help during the integration process?

3. How can an organization maintain its image while dealing with a talent surplus? If layoffs

are necessary, what would you recommend managers do to ensure that survivors remain

committed and productive?

4. As the HR manager for a multinational corporation, you want to identify HR competencies

that are critical for global companies. Visit the website for the World Federation of People

Management Association (www.wfpma.com) to research the topic and to identify

differences in the body of knowledge in different parts of the world.

5. As the HR Director of a U.S.-based company that is looking at global opportunities in

China, you have been asked by the company president to prepare an outline for an HR

strategic plan as part of the company’s expansion process. You need to develop an HR

strategic plan that will integrate the goals, objectives, and strategies of the HR department

with those of the company. The plan also needs to support the objectives of other

A. What is the process to use for identifying the components of the HR strategic

planning process?

Most students will probably refer to the Strategic Planning Process shown in Figure

B. What other company strategic objectives must the HR strategic plan integrate and

support?

Chapter 2: Human Resource Strategy and Planning

be others related to globalization, mergers/acquisitions, technology changes, etc.

Case: Happy and Healthy Talent Transformation at Walgreens

Walgreens is responding to rapid advancements in technology and shifting customer shopping

preferences by introducing changes in its core business model and transitioning to a customer-

driven supply chain approach.

1. What are other ways that Walgreens can improve its image as a leader in supply chain

considering it is competing with companies like Amazon? How can Walgreens

differentiate itself to become attractive to hard-to-find supply chain experts?

2. What additional development would be important to retain supply chain interns and

professionals who join the Walgreens team?

Supplemental Cases

HR’s Performance Consulting at Ingersoll Rand

This case illustrates how HR staff linked employee performance and development to strategic

1. Why do HR personnel need to think more strategically in companies? Why might such an

approach enable HR to be taken more seriously by other managers?

1. How does this case illustrate the lack of HR planning?

2. What approaches could be used to recruit mechanics?

Answers will vary. Because the objective of strategic planning is to anticipate future

events and conditions, managers should evaluate and revise the strategic plan on a

Comments

The situation described in Boomtown is very typical in several parts of the western United

States. Unfortunately, there are no easy solutions that Milt can adopt. He might try recruiting

Xerox

This case highlights the challenges of employee retention during stressful and unpredictable

times when Xerox was undergoing a significant shift in its strategic focus. (For the case, visit

2. How can HR professionals develop the needed skills to analyze and interpret metrics?

What resources could an HR professional consult to begin building expertise in this area?

Extra Teaching Video

On the Job Video: Ocean House—HR Business Strategy

This short video will help reinforce key points and may prompt additional discussion from the

class.