tenth edition Chapter Strategic Human Resource Management and the HR Scorecard © 2005 Prentice Hall Inc All rights reserved Warm Up…  What has been your experience in a strategic management model within your organization?  How can HR be instrumental in helping a company create a competitive advantage?  Are organizations always ready for our help and input?  What makes an organization’s senior leadership ready to listen to HR?  Are strategic plans just the “flavor of the month?” © 2005 Prentice Hall Inc All rights reserved 3–2 After studying this chapter, you should be able to: Outline the steps in the strategic management process Explain and give examples of each type of companywide and competitive strategy Explain what a high performance work system is and why it is important Illustrate and explain each of the seven steps in the HR Scorecard approach to creating HR systems © 2005 Prentice Hall Inc All rights reserved 3–3 3–3 HR’s Strategic Challenges  Strategic plan – A company’s plan for how it will match its internal strengths and weaknesses with external opportunities and threats in order to maintain a competitive advantage – Where are we now as a business and where we want to be?  Three basic challenges HR Managers must address in formulating strategies: – The need to support corporate productivity and performance improvement efforts – That employees play an expanded role in employers’ performance improvement efforts HR must assist with developing organizations – HR must be more involved in designing—not just executing—the company’s strategic plan © 2005 Prentice Hall Inc All rights reserved 3–4 The Strategic Management Process  Strategic management – The process of identifying and executing the organization’s mission by matching its capabilities with the demands of its environment  Strategy – A strategy is a course of action – The company’s long-tem plan for how it will balance its internal strengths and weaknesses with its external opportunities and threats to maintain a competitive advantage © 2005 Prentice Hall Inc All rights reserved 3–5 Several Steps To The Strategic Management Process – Step 1: Define the Business and Its Mission – Step 2: Perform External and Internal Audits – Step 3: Translate the Mission into Strategic Goals – Step 4: Formulate a Strategy to Achieve the Strategic Goals – Step 5: Implement the Strategy – Step 6: Evaluate Performance Let’s take a look at each of them… © 2005 Prentice Hall Inc All rights reserved 3–6 Steps in Strategic Management… Step 1: Define the Business and Its Mission Where are we now in terms of business? What business we want to be in or expand, even lessen? We choose our strategies to take us there Must have a Vision: A statement of where the company intends to go, evokes emotional feelings in organization members A mental image of a future desirable state What the business should be Must have a Mission: Spells out who the company is, what it does, and where it’s headed Tells us who the company is supposed to be now Q: What does your company’s vision or mission say about them? © 2005 Prentice Hall Inc All rights reserved 3–7 Steps in Strategic Management… Step 2: Perform External and Internal Audits SWOT Analysis The use of a SWOT chart to compile and organize the process of identifying company Strengths, Weaknesses, Opportunities, and Threats © 2005 Prentice Hall Inc All rights reserved 3–8 Steps in Strategic Management… Step 3: Translate the Mission Into Strategic Goals Managers need long-term strategic goals What does the mission mean for the next years? What kinds of partnerships we form? Short-term goals as well! Step 4: Formulate a Strategy to Achieve the Strategic Goals How are we going to get there? Get the employees involved!! People will not implement strategies they don’t buy into Q: What are your experiences in your organizations? © 2005 Prentice Hall Inc All rights reserved 3–9 Steps in Strategic Management… Step 5: Implement The Strategy Translate the strategy into action and results! Involves all of the management functionsPlanning Organizing Staffing Leading Controlling Step 6: Evaluate Performance Strategic Control! – Keeps our strategies up to date Take constant corrective action as needed “Are all the resources we have contributing as planned to achieve our goals?” “Do we need to revise our plans?” © 2005 Prentice Hall Inc All rights reserved 3– 10 To Be Strategic, HR Must Understand Value of a Firm Break into your groups and discuss the following: How does your company make money? What creates wealth for your company as defined by your customers and also just as importantly, your employees? Who in your organization manages/monitors these activities each day? What is the feedback given to the field? What is your HR’s involvement in this process? Be ready to share in class © 2005 Prentice Hall Inc All rights reserved 3– 25 HR