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McMaster University

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 organizations 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 Porters 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 Snows 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 lets 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 unemploy
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