The linkage between strategic planning and HR planning

Strategy:

A strategy is a way of doing something. It usually includes the formulation of a goal and set of action plans for accomplishment of that goal.

The concept of strategy is very old. It originated from the Greek term strategia which means the art of science of being a general. Effective Greek generals needed to lead an army, win and hold territory, protect cities from invasion, destroy the enemy, and so forth. Each objective needed a different deployment of resources. The Greeks knew that strategy was more than fighting battles. Effective generals had to determine the right lines of supply, decide when to fight and when not to, and manage the army’s relationships with citizens, politicians and diplomats. Effective generals had, therefore, to plan and act. For Greeks, strategy had both a planning component and an action component. It is no different even today.

Linkage between strategic planning and HR planning

A strategy is a way of doing something. It usually includes the formulation of a goal and set of action plans for the accomplishment of that goal.

Strategic management may be understood as the process of formulating, implementing and evaluating business strategies to achieve organizational objectives.

A more comprehensive definition of strategic management is:

That set of managerial decisions and actions that determine the long-term performance of a corporation. It includes environmental scanning, strategy formulation, strategy implementation and evaluation and control. The study of strategic management, therefore, emphasizes monitoring and evaluating environmental opportunities and threats in the light of a corporation’s strengths and weaknesses.

Managing HR Surplus or Shortage

Managing a Shortage of Employees

Use overtime
Add contingent workers
Bring back recent retirees
Outsource work
Reduce turnover

Managing a Human Resources Surplus

Workforce Reductions and the WARN Act.
Workforce Downsizing.
Attrition and Hiring Freezes.
Voluntary Separation Programs
Layoffs.

Workforce Realignment

Downsizing”, “Rightsizing”, and “Reduction in Force” (RIF) all mean reducing the number of employees in an organization.

Causes

Economic—weak product demand, loss of market share to competitors

Structural—technological change, mergers and acquisitions.

Positive consequences

Increase competitiveness.

Increased productivity.

Negative consequences

¨ Cannibalization of HR resources.

¨ Loss of specialized skills and experience.

¨ Loss of growth and innovation skills.

Managing survivors

¨ Provide explanations for actions and the future.

¨ Involve survivors in transition/regrouping activities.

Downsizing approaches

– Attrition and hiring freezes

¨ Not replacing departing employees and not hiring new employees.

– Early retirement buyouts

¨ Offering incentives that encourage senior employees to leave the organization early.

– Layoffs

¨ Employees are placed on unpaid leave until called back to work when business conditions improve.

¨ Employees are selected for layoff on the basis of their seniority or performance or a combination of both.

– Outplacement services provided to displaced employees to give them support and assistance:

– Personal career counseling

– Resume preparation and typing services

– Interviewing workshops

– Referral assistance

– Severance payments

– Continuance of medical benefits

– Job retraining.

Managing a Labor Shortage:

Use overtime
Add contingent workers
Bring back recent retirees
Outsource work
Reduce turnover

(1) Hiring Freezes. The pro for hiring freezes is that it compels managers to align its workforce more efficiently, whereas the con for hiring freezes is that it dumps additional work on employees who already feel overburdened.

(2) Not Replacing Those Employees Who Leave. The pro would be that the organization is cutting labor costs. The con for this strategy is similar to that for hiring freezes, but magnified. The employees who stay would then have no choice but to be tasked with more work due to the reduction in the workforce.

(3) Early Retirements. This surplus management strategy has a pro of cutting the organization’s high labor costs by reducing its aging workforce in order to have one that is more youthful and it can pay its employees less (e.g. wage workers). The con is that the organization would lose its veteran workers who have a plethora of valuable experience.

(4) Reducing Work Hours. It has a pro of saving labor costs and a con of a loss of productivity as a direct result.

(5) Voluntary Severance and Leaves of Absence. These surplus management strategies have the pro of aiding the curtailment of the organization in a win/win manner between employer and employee despite the circumstances. The employer cuts costs and is able to receive a manageable workforce while the exiting employees have a sense of empowerment with their choice to take the severance or leave of absence. The con would be the short-term expense of severance and the added workload to remaining employees.

(6) Across-The-Board Pay Cuts. The obvious pro is short-term labor cost savings. The con is a decreased sense of loyalty to the organization and lowered morale, which can negatively impact worker productivity. That is why I believe an organization should do everything in its power to not overextend this strategy.

(7) Reducing Outsourced Work. The pro for this surplus management strategy is cost savings and the rebuilding of organizational self-reliance, but the apparent con is the added responsibility derived from the work the third party was performing for the organization.

(8) Employee Training. When used as a surplus management strategy, it would have the pro of continuing the development of the necessary skills employees need to be productive workers. The con with this strategy is the added short-term expense to the organization to include the time allotted to train each applicable employee.

(9) Variable Pay Plan. Switching to a variable pay plan would have a pro of attracting, retaining, and rewarding employees who help the organization reach its goals. An example of a variable pay plan is profit sharing. The con would be that it can make employees complacent along with creating a possible discord among employees who perform and those who do not regarding issues of partiality while measuring performance.

