Chapter 3

The Managers Role in Strategic Human Resource Management

Part One | Introduction

Copyright 2011 Pearson Education, Inc. publishing as Prentice Hall PowerPoint Presentation by Charlie Cook The University of West Alabama

What CEOs Want from HR

Make workforce strategies integral to company strategies and goals Leverage HRs role in major change initiatives, such as strategic planning; mergers, and acquisitions Earn the right to a seat at the corporate table Develop awareness and/or an understanding of the business Understand finance and profits Help line managers achieve their goals The above list is a sharp deviation from what has traditionally been an administrative type role for HR.
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Why Strategic Planning Is Important To All Managers

The firms strategic plan guides much of what is done by all to accomplish organizational goals. Decisions made by managers depend on the goals set at each organizational level in support of higher level goals.

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Strategic HR planning
The process of formulating HR strategies and establishing programs or tactics to implement them.

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The Benefits of Strategic HR planning

Encouragement of proactive rather than reactive behavior Explicit communication of company goals (e.g., 3M innovation) Stimulation of critical thinking and ongoing examination of assumptions Identification of gaps between current situation and future vision Encouragement of line managers participation; secure buy-in Identification of HR constraints and opportunities Creation of common bonds

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The Strategic Management Process

Strategy
A course of action the organization intends to pursue to achieve

its strategic aims.

Strategic Plan
How an organization intends to match its internal strengths and

weaknesses with its external opportunities and threats to maintain a competitive advantage over the long term.

Strategic Management
The process of identifying and executing the organizations

mission by matching its capabilities with the demands of its environment.

Leveraging
Capitalizing on a firms unique competitive strength while

underplaying its weaknesses.

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A Model of the Strategic Management Process

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FIGURE 38

Type of Strategy at Each Company Level

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Types of Corporate Strategies

Corporate Strategy Possibilities

Concentration

Diversification

Consolidation

Vertical integration

Geographic expansion

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Two Well-Known Business Unit Strategies

Porter Miles and Snow

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Porters Types of Business Unit Competitive Strategies

Business-Level Competitive Strategies

Cost leadership

Differentiation

Focus/Niche

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Selected HR Strategies that Fit Porters Model

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Miles and Snows Two Major Types of Business Strategies

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A Model of the Strategic Management Process

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Business Vision and Mission

Vision
A general statement of an organizations intended direction that

evokes emotional feelings in organization members.

The Walt Disney Company: to make people happy.

Mission
Spells out who the firm is, what it does, and where its headed. The Walt Disney Company: "The mission of The Walt Disney Company is to be one of the world's leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world."

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A Model of the Strategic Management Process

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FIGURE 31

Sample Hierarchy of Goals Diagram for a Company

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Fundamentals of Management Planning

The Planning Process
1

Set an objective. Make forecasts and check assumptions. Determine/develop alternative courses of action. Evaluate the alternatives. Implement and evaluate your plan.

2
3 4 5

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How Managers Set Objectives: SMART Goals

S M

Specific Measureable

A
R T
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Attainable
Relevant Timely
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How to Set Motivational Goals

Motivational Goal Setting

Assign specific goals

Assign measurable goals

Assign challenging but doable goals

Encourage employee participation

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Using Management by Objectives (MBO)

The MBO Process
1 2 3 4 5

Set overall organizational goals. Set departmental (supporting) goals. Discuss departmental goals with subordinates. Set individual goals and timetables. Give feedback on progress toward goal.

