Strategy and Human
Resources Planning
Human
Resource
Management
Managing Human Resources
• Snell
SnellBohlander
• Bohlander
© 2007 Thomson/South-Western.
All rights reserved.
14th edition
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Objectives
After studying this chapter, you should be able to:
1. Identify the advantages of integrating human
resources planning and strategic planning.
2. Understand how an organization’s competitive
environment influences strategic planning.
3. Recognize the importance of internal resource
analysis.
4. Describe the basic tools for human resources
forecasting.
5. Explain the linkages between competitive strategies
and HR.
© 2007 Thomson/South-Western. All rights reserved.
2–2
Objectives
(cont’d)
After studying this chapter, you should be able to:
6. Understand the requirements of strategy
implementation.
7. Recognize the methods for assessing and
measuring the effectiveness of strategy.
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2–3
Strategic Planning and Human Resources
• Strategic Planning
 Procedures for making decisions about the
organization’s long-term goals and strategies
• Human Resources Planning (HRP)
 Process of anticipating and making provision for the
movement (flow) of people into, within, and out of an
organization.
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2–4
Strategic Planning and HR Planning
• Strategic Human Resources Management
(SHRM)
 The pattern of human resources deployments and
activities that enable an organization to achieve its
strategic goals

Strategy formulation—providing input as to what is
possible given the types and numbers of people
available.

Strategy implementation—making primary resource
allocation decisions about structure, processes, and
human resources.
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2–5
HRP and Strategic Planning
• Strategic Analysis
 What human resources are needed and what are
available?
• Strategic Formulation
 What is required and necessary in support of human
resources?
• Strategic Implementation
 How will the human resources be allocated?
Human Resources
Planning
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Strategic
Planning
2–6
Figure 2–1
Linking Strategic Planning and Human Resources
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2–7
Step One: Mission, Vision, and Values
• Mission
 The basic purpose of the organization as well as its
scope of operations
• Strategic Vision
 A statement about where the company is going and
what it can become in the future; clarifies the longterm direction of the company and its strategic intent
• Core Values
 The strong and enduring beliefs and principles that
the company uses as a foundation for its decisions
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2–8
Step Two: Environmental Scanning
• Environmental Scanning
 The systematic monitoring of the major external
forces influencing the organization.
1. Economic factors: general and regional conditions
2. Competitive trends: new processes, services, and
innovations
3. Technological changes: robotics and office automation
4. Political and legislative issues: laws and administrative
rulings
5. Social concerns: child care and educational priorities
6. Demographic trends: age, composition,and literacy
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2–9
Figure 2–2
Five Forces Framework
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2–10
Step Three: Internal Analysis
Culture
Competencies
Internal
Analysis
Composition
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2–11
Scanning the Internal Environment
• Cultural Audits
 Audits of the culture and quality of work life in an
organization.
How do employees spend their time?
How do they interact with each other?
Are employees empowered?
What is the predominant leadership style of
managers?
How do employees advance within the
organization?
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2–12
Competitive Advantage through People
• Core Competencies
 Integrated knowledge sets within an organization
that distinguish it from its competitors and deliver
value to customers.
• Sustained competitive advantage through
people is achieved if these human resources:
1. Are valuable.
2. Are rare and unavailable to competitors.
3. Are difficult to imitate.
4. Are organized for synergy.
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2–13
Composition: The Human Capital
Architecture
• Core knowledge workers
 Employees who have firm-specific skills that are
directly linked to the company’s strategy.

Example: Senior software programmer
• Traditional job-based employees
 Employees with skills to perform a predefined job that
are quite valuable to a company, but not unique.

Example: Security guard
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2–14
Composition: The Human Capital
Architecture (cont’d)
• Contract labor
 Employees whose skills are of less strategic value
and generally available to all firms.

Example: General electrician
• Alliance/partners
 Individuals and groups with unique skills, but those
skills are not directly related to a company’s core
strategy.

