2BC3-CH2.docx

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11 Apr 2012
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Commerce 2BC3
Chapter 2: Strategic HR Management and Planning
Nature of Strategic HR Management
Strategic HR Management (SHRM): Process of linking the HR function with the strategic objectives of the
organization in order to improve performance
- Links HR vertically and horizontally
- Vertically: Require connecting HR practices with the strategic management process of the organization
- Horizontally: Involve the coordination of various practices within HR through a patterned or planned action
- Are linked to organizational plans, to anticipate HR needs, and to HR programs that will be implemented to
meet those needs
- Involves multiple HR processes (that are linked to the strategic objectives)
- HR best practices:
- Employment security
- Selective recruiting
- High Wages/incentives
- Information sharing/participation
- Training/cross-training
- Promotion from within
- Measurement
Operationalizing HR Strategy
- Understand the business
Knowing the financials and the hey drivers of business success is important to understanding he need for
certain changes
- Focus on the key business goals
Programs that have the greatest relevance to business objectives should get priority
- Know what to measure
Metrics are a vital part of assessing success, which means picking those measures that directly relate to
the business goals
- Prepare for the future
Strategic thinking requires preparing for the future, not focusing on the past
Linkage of Organizational and HR Strategies
- 2 popular strategies
Using either of these approaches can help in determining which HR strategies best fit the organization’s
overall business
Organizational Strategy: The pattern of decisions in a company that determines and reveals its objectives,
purposes, or goals and produces the principal policies and plans for achieving those goals
- Defines the range of business the company is to pursue, the kind of economic and human organization it
intends to be, and the nature of the economic and non-economic contribution it intends to make to its
shareholders, employees, customers, and communities
- Must be competitive to be effective
Porter’s Strategic Models
- 3 internally consistent generic strategies for creating a defendable position and outperforming competitors
in an industry
- Overall cost leadership, differentiation, and focus
Cost-leadership strategy: Strategy that approaches competition on the basis of low price and high quality
of product or service
- Many require an organization to build its own employees to fits its specialized needs
- Needs a long HR planning horizon
- It may employ a high number of contract or part-time employees
- To ensure higher quality of product or service, the organization may have to offer more training
Differentiation strategy: More appropriate in a dynamic environment characterized by rapid change and
requires continually finding new products and new markets
- More responsive, HR planning is likely to have a shorter time frame
- Makes greater use of external sources
- Employers would need more full-time employees
Focused Strategy: Occurs when a firm concentrates its efforts on serving a distinctively defined market
segment, which may include some combination of a portion of a product line, particular customer segment,
limited geographic area, or particular distribution channel
- Attempts to achieve either a cost advantage or differentiation
Miles and Snow’s Strategy Typology
- View an organization as a complete and integrative system in dynamic interaction with its environments
- Competing firms within an industry can be categorized into 4 basic types of their general strategic
orientation
Defenders
- Are companies with limited product lines that focus on improving the efficiency of their existing operations
- There is a centralized authority and tight cost control that leads to slow overhead
- Little employee empowerment with very close supervision
Prospectors
- Organizations with fairly bound product lines that focus on product innovation and search for the new
market opportunities
- Will have a learning orientation that is flexible, fluid, and decentralized in structure
- Have a strong capability in research, and creativity is valued, as are risk-taking and innovation
Analyzers
- Organizations that operate in at least 2 different product-market areas, where one is stable and one is
variable
- Stable Efficiency is emphasized
- Variable Innovation and risk-taking is emphasized
Reactors
- An organization that lacks a consistent strategy, structure, or culture relationship
- No clear organizational approach
- Consideration of HR should be part of the strategy formulation process
- Sometimes need to be more flexible to adapt to ever-changing conditions
Human Resources Planning
HRP: The process of analyzing and identifying the need for and availability of human resources so that the
organization can meet its objectives
- Must be linked effectively with strategic plans for human resources for be a core competency that provides
competitive advantages
Purpose of Strategic HR Planning
- Is to have the right number of human resources, with the right capabilities, at the right times, and in the
right places
- An organization must consider the availability of and allocation of people to jobs over long periods of time
- Requires knowledge of strategic expansions or reductions in operations and an technological changes that
