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Chapter 2

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Administrative Studies
ADMS 2600
Sung Kwon

Chapter 2: Strategy and Human Resources Planning Strategic planning - procedures for making decisions about the organization's long-term goals and strategies strategic plans - have a strong external orientation that covers major portions of the organization - especially focus on how the organization will position itself relative to its competitors to ensure its long-term survival, create value, and grow Human resources planning (HRP) - process of anticipating and providing for the movement of people into, within, and out of an organization - purpose is to help managers deploy their human resources as effectively as possible, where and when they are needed, to accomplish the organization's goals Strategic human resources management (SHRM) - combines strategic planning and HR planning - pattern of human resources deployments and activities that enable an organization to achieve its strategic goals Strategic Planning and HR Planning: Linking the Processes strategy formulation - HRP provides a set of inputs into the strategic formulation process in terms of what is possible, that is, whether a firm has the types and numbers of people available to pursue a given strategy strategy implementation - company's executives must make resource allocation decisions to implement the strategy, including decisions related to the firm's structure, processes, and human capital Steps in Strategic Planning 1. Mission, Vision, and Values 2. Environmental Analysis 3. Internal Analysis 4. Formulating Strategy 5. Strategy Implementation 6. Evaluation and Assessment Step 1: Mission, Vision, and Values mission - basic purpose of the organization, as well as its scope of operations - statement of the organization's reason for existing strategic vision - provides a perspective on where the company is headed and what the organization can become in the future - ideally clarifies the long-term direction of the company and its strategic intent core values - strong, enduring beliefs and principles that the company uses as a foundation for its decisions - the underlying parameters for how the company will act toward customers, employees, and the public in general - capture the underlying philosophy of the company culture and give direction to its employees - also place limits on what behaviour is seen as ethical and acceptable Step 2: Environmental Analysis Environmental scanning - systematic monitoring of the major external forces influencing the organization. Six External issues monitored most frequently:  Economic factors and development information, including general, regional, and global conditions  Industry and competitive trends, including new processes, services, and innovations  Technological changes, including information technology, innovations, and automation  Government and legislative issues, including laws and administrative rulings  Social concerns, including childcare, eldercare, the environment, and educational priorities  Demographic and labour market trends, including the age, composition, and literacy of the labour market and immigration Competitive Environment - analysis central to strategic planning - includes the specific organizations with which the firm interacts - the more power each of these forces has, the less profitable (and therefore attractive) the industry will be Customers - One of the most important assessments is identifying the needs of customers - firm's strategy should focus on creating customer value at a fundamental level - organizations need to know how they will provide value to customers (foundation for strategy), and it influences the kind of skills and behaviour that will be needed from employees. Actions and attitudes that lead to excellent customer service can include the following:  Speed of delivering normal orders  Willingness to meet extraordinary needs  Merchandise delivered in good condition  Readiness to take back defective goods and resupply new goods quickly  Availability of installation and repair services and parts Rival Firms - most obvious element of industry analysis is examining the nature of competition New Entrants - companies often try to establish entry barriers to keep new firms out of the industry - when new firms do enter an industry, it is often because they have a different—and perhaps better—way to provide value to customers - can change the ―rules of the game‖ in an industry - impact on labour costs, productivity, skills required, and work design are important considerations in both strategic planning and HRP Substitutes - can be biggest opportunity or threat in an industry - firms may need to adjust their employee skill bases to support different technologies, or they may need to think about how they will compete in different ways Suppliers - provide organizations with key inputs, i.e. raw materials for production, money (from banks and stockholders), information, and people - people, or labour, has direct implications for strategic planning and HRP External Supply of Labour Factors influencing the labour supply:  demographic changes in the population  national and regional economics  education level of the workforce  demand for specific employee skills  population mobility  governmental policies labour force trends - illustrate the importance of monitoring demographic changes as a part of environmental scanning Importance of labour force changes:  operational - change in labour supply directly influences hiring plans that must take into account the demographic composition of the population in the area in which the organization is located or plans to locate - with a ―maturing‖ workforce, HRP must consider the implications for recruitment and replacement policies  strategic - changes in the labour supply can limit the strategies available to firms - high-growth companies in particular may find it difficult to find the talent they need to expand their businesses - shortage of talent in high-skill jobs continues to create challenges for firms Step 3: Internal Analysis internal analysis - provides strategic decision makers with an inventory of organizational skills and resources as well as performance levels - many resources combine to give organizations a competitive advantage - advantages due to physical assets are being supplanted by intangible assets, including people The Three Cs: Capabilities, Composition, and Culture Capabilities: People as a Strategic Resource core capabilities - bundles of people, processes, and systems that distinguish an organization from its competitors and deliver value to customers - tend to be limited in number, but they provide a long-term basis for technology innovation, product development, and service delivery - people are a key resource that underlies a firm's core capabilities - knowledge-based industries depend on ―people-embodied know-how‖ (knowledge, skills, and abilities of employees) for success o a number of companies that previously relied on standard plans for recruiting and managing their employees are designing more personalized plans designed to address the individual needs of employees so they will be in a better position to help implement their firms’ strategies Organizations can achieve a sustained competitive advantage through people if they are able to meet the following criteria that highlight the importance of people and show the closeness of HRM to strategic management:  resources must be valuable - people are a source of competitive advantage when they improve the efficiency or effectiveness of the company - value is increased when employees find ways to decrease costs, provide something unique to customers, or some combination of the two  resources must be rare - people are a