Example: Independent product label designer
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2–15
Figure 2–3
Mapping Human Capital
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2–16
Forecasting: A Critical Element of Planning
• Forecasting involves:
a. forecasting the demand for labor
b. forecasting the supply of labor
c. balancing supply and demand considerations.
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2–17
Figure 2–4
Model of HR Forecasting
FORECASTING DEMAND
Considerations
• Product/service demand
• Technology
• Financial resources
• Absenteeism/turnover
• Organizational growth
• Management philosophy
Techniques
• Staffing tables
• Markov analysis
• Skills inventories
• Management inventories
• Replacement charts
• Succession planning
Techniques
• Trend analysis
• Managerial estimates
• Delphi technique
BALANCING
SUPPLY AND
DEMAND
(Shortage)
Recruitment
• Full-time
• Part-time
• Recalls
External Considerations
• Demographic changes
• Education of the workforce
• Labor mobility
• Government policies
• Unemployment rate
(Surplus)
Reductions
• Layoffs
• Terminations
• Demotions
• Retirements
FORECASTING SUPPLY
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2–18
Forecasting Demand for Employees
Quantitative Methods
Forecasting Demand
Qualitative Methods
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2–19
Quantitative Approach: Trend Analysis
• Forecasting labor demand based on an
organizational index such as sales:
1. Select a business factor that best predicts human
resources needs.
2. Plot the business factor in relation to the number of
employees to determine the labor productivity ratio.
3. Compute the productivity ratio for the past five years.
4. Calculate human resources demand by multiplying
the business factor by the productivity ratio.
5. Project human resources demand out to the target
year(s).
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2–20
Figure 2–5
Example of Trend Analysis of HR Demand
BUSINESS
FACTOR
YEAR

(SALES IN THOUSANDS)
LABOR
PRODUCTIVITY
(SALES/EMPLOYEE)
=
HUMAN RESOURCES
DEMAND
(NUMBER OF EMPLOYEES)
2000
$2,351
14.33
164
2001
$2,613
11.12
235
2002
$2,935
8.34
352
2003
$3,306
10.02
330
2004
$3,613
11.12
325
2005
$3,748
11.12
337
2006
$3,880
12.52
310
2007*
$4,095
12.52
327
2008*
$4,283
12.52
342
2009*
$4,446
12.52
355
*Projected figures
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2–21
Qualitative Approaches
• Management Forecasts
 The opinions (judgments) of supervisors, department
managers, experts, or others knowledgeable about
the organization’s future employment needs.
• Delphi Technique
 An attempt to decrease the subjectivity of forecasts
by soliciting and summarizing the judgments of a
preselected group of individuals.
 The final forecast represents a composite group
judgment.
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2–22
Forecasting the Supply of Employees:
Internal Labor Supply
• Staffing Tables
• Markov Analysis
• Skill Inventories
• Replacement Charts
• Succession Planning
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2–23
Forecasting Internal Labor Supply
• Staffing Tables
 Graphic representations of all organizational jobs,
along with the numbers of employees currently
occupying those jobs and future (monthly or yearly)
employment requirements.
• Markov Analysis
 A method for tracking the pattern of employee
movements through various jobs.
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2–24
Figure 2–6
Hypothetical Markov Analysis for a Retail Company
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2–25
Internal Demand Forecasting Tools
• Skill Inventories
 Files of personnel education, experience, interests,
skills, etc., that allow managers to quickly match job
openings with employee backgrounds.
• Replacement Charts
 Listings of current jobholders and persons who are
potential replacements if an opening occurs.
• Succession Planning
 The process of identifying, developing, and tracking
key individuals for executive positions.
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2–26
Highlights in HRM 2
SuccessionPlanning Checklist
RATE THE SUCCESS OF YOUR
SUCCESSION PLANNING
For each characteristic of a
best-practice successionplanning and management
program appearing in the left
column below, enter a number
to the right to indicate how
well you believe your
organization manages that
characteristic. Ask other
decision makers in your
organization to complete this
form individually. Then compile
the scores and compare notes.
Scores
Source: From William J. Rothwell, “Putting Success into Your Succession Planning,”
The Journal of Business Strategy 23, no. 3 (May/June 2002): 32–37. Republished with
permission—Thomson Media, One State Street, 26th Floor, New York, NY 10004.
© 2007 Thomson/South-Western. All rights reserved.
2–27
Figure 2–7
An Executive Replacement Chart
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2–28
Step Four: Formulating Strategy
• Strategy Formulation
 Moving from simple analysis to devising a coherent
course of action.
• SWOT analysis
 A comparison of strengths, weaknesses,
opportunities, and threats for strategy formulation
purposes.
 Use the strengths of the organization to capitalize on
opportunities, counteract threats, and alleviate
internal weaknesses.
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2–29
Corporate Strategy
Growth and
Diversification
Mergers and
Acquisitions
Corporate
Strategy
Strategic Alliances
and Joint Ventures
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2–30
Business Strategy
• Value Creation
 What the firm adds to a product or service by virtue of
making it; the amount of benefits provided by the
product or service once the costs of making it are
subtracted.
 Low-cost strategy: competing on productivity and
efficiency

Keeping costs low to offer an attractive price to
customers (relative to competitors).
 Differentiation strategy: compete on added value

