Fundamentals of Human Resource

Management
Fifth Edition

Chapter 2
Human Resource
Strategy and
Performance

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Learning Objectives (1 of 2)
1. Explain, with examples, each of the steps in the
strategic management process.
2. Define strategic human resource management,
and give an example of strategic human
resource management in practice.
3. Explain, with examples, why metrics are
important for managing human resources.

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Learning Objectives (2 of 2)
4. Answer the question “What are high-
performance work systems?” and give examples
of how they differ from non-high-performance
ones.
5. Answer the question (with examples) “Why is
employee engagement important?”
6. Describe how you would execute a program to
improve employee engagement.

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Explain, with examples, each of the steps
in the strategic management process

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The Strategic Management Process (1 of 2)
• Strategic Plan
• The Basic Management Planning
Process
– Goals
– Forecasts
– Plan
– Hierarchy of goals
• Policies and Procedures

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Hierarchy of Goals

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Strategic Planning
• Strategy
• Strategic Management
• Strategic Management Process
• Vision and Mission Statement

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The Strategic Management Process

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Worksheet for Environmental Scanning

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SWOT Matrix, with Generic Example
Potential Strengths Potential Opportunities
• Market leadership • New overseas markets
• Strong research and development • Failing trade barriers
• High-quality products • Competitors failing
• Cost advantages • Diversification
• Patents • Economy rebounding

Potential Weaknesses Potential Threats

• Large inventories • Market saturation
• Excess capacity for market • Threat of takeover
• Management turnover • Low-cost foreign competition
• Weak market image • Slower market growth
• Lack of management depth
702068-Human resource•management
Growing government regulation
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Types of Strategies
• Corporate-Level Strategy
• Competitive Advantage
• Competitive Strategy
– Cost leadership
– Differentiation
– Focus
• Functional Strategy

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Type of Strategy at Each Company Level

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Groupwork
• Mission & Vision
• Goals
• Type of strategies
• HRM plan

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Managers’ Role in Strategic Planning
• Devise a Plan
• Obtain Competitive Intelligence
• Identify Strengths and Weaknesses
• Participate in Communication

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

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What Is Strategic Human Resource
Management?
• Formulate strategic plans
• Ensure employee competencies and behaviors
• HR strategies, policies, and practices

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The HR Strategy Model

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Three Important Strategic HR Tools
• Strategy Map
– 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.

• HR Scorecard
– A process for assigning financial and nonfinancial goals or metrics
to the human resource management–related chain of activities
required for achieving the company’s strategic aims and for
monitoring results.

• Digital Dashboard
– 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 resource
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Strategic Human Resource Management
Tools
• Strategy Map

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Strategic Human Resource Management
Tools
• HR Scorecard
• Digital Dashboard

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HR Metrics and Benchmarking
• Types of Metrics
• Benchmarking
• Strategy-Based Metrics
• Workforce/Talent Analytics and Data Mining

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Metrics/Benchmarking Report (1 of 2)
Organizational Data Employment Data
• Revenue • Number of Positions Filled
• Revenue per FTE • Time-to-Fill
• Net Income Before Taxes • Cost-Per-Hire
• Net Income Before Taxes per FTE • Employee Tenure
• Positions Included within the Organization’s • Annual Overall Turnover Rate
Succession Plan
• Annual Voluntary Turnover Rate
HR Department Data • Annual Involuntary Turnover Rate
• Total HR Staff
Expectations for Revenue and
• HR-to-Employee Ratio Organizational Hiring
• Percentage of HR Staff in Supervisory Roles • Percentage of Organizations Expecting
• Percentage of HR Staff in Professional/Technical Changes in Revenue in 2011 compared to
Roles 2010

• Percentage of HR Staff in Administrative Support • Percentage of Organizations Expecting

Roles Changes in Hiring in 2011 compared to 2010

• Reporting Structure for the Head of HR

• Types of HR Positions Organizations Expect to
Hire in 2011 702068-Human resource management
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Metrics/Benchmarking Report (2 of 2)
HR Expense Data Metrics for More Profitable Organizations
• HR Expenses • Total HR Staff
• HR Expense to Operating Expense Ratio • HR-to-Employee Ratio
• HR Expense to FTE • HR Expenses

Compensation Data • HR Expense to Operating Expense Ratio

• Annual Salary Increase • HR Expense to FTE Ratio

• Salaries as a Percentage of Operating Expense • Annual Salary Increase

• Target Bonus for Non-Executives • Target Bonus for Non-Executives

• Target Bonus for Executives • Target Bonus for Executives

• Maximum Reimbursement Allowed for
Tuition/Education Data Tuition/Education Expenses per Year
• Maximum Reimbursement Allowed for
• Percentage of Employees Participating in
Tuition/Education Expenses per Year
Tuition/Education Reimbursement Programs
• Percentage of Employees Participating in
• Time-to-Fill
Tuition/Education Reimbursement Programs
• Cost-Per-Hire
• Annual Overall Turnover Rate

Source: Reprinted with permission from the Society for Human Resource
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HR as a Profit Center
• Analytical HR
• Human capital investment
analysis
• Talent value model
• Talent supply chain