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FIGURE 34

Management Objectives Grid

Company-Wide or Departmental Objective: Double sales revenue to $16 million in fiscal year 2011

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FIGURE 3A-2 Revenue per FTE (by Industry)

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FIGURE 3A-3 2007 Target Bonus Percentage for Executives (Percent of Total Compensation, by Organizational Size)

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FIGURE 3A-4 Sample Metrics from SHRM Measurements Library

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FIGURE 3A-5 Highlights of SHRM Customized Benchmarking Service

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FIGURE 3A-6 Customized Human Capital Benchmarking Report for [Your Organizations Name Here]

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FIGURE 3A-7 Customized Human Capital Benchmarking Report for [Your Organizations Name Here]

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TABLE 32

Examples of HR Metrics

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A Model of the Strategic Management Process

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FIGURE 37

SWOT Matrix, with Generic Examples

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FIGURE 36

Worksheet for Environmental Scanning

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Looking at the Environment: 4 Major Dimensions

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A Model of the Strategic Management Process

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A Sampling of Strategic HR Choices

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A Model of the Strategic Management Process

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Strategic Human Resource Management

The linking of HRM with strategic goals and

objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility.
Involves formulating and executing HR

systemsHR policies and activitiesthat produce the employee competencies and behaviors that the company needs to achieve its strategic aims.

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Certain HR Practices That Are Associated With Sustained Firm Performance

Employment SecuritySecurity of employment signals a longstanding commitment by the organization to its workforce. Selectivity in RecruitingSecurity in employment and reliance on the workforce for competitive success mean that one must be careful to choose the right people, in the right way. High WagesIf you want to recruit outstanding people, and want them to stay with the organization, paying more is helpful, although not absolutely necessary. Incentive PayThere has been a tendency to overuse money in an effort to solve myriad organizational problems. People are motivated by more than moneythings like recognition, security, and fair treatment. Nevertheless, if people are responsible for enhanced levels of performance and profitability, they will want to share in the benefits.
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Certain HR Practices That Are Associated With Sustained firm Performance contd
Employee OwnershipEmployee ownership offers two advantages. First, employees who have ownership interests in the organizations for which they work have less conflict between capital and laborto some degree they are both capital and labor. Second, ownership makes employees more inclined to take a long-term view of the organization, its strategy, and its investment policies. Information SharingIf people are to be a source of competitive advantage, clearly they must have the information necessary to do what is required to be successful. Participation and EmpowermentHigh-performing organizations encourage decentralization of decision making and elicit ideas from workers and allow employees greater control over their work processes.
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Certain HR Practices That Are Associated With Sustained firm Performance contd
Self-Managed TeamsTeams are effective because of peer monitoring and high expectations of coworkers that induce team members to be more highly motivated to do the best job possible. Training and Skill DevelopmentHigh-performance organizations show a greater commitment to training and skill development. Note, however, that this training will produce positive returns only if the trained workers are then permitted to employ their skills. Cross-Utilization and Cross-TrainingHaving people do multiple jobs has a number of potential benefits. The most obvious is that doing more things can make work more interesting-variety is one of the core job dimensions that affect how people respond to their work.
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Certain HR Practices That Are Associated With Sustained firm Performance contd
Promotion from WithinPromotion from within is a useful adjunct to many of the practices described. It encourages training and skill development because the availability of promotion opportunities within the firm binds workers to employers and vice versa.

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TABLE 31

Comparison of Selected Human Resource Practices in High-Performance and Low-Performance Companies

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Strategic HRM Tools

Strategic HRM Tools

Strategy map

HR scorecard

Digital dashboard

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FIGURE 315 Three Important Strategic HR Tools

Strategy Map

HR Scorecard

Digital Dashboard

A graphical tool that summarizes the chain of activities that contribute to a company's success, and so shows employees the "big picture" of how their performance contributes to achieving the company's overall strategic goals.

A process for managing employee performance and for aligning all employees with key objectives, by assigning financial and nonfinancial goals, monitoring and assessing performance, and quickly taking corrective action.

An information technology tool that presents the manager with desktop graphs and charts, so he or she gets a picture of where the company has been and where it's going, in terms of each activity in the strategy map.