(10) Expanding Operations. This surplus strategy has the primary pro of gaining economies of scale. The organization would reduce unit costs as the size of the facility increases. The con would be over-expansion, which would result in diseconomies of scale or increased per-unit costs.

(11) Layoffs. Layoffs are the last resort and the last strategy I will mention when it comes to managing surpluses. Loosing skilled employees can put a business at a competitive disadvantage once the company rebounds. Further, the morale of the surviving employees is usually severely impacted when layoffs occur, because they now realize the job security they thought they had has eroded. Conversely, the pro is that it’s a quick way to cut payroll costs.

Role of HRM in Strategic Management:

The role of HRM, in formulating and implementing strategies is crucial. It is the people who formulate and implement strategies and the people are supplied by HRM.

Role in strategy formulation:

Strategy formulation is preceded by environmental scanning. Scanning helps identify threats and opportunities prevailing in the external environment. HRM is of great help in locating opportunities and threats.

HRM is in a unique position to supply competitive intelligence that may be useful in strategy formulation. Details regarding advanced incentive plans being used by competitors, opinion survey data from employees that elicit information about customer complaints and information about pending legislation like labor laws or mandatory health insurance are some examples.

The strengths and weaknesses of a company’s human resources can have a determining effect on the viability of a company’s strategic options. Unique HR capabilities serve as a driving force in strategy formulation. A company may build its new strategy around a competitive advantage stemming from its human resource. The well-known accounting and consulting firm, Arthur Anderson, developed unique HR capabilities in training. The firm’s Illinois training facility is so sophisticated that it provides the firm with a competitive advantage enabling, it to provide fast and uniform in-housing training.

Role in strategy implementation:

HRM supplies the company with a component and willing workforce which is responsible for executing strategies. Maruti Udyog and Hindustan Motors are manufacturing cars, essentially using identical technology. The secret behind the meteoric rise of Maruti is its work force.

HRM supports strategy implementation in other ways, too. For example, human resource today is heavily involved in the execution of the company’s downsizing and restructuring strategies through outplacing employees, instituting performance-linked pay plans, reducing health-care costs and retraining employees. And, in an increasingly competitive global market place, instituting HR practices that build employee commitment can help improve an organization’s responsiveness.

It is important to remember that linking strategy and HRM effectively requires more than a selection from a series of practice choices. The challenge is to develop a configuration of HR practice choices that help implement an organization’s strategy and enhance its competitiveness.

A well designed strategy can fail if sufficient attention is not paid to the HR dimension. HR problems that arise when executing strategies may be traced to one of the three causes:

Disruption of social and political structures;
Failure to match individuals aptitudes with implementation tasks;
Inadequate top-management support for implementation activities.

Strategy implementation poses a threat to many managers and employees in an organization. New power and status relationships are anticipated and realized. New formal and informal groups are formed whose values, beliefs and priorities may be unknown. Managers and employees may engage themselves in resistance behaviors as their roles, prerogatives and power in the organization change. Disruption of social and political structures that accompany strategy execution must be anticipated and considered during strategy formulation and managed during strategy implementation.

Human Resource Department’s HR Management Responsibilities:

The Human Resource Department provides this specialized assistance. In doing so, the HR manager carries out three distinct functions:

A Line function

A coordinate function

A Staff (service) function

A Line Function:

First, the HR manager performs a line function by directing the activities of the people in his/her own department and in service areas (like the plant cafeteria). In other words, he/she exerts line authority within the personnel? HR department. HR managers are also likely to exert implied authority. Why? Because line managers know the HR manager often has access to top management in personnel areas like testing & affirmative action. As a result, HR managers “suggestions” are often seen as “order from top-side”. This implied authority carries even more weight with supervisors troubled by Human Resource/Personnel problems.

A coordinate Function:

HR managers also function as coordinators of personnel activities, a duty often refer to as functional control. Here the HR manager and department act as “the right arm of the top executive to assist him/her that HR objectives, policies and procedures are being consistently carried out by line managers.

A Staff Function:

Serving and advising line managers is the “bread and butter” of the managers’ job. For example, HR assists in hiring, raining, evaluating, rewarding, counseling, promoting and firing of employees. It also administers the various benefit programmes (health and accident insurance, retirement, vacation, and so on.) it assists line managers in their attempts to comply with equal employment and occupational safety laws.. and it plays an important role with respect to grievances and labor relations. As part of these service activities, HR also carries out an innovator role by providing “up ot date information on current trends and new methods of solving problems.” For example, there is interest today in instituting reengineering programmes and in providing career planning for employees. HR managers stay on top of such trends and help their organizations implement these programmes.

Employee Advocacy:

In assisting line managers, though HR can’t forget its Employee advocacy role. Among other things this means HR must take responsibility of clearly defining how management should be treating employees, make sure employees have the mechanism required to contest unfair practices, and represent the interest of employees within the framework of its primary obligation to senior management.

Thank You

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Human Resources Business Partner: Concept, Importance in business, Role and Model-Part-A

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The linkage between strategic planning and HR planning