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Using HR Audits (1 of 2)
• Roles and head count (including job descriptions, and employees
categorized by exempt/nonexempt and full- or part-time)
• Compliance with federal, state, local employment–related legislation
• Recruitment and selection (including use of selection tools,
background checks, and so on)
• Compensation (policies, incentives, survey procedures, and so on)
• Employee relations (union agreements, disciplinary procedures,
employee recognition)
• Mandated benefits (Social Security, unemployment insurance, workers’
compensation, and so on)
• Group benefits (insurance, time off, flexible benefits, and so on)
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Using HR Audits (2 of 2)
• Payroll (such as legal compliance)
• Documentation and record keeping (For example, do our files contain
information including résumés and applications, offer letters, job
descriptions, performance evaluations, benefit enrollment forms,
payroll change notices, and documentation related to personnel
actions such as employee handbook acknowledgments?)
• Training and development (new employee orientation, workforce
development, technical and safety, career planning, and so on)
• Employee communications (employee handbook, newsletter,
recognition programs)
• Termination and transition policies and practices

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Evidence-Based HR
• Objective
• Experimentation
• Predict

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Building High-Performance Work Systems
• High-Performance Work System
• High Performance Work Practices
– Paid more
– Trained more
– Sophisticated recruitment
– More self-managed work teams
• Human Resource Metrics

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Comparison of High-Performance vs. Low-
Performance (1 of 2)
TABLE 3.1 Examples Selected from Several Studies of How Recruitment, Selection, Training,
Appraisal, Pay, and Other Practices Differ in High-Performance and Low-Performance Companies
Higher-Performance Companies’
Lower-Performance Companies’ HR Practice Averages
HR Practice Averages (e.g., (e.g.,company performance in
company performance in terms of terms of sales/employee,
sales/employee, innovation, and innovation, and employee
blank employee retention)* retention)*
Recruitment: Average number of qualified 8 37
applicants per position
Selection: Average percentage of employees 4% 30%
hired based on a validated selection test
Training: Average number of hours of training for 35 Hours 117 Hours
new employees
Appraisal: Average percentage of employees 41% 95%
receiving a regular performance appraisal
Pay Practices: Average percentage of the 28% 84%
workforce eligible for incentive pay
Use of Teams: Average percentage of the 11% 42%
workforce routinely working in all teams,
semiautonomous, cross functional, or project
teams
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Comparison of High-Performance vs. Low-
Performance (2 of 2)
TABLE 3.1 Examples Selected from Several Studies of How Recruitment, Selection, Training,
Appraisal, Pay, and Other Practices Differ in High-Performance and Low-Performance Companies
Lower-Performance Companies’ Higher-Performance Companies’
HR Practice Averages HR Practice Averages
(e.g.,company performance in (e.g.,company performance in
terms of sales/employee, terms of sales/employee,
innovation, and employee innovation, and employee
blank retention)* retention)*
Self-Directed Teams: Percent of companies with 9% 70%
semiautonomous or autonomous work teams
Operational Information Sharing: Employees 62% 82%
receive relevant operating performance
information
Financial Information Sharing: Employees 43% 66%
receive relevant financial performance information
*Findings rounded.
Source: Based on “Comparison of HR Practices in High-Performance and Low-Performance Companies,” by B. E. Becker
et al., from The HR Scorecard: Linking People, Strategy and Performance (Boston: Harvard Business School Press, 2001);
Barry Macy, Gerard Farias, Jean-Francois Rosa, and Curt Moore, “Built to Change: High-Performance Work Systems and
Self-Directed Work Teams—A Longitudinal Field Study,” Research in Organizational Change and Development, 16, pp.
339–418, 2007; James Gathrie, Wenchuan Liu, Patrick Flood, and Sarah MacCurtain, “High Performance Work Systems,
Workforce Productivity, and Innovation: A Comparison of MNCs and Indigenous Firms,” The Learning, Innovation and
Knowledge (LINK) Research Centre Working Paper Series, WP 04-08, 2008; Richard A. Posthuma, Michael C. Campion,
and Malika Masimova, “A High Performance Work Practices Taxonomy: Integrating the Literature and Directing Future
Research,” Journal of Management, 39, no.702068-Human
5, July 2013, pp. resource
1184–1220.
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Employee Engagement
• Why is employee engagement important?
• The employee engagement problem
• What can managers do to improve employee
engagement?
• How to measure employee engagement

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Employee Engagement Guide
• How Kia Motors Improved Performance
• The Challenges

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The New HRM Strategy for Kia
Six Steps for Improving Employee Engagement
1. Set measurable objectives
2. Provide leadership development
3. Employee recognition programs
4. Improve internal communications
5. Employee development program
6. Examine compensation and other policies

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Summary
1. Strategic planning is important to all managers
2. Each function or department needs its own
functional strategy
3. The manager will want to gather and analyze
data prior to making decisions
4. High-performance work system is a set of HRM
policies
5. Employee engagement is important
6. HR Strategy involves six steps
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Copyright

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