MGT 430 – Spring 2016
Class 2 - Chapter 2
Organizational Demands and
Environmental Influences
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Syllabus Discussion Topics
1.
2.
3.
4.
Form teams
Elect officers for 1st term (Jan 20 – Mar 15)
Essays
Presentations
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BASIC BUSINESS 101
INCREASE REVENUE
LOWER COSTS
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HR
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Business Strategy
A set of integrated and coordinated commitments and
actions intended to achieve stated business goals.
Strategy answers the questions:
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What is our business?
Who is the customer?
What is the value to the customer?
What should (or can) our business be?
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Company Characteristics
• Size
Large – medium- small; one division – multiple divisions
• Resources available
Plenty vs. limited; domestic vs. global
• Company life cycle stage
Introduction – Growth – Maturity - Decline
• Company success
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Organizational Culture
The mental programing of a group of people. It is comprised of
the values, customs, and belief systems of that particular group
Impacted by:
Industry
Geography
Age
Diversity
History
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(banking vs. construction)
(Miami vs. San Francisco vs. Cairo)
(Millenials vs. Ba=by-Boomers)
(Race vs. ethnic vs. age vs. income)
(Home-grown vs. start-up)
Company Culture
• The unique pattern of shared assumptions, values, and norms
that shape the socialization activities, language, symbols, and
ceremonies of people in the organization, e.g.
• banking vs. construction
• teaching vs. retail sales
• accounting vs. R&D
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Employee Concerns
Some issues:
• Single parents; caring for aging parents
• Dual career; balancing demands of work and personal lives
• Attractiveness of flexible scheduling, family-friendly benefits
and telecommuting
Some Topics of Interest
• Work/Life Balance
• Justice/Fairness
• Engagement/Commitment
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Labor Force Trends
• Diversity in race, gender and age
• Number of women expected to grow 9% from 2006 to
2016
• Fastest-growing groups: Hispanics and Asians
• Aging of the workforce - Size of group 55 and older
increasing dramatically
• Occupational trends
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Technology
• Factories and mass production
• HRIS & QR
• Reducing labor costs vs. acceding to consumer demand for
electronic transactions, e.g. ATM, QR apps, self-checkout
• Challenges privacy issues and potential misuse by employees
• Reach
– Broadens access to labor market
– Enables virtual workforce
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Globalization
• Blurs country boundaries
• Enables international joint ventures and
partnerships
• Challenges companies with differences in
values and beliefs
• Encourages offshoring—sending work to
other countries for lower costs
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Ethics and Social Responsibility
• Companies and their management being held
accountable for ethical behavior
• Corporate policies and procedures spell out
ethical behavior
• Social responsibility takes ethics to a new level
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HRM MARKET FOCUS STRATEGY CONSIDERATIONS
Low cost
Zales vs. Tiffany
Motel 6 vs. Ritz-Carlton
Differentiation
Sears vs. Brooks Brothers
Rolls-Royce vs. Hyundai
Niche
Antique car parts vs.
AutoZone/Pepboys
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Changes in the Labor Force
Aging Workforce
Diverse Workforce
Skill Deficiencies
AGE DISTRIBUTION OF U.S LABOR FORCE, 2010 AND 2020
HRM Implications of an Aging Workforce
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HR professionals spend much time on concerns related to
retirement planning, retraining older workers, and
motivating workers whose careers have reached a plateau.
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Organizations struggle to control rising costs of health care
and other benefits.
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Managers will supervise employees much older than
themselves.
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Organizations must find ways to attract, retain, and prepare
youth labor force.
Skill Deficiencies of the Workforce
• Employers are looking
for skills:
 mathematical
 verbal
 interpersonal
 Computer
 STEM
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Science
Technology
Engineering
Math
Skill Deficiencies in HRM
• Silo mentality
• Knowing how the company makes money
• Basic, but strong, understanding of business finance
• Enhanced business acumen
• Linking HR work to the critical decision making factors
demanded by TMT
• Making a business case for HRM initiatives.