Managers Have Two Basic Roles in Strategy  Strategy Execution  Strategy Formulation © 2005 Prentice Hall Inc All rights reserved 3– 26 HR’s Strategy Execution Role  Strategy Execution is at the heart of the HR Manager’s strategic planning job  Management forms the signposts regarding the strategy and HR assists with executing that plan  How? By their HR department’s strategies, policies, and activities making sense in terms of the company’s corporate and competitive strategies, and they must support those strategies Examples: Outplacing employees, reducing health care costs, retraining employees in new jobs to avoid RIFs, merging cultures during M&A © 2005 Prentice Hall Inc All rights reserved 3– 27 HR’s Strategy Formulation Role  HR helps top management formulate strategy in a variety of ways by: – Supplying competitive intelligence that may be useful in the strategic planning process, specifically looking at its external opportunities and threats – Supplying information regarding the company’s internal human strengths and weaknesses So, very important to look at, but often ignored – Build a persuasive case that shows how—in specific and measurable terms—that the firm’s HR activities can and contribute to creating value for the company © 2005 Prentice Hall Inc All rights reserved 3– 28 The Basic Architecture of HR © 2005 Prentice Hall Inc All rights reserved Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance (Boston: Harvard Business School Press, 2001), p 12 3– 29 Figure 3–8 HR Must Be Involved in Building The High-Performance Work System  High-performance work system (HPWS) practices – High-involvement employee practices (such as job enrichment and team-based organizations), – High commitment work practices (such as improved employee development, communications, and disciplinary practices) – Flexible work assignments – Other practices include those that foster skilled workforces and expanded opportunities to use those skills Guess what? it works, it leads companies to success! INSPIRE!! © 2005 Prentice Hall Inc All rights reserved 3– 30 Translating Strategy into HR Policy and Practice Basic Model of How to Align HR Strategy and Actions with Business Strategy © 2005 Prentice Hall Inc All rights reserved Source: Adapted from Garrett Walker and J Randal MacDonald, “Designing and Implementing an HR Scorecard,” Human Resources Management 40, no (2001), p 370 3– 31 Figure 3–9 Takes Us To The HR Scorecard  HR scorecard – Measures the HR function’s effectiveness and efficiency in producing employee behaviors needed to achieve the company’s strategic goals  Creating an HR scorecard – Must know what the company’s strategy is – Must understand the links between HR activities, employee behaviors, organizational outcomes, and the organization’s performance – Must have metrics to measure all the activities and results involved © 2005 Prentice Hall Inc All rights reserved 3– 32 Strategic HR Relationships HR Activities Emergent Employee Behaviors Strategically Relevant Organizational Outcomes © 2005 Prentice Hall Inc All rights reserved Organizational Performance Achieve Strategic Goals 3– 33 Figure 3–10 Using the HR Scorecard Approach  Step 1: Define the Business Strategy - What are the companies strategic plans, how does HR fall into this? - How HR practices and deliverables get us to that point?  Step 2: Outline the Company’s Value Chain – A tool for identifying, isolating, visualizing, and analyzing the firm’s most important activities and strategic costs – Identifying the primary and crucial activities that create value for customers and the related support activities • Each activity is part of the process of designing, producing, marketing, and delivering the company’s product or service – Shows the chain of essential activities – Prompts future questions © 2005 Prentice Hall Inc All rights reserved 3– 34 Using the HR Scorecard Approach  Step 3: Identify the Strategically Required Organizational Outcomes Ex: Dell….”receiving quick, competent, and courteous technical advice by phone.”  Step 4: Identify the Required Workforce Competencies and Behaviors These are HR deliverables…motivation, commitment, working proactively, behaviors, etc  Step 5: Identify the Strategically Relevant HR System Policies and Activities What HR system policies and activities will enable us to produce those workforce competencies and behaviors? Be specific Align the HR system with the company’s strategic needs © 2005 Prentice Hall Inc All rights reserved 3– 35 Using the HR Scorecard Approach  Step 6: Design the HR Scorecard Measurement System How we measure everything now? Consider the proper measures or metrics Helps the manager understand how things are going,… AND it assists the HR department to build a business case for how HR contributes to achieving company goals  Step 7: Periodically Evaluate the Measurement System Is