Involves providing something unique and distinctive to
customers that they value.
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2–31
Functional Strategy: Ensuring Alignment
• External Fit (or External Alignment)
 Focuses on the connection between the business
objectives and the major initiatives in HR.
• Internal Fit (or Internal Alignment)
 Aligning HR practices with one another to establish a
configuration that is mutually reinforcing.
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2–32
Highlights in HRM 4
Source: Company document.
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2–33
Figure 2–8
The 7-S Model
Source: McKinsey & Company
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2–34
Step Five: Strategy Implementation
• Taking Action: Reconciling Supply and Demand
 Balancing demand and supply considerations
 Forecasting business activities (trends)
 Locating applicants
 Organizational downsizing
 Reducing “headcount”
 Making layoff decisions
 Seniority or performance?
 Labor agreements
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2–35
Step Six: Evaluation and Assessment
• Evaluation and Assessment Issues
 Benchmarking: The process of comparing the
organization’s processes and practices with those of
other companies
 Human capital metrics

Assess aspects of the workforce
 HR metrics

Assess the performance of the HR function itself
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2–36
Highlights in HRM 5
The Top Ten Measures Of Human Capital
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Your most important issues
Human capital value added
Human capital ROI
Separation cost
Voluntary separation rate
Total labor-cost/revenue percentage
Total compensation/revenue percentage
Training investment factor
Time to start
Revenue factor
Source: “The Top 10 Measures of Human Capital Management,” HRFocus 78, no. 5 (May 2001): 8.
Copyright © 2001. Reprinted by permission of the publisher via Copyright Clearance Center.
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2–37
Measuring Strategic Alignment
• Strategy Mapping and the Balanced Scorecard
 Balanced Scorecard (BSC)

A measurement framework that helps managers translate
strategic goals into operational objectives
– financial
– customer
– processes
– learning
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2–38
Figure 2–9
Balanced Scorecard
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Figure 2–10
Assessing Internal Fit
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Ensuring Strategic Flexibility for the Future
• Organizational Capability
 Capacity of the organization to act and change in
pursuit of sustainable competitive advantage.
 Coordination flexibility

The ability to rapidly reallocate resources to new or
changing needs.
 Resource flexibility

Having human resources who can do many different
things in different ways.
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2–41
Key Terms
•
•
•
•
•
•
•
•
•
•
•
Balanced Scorecard (BSC)
benchmarking
core competencies
core values
cultural audits
environmental scanning
human resources planning
(HRP)
management forecasts
Markov analysis
mission
organizational capability
© 2007 Thomson/South-Western. All rights reserved.
•
•
•
•
•
•
•
•
•
•
replacement charts
skill inventories
staffing tables
strategic human resources
management (SHRM)
strategic planning
strategic vision
succession planning
SWOT analysis
trend analysis
value creation
2–42
Calculating Turnover
and Absenteeism
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Employee Turnover Rates
• Computing Turnover Rates:
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Employee Turnover Rates (cont’d)
• Computing Turnover Rates (cont’d):
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Highlights in HRM 6
Costs Associated With The Turnover Of One Computer Programmer
(Turnover costs = Separation costs + Replacement costs + Training costs)
Separation costs
1. Exit interview cost for salary and benefits of both interviewer and departing employee
during the exit interview = $30+$30 = $60
2. Administrative and record-keeping action = $30
Total separation costs = $60 + $30 = $90
Replacement costs
1.
2.
3.
4.
5.
Advertising for job opening = $2,500
Preemployment administrative functions and record-keeping action = $100
Selection interview = $250
Employment tests = $40
Meetings to discuss candidates (salary and benefits of managers while participating in
meetings )= $250
Total replacement costs = $2,500 + $100 + $250 + $40 + $250 = $3,140
Training costs
1. Booklets, manuals, and reports = $50
2. Education = $240/day for new employee’s salary and benefits x 10 days of workshops,
seminars, or courses = $2,400
3. One-to-one coaching = ($240/day/new employee + $240/day/staff coach or job expert) x 20
days of one-to-one coaching = $9,600
4. Salary and benefits of new employee until he or she gets “up to par” = $240/day for salary
and benefits x 20 days = $4,800
Training costs = $50 + $2,400 + $9,600 + $4,800 = $16,850
Total turnover costs= $90 + $3,140 + $16,850 = $20,080
Source: Adapted from the book Turning Your Human Resources Department into a Profit CenterTM by Michael Mercer, Ph.D. (Castlegate Publishers, Inc.,
Barrington, Illinois). Copyright 2002 Michael Mercer. Reproduced with permission from Michael Mercer, Ph.D., www.DrMercer.com.
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2–46
Employee Absenteeism Rates
• Computing Absenteeism Rates
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