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FIGURE 313 Strategy Map for Southwest Airlines

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The Balanced Scorecard

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Balanced Scorecard - Factors and Examples

Department Finance Areas Return On Investment Cash Flow Return on Capital Employed Financial Results (Quarterly/Yearly) Number of activities per function Duplicate activities across functions Process alignment (is the right process in the right department?) Process bottlenecks Process automation Is there the correct level of expertise for the job? Employee turnover Job satisfaction Training/Learning opportunities Delivery performance to customer Quality performance for customer Customer satisfaction rate Customer percentage of market Customer retention rate

Internal Business Processes

Learning & Growth

Customer

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FIGURE 314 The Basic HR Scorecard Relationships

HR activities

Emergent employee behaviors

Strategically relevant organizational outcomes Organizational performance

Achieve strategic goals

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Creating an HR Scorecard
The 10-Step HR Scorecard Process
1 2 3 4 5 Define the business strategy Outline value chain activities Outline a strategy map Identify strategically required outcomes Identify required workforce competencies and behaviors 6 7 8 9 10 Identify required HR policies and activities Create HR Scorecard Choose HR Scorecard measures Summarize Scorecard measures on digital dashboard Monitor, predict, evaluate

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FIGURE 315 Three Important Strategic HR Tools

Strategy Map

HR Scorecard

Digital Dashboard

A graphical tool that summarizes the chain of activities that contribute to a company's success, and so shows employees the "big picture" of how their performance contributes to achieving the company's overall strategic goals.

A process for managing employee performance and for aligning all employees with key objectives, by assigning financial and nonfinancial goals, monitoring and assessing performance, and quickly taking corrective action.

An information technology tool that presents the manager with desktop graphs and charts, so he or she gets a picture of where the company has been and where it's going, in terms of each activity in the strategy map.

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KEY TERMS
business plan management by objectives (MBO) offshoring strategic human resource

strategic plan
strategy strategic management vision statement mission statement corporate-level strategy competitive strategy

management
strategy map HR Scorecard digital dashboard high-performance work system human resource metric value chain

competitive advantage
functional strategies

HR audit

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A Model of the Strategic Management Process

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FIGURE 35

The Strategic Management Process

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FIGURE 32

Business Plan Table of Contents

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FIGURE 33

Acme Consulting Profit and Loss

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Achieving Strategic Fit

The Fit Point of View (Porter)
All of the firms activities must be tailored to or fit the chosen

strategy such that the firms functional strategies support its corporate and competitive strategies.

Leveraging (Hamel and Prahalad)

Stretch in leveraging resourcessupplementing what you have

and doing more with what you havecan be more important than just fitting the strategic plan to current resources.

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FIGURE 39

Southwest Airlines Activity System

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Departmental Managers Strategic Planning Roles

Department Managers and Strategy Planning

Help devise the strategic plan

Formulate supporting, functional/ departmental strategies

Execute the strategic plans

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FIGURE 310 Linking Company-Wide and HR Strategies

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FIGURE 311 Basic Model of How to Align HR Strategy and Actions with Business Strategy

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Building A High-Performance Work System

High-Performance Work System (HPWS)
A set of human resource management policies and practices

that promote organizational effectiveness.

High-Performance Human Resource Policies and Practices

Emphasize the use of relevant HR metrics. Set out the things that HR systems must do to become an

HPWS.
Foster practices that encourage employee self-management. Practice benchmarking to set goals and measure the notable

performance differences required of an HPWS.

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TABLE 31

Comparison of Selected Human Resource Practices in High-Performance and Low-Performance Companies

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FIGURE 3A-1 Simple Value Chain for The Hotel Paris

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WHERE WE ARE NOW

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LEARNING OUTCOMES
1. Explain why strategic planning is important to all managers. 2. Outline the basic steps in the management planning process. 3. List the main contents of a typical business plan. 4. Answer the question, What should a manager do to set smart motivational goals? 5. Explain with examples each of the seven steps in the strategic planning process. 6. List with examples the main generic types of corporate strategies and competitive strategies.

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LEARNING OUTCOMES (contd)

7. Define strategic human resource management and give an example of strategic human resource management in practice.

8. Briefly describe three important strategic human resource management tools.

9. Explain with examples why metrics are essential for identifying and creating high-performance human resource policies and practices.

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FIGURE 316 Simple Value Chain for The Hotel Paris

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