LU 2 Strategic Human Resource Management

I. The Strategic Management Process A. Goal-Setting and the Planning Process - Strategic planning is important because in a well-run organization the goals from the top of the organization downward should form an unbroken chain, or hierarchy, of goals. These goals, in turn, should guide everyone in the organization in what they do. B. Strategic Planning - A strategic plan is the companys plan for how it will match its internal strengths and weaknesses with external opportunities and threats in order to maintain a competitive advantage. Figure 3-2 sums up the strategic management process in seven steps as follows: 1. 2. 3. 4. 5. 6. 7. Define the current business and mission. Perform external and internal audits. Formulate a new direction. Translate the mission into goals. Formulate strategies to achieve the strategic goal. Implement the strategy. Evaluate performance.

C. Improving Productivity through HRIS: Using Computerized Business Planning Software Business planning software packages are available to assist the manager in writing strategic and business plans. D. Types of Strategies Managers develop three types of strategies. 1. Corporate-level strategy Identifies the portfolio of businesses that comprise the company and the ways in which these businesses are related to each other. Concentration, diversification, vertical integration, consolidation, and geographic expansion are all examples of corporate-level strategies. Competitive strategy Managers endeavor to achieve competitive advantages for each of their businesses. Competitive advantages enable a company to differentiate its product or service from those of its competitors to increase market share. Examples of competitive strategies include cost leadership, differentiation, and focus.
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HR as a Competitive Advantage Human capital is one of the best competitive advantages because it is hard to duplicate a companys personnel. Functional strategies These strategies identify the basic course of action that each department will pursue in order to help the business attain its competitive goals. Strategic Fit Strategic planning experts have different views on fitting capabilities to the opportunities and threats vs. stretching beyond capabilities to take advantage of an opportunity. The fit point of view, as purported by Michael Porter, states that all of the firms activities must be tailored to or fit its strategy by ensuring that the firms functional strategies support its corporate and competitive strategies.

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B. The Top Managers Role in Strategic Planning - Devising a strategic plan is top managements responsibility. Because the consequences of a poor choice can be dire, few top managers delegate the job of deciding how the company should match internal strengths and weaknesses with external opportunities and threats to maintain a competitive advantage. C. Departmental Managers Strategic Planning Roles - It would be reckless for any top executive to formulate a strategic plan without the input of his or her lower-level manager. Few people know as much about the firms competitive pressures, vendor capabilities, and concerns than do the companys department managers. D. Departmental Managers Strategic Planning Roles in Action: Improving Mergers and Acquisitions When mergers and acquisitions fail, it is usually due to personnel issues. Functional managers help top management to plan and execute the firms strategy. When mergers and acquisitions do fail, its often not due to financial or technical issues but to personnel-related ones. These may include, for example, employee resistance, mass exits by high-quality employees, and declining morale and productivity. As one study concluded some years ago, mergers and acquisitions often fail due to a lack of adequate preparation of the personnel involved and a failure to provide training which fosters selfawareness, cultural sensitivity, and a spirit of cooperation.

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Strategic Human Resource Management

A. Defining Strategic HRM Every company needs its human resource management policies and activities to make sense in terms of its broad strategic aims. Strategic human resource management means formulating and executing human resource policies and practices that produce the employee competencies and behaviors the company needs to achieve its strategic aims. Figure 3-7 demonstrates the relationship between human resource strategy and the companys strategic plans. The following steps demonstrate linking company-wide and HR strategies: 1. 2. 3. 4. 5. Evaluate Companys Competitive Environment Formulate Business Strategy Identify Workforce Requirements Formulate HR Strategic Policies and Activities Develop Detailed HR Scorecard Measures

B. Human Resources Strategies and Policies - Managers call the specific human resource management policies and practices they use to support their strategic aims human resource strategies. The Shanghai Portmans human resource strategy was to produce the service-oriented employee behaviors the hotel needed to improve significantly the hotels level of service. Its HR policies therefore included installing the Ritz-Carlton Companys human resource system, having top management personally interview each candidate, and selecting only employees who cared for and respected others. C. Strategic HRM Tools - Managers use several tools to help them translate the companys broad strategic goals into specific human resource management policies and activities. Three important tools include the strategy map, the HR Scorecard, and the digital dashboard. 1. Strategy Map - The strategy map shows the big picture of how each departments performance contributes to achieving the companys overall strategic goals. It helps the manager understand the role his or her department plays in helping to execute the companys strategic plan. 2. HR Scorecard - Many employers quantify and computerize the maps activities. The HR Scorecard helps them to do so. The HR Scorecard is not a scorecard. It refers to a process for assigning financial and nonfinancial goals or metrics to the human resource management related chain of activities required for achieving the companys strategic aims and for monitoring results.
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3. Digital Dashboards - A digital dashboard presents the manager with desktop graphics and charts.

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HR Metrics and Benchmarking

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Types of Metrics Figures 3-11 and 3-12 present examples of broad and more focused measures organizations can use to measure HR effectiveness. Improving Productivity through HRIS: Tracking Applicant Metrics for Improved Talent Management There are a number of metrics that can be used to collect and assess the quality of different recruitment sources. Many companies choose to use an applicant tracking system. There are two basic steps in this process: 1) deciding how to measure performance of new hires and 2) tracking sources that result in superior hires. Benchmarking in Action - Benchmarking occurs when an organization compares the practices of high performing organizations with their own in order to understand what they can do to improve. Strategy and Strategy-Based Metrics Benchmarking is only part of the process. HR must also use strategy-based metrics to determine how HR is helping the organization reach its goals. Workforce/Talent Analytics and Data Mining Many companies are using workforce analytics to analyze and track HR data to help improve performance and increase job satisfaction. Another technique, data mining, involves statistical analysis to find hidden or new relationships among different variables such as tracking when and who is more likely to buy a certain product. This can help a company better manage its marketing money by targeting certain groups of people with advertising. What are HR Audits? These audits are a way for an organization to measure its current policies and practices and identify areas where improvements can be made based on company goals. Evidence-Based HR and the Scientific Way of Doing Things Evidence-based HR is the use of data, facts, etc. to support HR proposals, decisions, practices, and conclusions. This requires managers to be more scientific in making organizational decisions. This approach requires objectivity, experimentation, quantification, explanation, prediction, and replication.

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