everything still valid? Do all the systems still make sense? HR must evaluate © 2005 Prentice Hall Inc All rights reserved 3– 36 HR Scorecard for the Hotel Paris International Corporation* Note:*(An abbreviated example showing selected HR practices and outcomes aimed at implementing the competitive strategy, “To use superior guest services to differentiate the Hotel Paris properties and thus increase the length of stays and the return rate of guests, and thus boost revenues and profitability”) © 2005 Prentice Hall Inc All rights reserved 3– 37 Figure 3–13 Housekeeping Next class, bring in two help wanted ads/student Now on to our next group activity! © 2005 Prentice Hall Inc All rights reserved 3– 38 Let’s Apply…  Break into your groups  Turn to page 99 in Dessler  Application Case: Siemens Builds A Strategy-Oriented HR System  Discuss questions  Be ready to discuss in class © 2005 Prentice Hall Inc All rights reserved 3– 39 [...]... “Designing and Implementing an HR Scorecard,” Human Resources Management 40, no 4 (2001), p 37 0 3 31 Figure 3 9 Takes Us To The HR Scorecard  HR scorecard – Measures the HR function’s effectiveness and efficiency in producing employee behaviors needed to achieve the company’s strategic goals  Creating an HR scorecard – Must know what the company’s strategy is – Must understand the links between HR activities,... 3 20 Figure 3 5 So What Is 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  Formulating and executing HR systems HR policies and activities—that produce the employee competencies and behaviors the company needs to achieve its strategic aims... Align the HR system with the company’s strategic needs © 2005 Prentice Hall Inc All rights reserved 3 35 Using the HR Scorecard Approach  Step 6: Design the HR Scorecard Measurement System How do we measure everything now? Consider the proper measures or metrics Helps the manager understand how things are going,… AND it assists the HR department to build a business case for how HR contributes to achieving... outcomes, and the organization’s performance – Must have metrics to measure all the activities and results involved © 2005 Prentice Hall Inc All rights reserved 3 32 Strategic HR Relationships HR Activities Emergent Employee Behaviors Strategically Relevant Organizational Outcomes © 2005 Prentice Hall Inc All rights reserved Organizational Performance Achieve Strategic Goals 3 33 Figure 3 10 Using the HR. .. activities that create value for customers and the related support activities • Each activity is part of the process of designing, producing, marketing, and delivering the company’s product or service – Shows the chain of essential activities – Prompts future questions © 2005 Prentice Hall Inc All rights reserved 3 34 Using the HR Scorecard Approach  Step 3: Identify the Strategically Required Organizational... HR Scorecard Approach  Step 1: Define the Business Strategy - What are the companies strategic plans, how does HR fall into this? - How do HR practices and deliverables get us to that point?  Step 2: Outline the Company’s Value Chain – A tool for identifying, isolating, visualizing, and analyzing the firm’s most important activities and strategic costs – Identifying the primary and crucial activities... Better Communication Coaching Managers Developing Better Recruitment Systems © 2005 Prentice Hall Inc All rights reserved 3 21 Linking Corporate and HR Strategies © 2005 Prentice Hall Inc All rights reserved Source: © 20 03, Gary Dessler, Ph.D 3 22 Figure 3 6 HR S Strategic Roles  HR professionals should be part of the firm’s strategic planning executive team – Identify the human issues that are vital... specific and measurable terms—that the firm’s HR activities can and do contribute to creating value for the company © 2005 Prentice Hall Inc All rights reserved 3 28 The Basic Architecture of HR © 2005 Prentice Hall Inc All rights reserved Source: Adapted from Brian Becker et al., The HR Scorecard: Linking People, Strategy, and Performance (Boston: Harvard Business School Press, 2001), p 12 3 29 Figure 3 8... Prentice Hall Inc All rights reserved 3 13 Types of Strategic Planning  Corporate-level strategy – Identifies the portfolio of businesses that, in total, comprise the company and the ways in which these businesses relate to each other – For example, PepsiCo owns Frito-Lay, Pepsi, Pizza Hut – 4 strategies used here: • Diversification strategy implies that the firm will expand by adding new product lines... rights reserved 3 17 Summary Among Strategies in Multiple- Business Firms © 2005 Prentice Hall Inc All rights reserved 3 18 Figure 3 4 How Do Companies Achieve Strategic Fit? The question with managers is….”should managers “fit” capabilities to the opportunities and threats or “stretch” beyond their capabilities to take advantage of an opportunity?”  Michael Porter – Emphasizes the “fit” point of