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HR As A Strategic Partner
Earning a Seat at the Decision Making Table
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Credibility
Business & financial intelligence
Competitive intelligence
Forecasting future needs
Talent management
Transactional perfection and efficiency
Helping other functions succeed
• Linking HRM to performance drivers of TMT
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Strategic Alignment of
HRM Performance Metrics
HR Metrics
Corporate Metrics
Talent management
Turnover/retention
Benefits
Labor
Compensation
Compliance – EEO / AAP
Training & development
Value-added outcomes
Shareholder value
Profitability / solvency
Cost controls
Market share
Mission, vision, values
Performance ratios
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HR as a Strategic Partner
Core Transactional & Strategic H.R. Deliverables
DIRECT/INDIRECT LINE OF SIGHT
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Increase revenue / decrease costs
Advance the objectives of the organization
Improve profitability & productivity
Generate competitive advantages
Keep the company in business
• Other???
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TMT
PROD
HR
FIN
M&S
LOG
Line of sight
Customers
Owners
Community
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Gov’t
Environment
R&D
HR Challenge Question
Production department problem Average monthly defect rate
Actual
5/100 = 5%
Acceptable
3/100 = 3%
1. Who owns this problem?
Production? HR? Purchasing?
2.
Goal
1/100 = 1%
Other?
How does HR impact these numbers?
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Potential HR Responses
• Production owns the problem
• HRM provides problem solving assistance, e.g.
Adequate staffing
Employee motivation
Goal setting
Other
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Training
Compensation
Job analysis
Possible HRM Responses
HRM partners with TMT to address these issues
along with partners from other disciplines
Staffing
Leadership
Job analysis
Performance mgmt.
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Scheduling
Job descriptions
Technology
Customer response
Linking HR Activities To Corporate Financial Performance
(Direct & Indirect)
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Health/pension liab.
Employee/labor costs
Outsourcing, TPA
Training costs
FMLA
Other ???
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$$$
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$$$
$$$
$$$
$$$
H.R.I.S
Layoffs
Legal defense
Compliance
Mandatory ins.
Part time/Temp.
HR’s Impact on Income Statements
Income Statement
• Revenue minus Expenses
• $10 - $7
• Profit margin (3/10)
= Net income / net loss
= $3
= 30%
Cost of Goods Sold
Headcount
Wages paid to employees (e.g. labor contracts)
Expenses e.g.
Selling, general & administrative expenses
Fringe benefits – e.g. vacation, holidays, sick leave
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HR Calculations
1. Revenue generated per employee
Revenue / # FTE Employees
$82,364,000/249 = $330,779
HR Linkage (cut 25 jobs)
= $82,364,000 / (249-25 or 224) = $367,696
= $367,696 - $330,779 = $36,917 (10%)
increase/employee
2. Benefit costs as % of revenue (40% of payroll)
Benefit costs / revenue
$14,825,000/$82,364,000 = 17.9%
HR linkage - National health care increase = $2
million
$16,825,000 / $82,364,000 = 20.4%
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More H.R. Calculations
4. Workers Compensation costs per covered employee
W.C. costs / # covered employees
Current:
$190,045 / 249
= $763
Worse safety
$223,529 / 249
= $898
Better safety:
$154,676 / 249
= $621
6. Turnover ratio (@150% of salary)
Annual # turnover / average # employees
Current:
17 /249
= 6.8%
Worse:
21 / 249
= 8.4%
Better:
11 / 249
= 4.4%
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HR Impact on Financial Condition
Option 1:
Raise revenue
- Improve training and its deliverables
- Partner with other functions to discover opportunities for
productivity and profitability improvements
- Define measureable and relevant outcomes across disciplines
(job descriptions)
- Enter new markets (awareness of labor costs)
- Exit non-productive markets (facility closing costs)
- Intensify focus on 80/20 customers (Pareto’s Law)
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HR Impact on Financial Conditions
Option 2:
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Lower costs
Reduce headcount
Outsource/off-shore
Evaluate third-party administration
Employ technology (H.R.I.S.)
Aggressive management of health care & pension costs
Cost vs. benefit analysis
Part time/temporary employees
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Suggested HR Metrics
Turnover ratios
Cost per hire
Benefit costs
Worker’s Comp.
Recruiting costs
Outsourcing
H.R.I.S.
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Compliance
Training costs
Payroll costs
Unemployment
e-learning
Labor relations