source of competitive advantage when their knowledge, skills, and abilities are not equally available to competitors  resources must be difficult to imitate - people are a source of competitive advantage when the capabilities and contributions of a firm's employees cannot be copied by others  resources must be organized - people are a source of competitive advantage when their talents can be combined and deployed to work on new assignments at a moment's notice - pervasive methods for ensuring an organized workforce: information technology, teamwork, and cooperation Composition: The Human Capital Architecture - determine whether people are available, internally or externally, to execute an organization's strategy - managers have to make tough decisions about whom to employ internally, whom to contract externally, and how to manage different types of employees with different skills who contribute in different ways to the organization - as a general rule, managers often consider contracting externally (or outsourcing) skill areas that are not central to the firm's core competence - HRP plays an important role in helping managers weigh the costs and benefits of using one approach to employment versus another. General trends in employment relationships and HR practices for different employees:  Strategic knowledge workers - tend to have unique skills that are directly linked to the company's strategy and are difficult to replace - typically are engaged in knowledge work that involves considerable autonomy and discretion - companies tend to make long-term commitments to these employees, investing in their continuous training and development and perhaps giving them an equity stake in the organization  Core employees - have skills that are quite valuable to a company but are not particularly unique or difficult to replace - tend to be employed in traditional types of jobs - could leave to go to another firm because their skills are transferable, so managers frequently make less investment in training and development and tend to focus more on paying for short-term performance achievements  Supporting workers - typically has skills that are of less strategic value to the firm and are generally available in the labour market - increasingly hired from external agencies on a contract basis to support the strategic knowledge workers and core employees - scope of their duties tends to be limited, and their employment relationships tend to be transaction based, focused on rules and procedures, with less investment in development  Partners and complementary skills - have skills that are unique but frequently are not directly related to a company's core strategy - have skills that are specialized and not readily available to all firms, so companies tend to establish longer- term alliances and partnerships with them and nurture an ongoing relationship focused on mutual learning - considerable investment is made in the exchange of information and knowledge Culture: Values, Assumptions, Beliefs, and Expectations (VABEs) cultural audits - audits of the culture and quality of work life in an organization - examines the values, assumptions, beliefs, and expectations (VABEs) of their workforces - leaders who target employees’ values, attitudes, beliefs, and expectations are more effective than those who simply focus on workers’ behaviours or thought processes - some firms conduct cultural audits that ask employees questions about the degree of fear associated with meeting their firms’ revenue goals and incentive plans that could encourage unethical or illegal behavior - can also be used to determine whether there are different groups, or subcultures, within the organization that have distinctly different views about the nature of the work and how it should be done values-based hiring - involves outlining the behaviours that exemplify a firm's corporate culture and then hiring people who are a fit for them Forecasting: A Critical Element of Planning - managers must continually forecast both the needs and the capabilities of the firm for the future to do an effective job at strategic planning - managers focus on (at least) three key elements o forecasting the demand for labour o forecasting the supply of labour o balancing supply and demand considerations High costs of not forecasting or forecasting poorly - if job vacancies are left unfilled, the resulting loss in efficiency can be very costly, particularly when you consider the amount of time it takes to hire and train replacement employees - poor forecasting that leads to unnecessary layoffs also makes it difficult for employees to accurately assess their own career prospects and development. When this happens, some of a firm's more competent and ambitious workers will be inclined to seek other employment where they feel they will have better career opportunities Accurate forecasting - provides the kind of information managers need to make sound decisions - can help them ensure that they have the right number and right kinds of people in the right places at the right times, doing things that provide value to both the organization and the employees Forecasting a Firm's Demand for Employees Quantitative approach - involve the use of statistical or mathematical techniques - modelling or multiple predictive techniques o usually used by larger companies with the help of analysts and statisticians - trend analysis o firm's employment requirements are forecasted on the basis of some organizational index o one of the most commonly used approaches for projecting HR demand o typically done in several stages  select an appropriate business factor (best available predictor of HR needs, e.g. sales)  plot a historical trend of the business factor in relation to the number of employees (ratio of employees to the business factor = labour productivity ratio)  compute the productivity ratio for at least the past five years  calculate HR demand by multiplying the business factor by the productivity ratio  project the firm's HR demand out to the target year Qualitative approach - Management forecasts o opinions (judgments) of supervisors, department managers, experts, or others knowledgeable about the organization's future employment needs - Delphi technique o attempts to decrease the subjectivity of forecasts by soliciting and summarizing the judgments of a preselected group of individuals o HR personnel can do this by developing a list of questions to ask the managers in their companies o final forecast thus becomes a collective, or group, judgment Forecasting the Supply of Employees - organization must also determine whether sufficient numbers and types of employees are available to staff the openings it anticipates having - process involves both tracking current employee levels and making future projections about those levels Focus on the number of employees in particular jobs  Staffing tables - graphic representations of all organizational jobs, along with the numbers of employees currently occupying those jobs (and perhaps also future employment requirements derived from demand forecasts)  Markov analysis - shows the percentage (and actual number) of employees who remain in each of a firm's jobs from one year to the next, as well as the proportions of those who are promoted, demoted, or transferred or exit the organization - can be used to track the pattern of employee movements through various jobs and to develop a transition matrix for forecasting labour supply  Employee turnover and absenteeism rates - quality of fill metric o attempts to measure how well new hires are performing so the company will have enough top performers to propel it toward its strategic objectives Focus on types of employees and their skills, knowledge, and experiences  Skill inventorie
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