may affect the organization
- Must identify the knowledge, skills, abilities, experience, and other characteristics affecting the capabilities
of employees for current and future jobs
- Changes in capabilities
- Can be made for shifting employees within the organization, laying off or cutting back, retraining, or
increasing the number of employees
- Requires significant time and effort
HR Planning Responsibilities
- The top HR executive and subordinate staff specialists have most of the responsibilities for this planning
- Other managers must provide information for the HR specialists to analyze
- Those other managers need to receive data from the Hr unit
- HR unit project the Hr needed to implement the overall organizational goals
Small Businesses and HR Planning
- The need for HR in large organizations is clear because if some formal adjustments are not made, people
or even entire divisions might be working at cross-purposed with the rest of the company
- In smaller businesses, even though the manager/owner knows on a daily basis what is happening and
what should be done, planning is still important
HR Planning Process
- Begins with considering the organizational objectives and strategies
- HR needs and supply sources must be analyzed both externally and internally and forecasts must be
developed
Human Resources management systems (HRMS): A system that let’s you keep track of all your
employees and information about them. It is usually done in a database or, more often, in a series of
interrelated databases
Is a system that lets you keep track of all your employees and information about them
Usually done in a database
Key to assessing HR is having solid information, which is accessible
- Once the assessments are complete, forecasts must be developed to identify the relationship between
supply and demand for HR
- Management then formulates HR strategies and plans to address imbalances, both short term and long
term
HR Strategies: Means used to anticipate and manage the supply of and demand for HR
- Provide overall direction for the ways HR activities will be designed and managed
- Specific HR plans are developed to provide more specific direction for the management of HR activities
- Consistent alignment of the availabilities and capabilities of HR with the needs of the organization over a
period of time
Scanning the External Environment
Environment scanning: Process of studying the environment of the organizations to pinpoint opportunities
and threats
- The external environment especially affects HR planning because each organization must draw from the
same labour markets that supplies all other employers
- One measure of organizational effectiveness is the ability of an organization to compete for a sufficient
supply of human resources with the appropriate capabilities
- All elements of the external environment- government influences, economic conditions, geographic and
competition issues, and workforce changes- must be apart of the scanning process
Government Influences
-Government regulations affect the labour supply and HR planning
- Must be performed by individuals who understand the legal requirements of various government
regulations
- Tax legislation at the provincial and federal levels also affects HR planning
- Pension legislation may change retirement patterns and funding options
- Employee benefits may be affected significantly by tax law changes
Economic Conditions
- Economic recessions and booms
- Interest rates, inflation, and economic growth affect the availability of workers
- Applicants who are available may be less employable because they are less educated, less skilled or
unwilling to work
- As the unemployment rate rises, the number of qualified people looking for work increases, making it
easier to fill jobs, which is described as a loose labour market
Geographic and Competitive Concerns
-The net migration into a particular region is important
- Working people have expressed an increasing reluctance to accept geographic relocation as a
precondition of moving up in organizations
- This trend has forced organizations to change their employee development policies and practices as well
as their HR plans
- Direct competitors is another external force
- Failure to consider the competitive labour market and to offer pay scales and benefits competitive with
those of organizations in the same general industry and geographic location may cost a company a lot in the
long run
- Other employers in a geographic region can greatly expand or diminish the labour supply
- The impact of international competition for labour intensifies as global competition shift jobs and workers
around the world
Workforce Composition
- Have created notably different workplaces
- Important to consider the following variables:
Aging of the workforce
Growing diversity of workers
Women workers and work/life balancing
Availability of contingent workers
Outsourcing possibilities
- Analyze how the current and future availability of workers with specific capabilities and experience
Assessing the Internal Workforce
- The needs of the organization must be compared against the labour supply available inside the
organization
Job and Skills Audit
- Need an audit of the jobs being done in the organization
- A comprehensive analysis of all current jobs of all current jobs provides a basis for forecasting what jobs
will need to be performed in the future
- The following questions are addressed:
What jobs exist?
How many individuals are performing each job?