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PART ONE INTRODUCTION

C H A P T E R T T h r e e

Human Resource Strategy and

Lecture Outline
Performance
3
I. The Strategic Management Process
A. The Basic Management Planning Process
B. What Is Strategic Planning? In Brief: This chapter explains
C. The Strategic Management Process how to design and develop an HR
D. Types of Strategies system that supports the
E. Managers’ Roles in Strategic Planning company’s strategic goals. It
II. Strategic Human Resource Management
explains the strategic management
A. What Is Strategic Human Resource Management?
B. Sustainability and Strategic Human Resource
process, what strategic HR
Management management is, HR metrics, high-
C. Strategic Human Resource Management Tools performance work systems, and
III. HR Metrics and Benchmarking employee engagement. It discusses
A. Types of Metrics how to create a strategy-oriented
B. Benchmarking HR system.
C. Strategy and Strategy-Based Metrics
D. Workforce/Talent Analytics
E. Data Mining Interesting Issues: The human
F. Using HR Audits resource function today continues
G. Evidence-Based HR and the Scientific Way of to play an increasingly visible role
Doing Things in the strategic planning and
IV. Building High-Performance Work Systems management process, requiring a
A. High-Performance Work Systems
new level of skill and competency
B. High-Performance Human Resource Policies and
Practices
among HR professionals. HR
V. Employee Engagement and Performance managers must develop
A. Employee Engagement measureable strategies that
B. Why Is Employee Engagement Important? convincingly showcase HR’s
C. The Employee Engagement Problem impact on business performance.
D. What Can Managers Do to Improve Employee Successful human resource
Engagement?
managers have adopted a
E. How to Measure Employee Engagement
VI. Employee Engagement Guide for Managers
perspective that focuses on how
A. How Kia Motors Improved Performance with an HR their departments can play a
Strategy Aimed at Boosting Employee Engagement central role in implementing the
B. The Challenges firm’s strategy.
C. The New HR Management Strategy
D. The Results

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ANNOTATED OUTLINE

I. The Strategic Management Process

A. The Basic Management Planning Process — The basic managerial

planning process involves setting goals, making basic planning
forecasts, reviewing alternative courses of action, evaluating which
options are best, and then choosing and implementing your plan. A plan
shows the course of action for getting from where you are to the goal.
Planning is always goal-directed.

1. Policies and Procedures — Policies and procedures provide the day-

to-day guidance employees need to do their jobs in a manner that is
consistent with the company’s plans and goals. Procedures spell out
what to do if a specific situation arises.

B. What Is Strategic Planning? — A strategic plan is the company’s overall

plan for how it will match its internal strengths with its external
opportunities and threats in order to maintain a competitive position. The
strategic planner asks, “Where are we now as a business, where do we
want to be, and how should we get there?” A strategy is a course of
action. Strategic management is the process of identifying and executing
the organization’s strategic plan, by matching the company’s capabilities
with the demands of the environment.

C. The Strategic Management Process — The seven-step process involves

1) asking “where are we now”? 2) evaluating the firm’s internal and
external strengths, weaknesses, opportunities, and threats, 3)
formulating a new business direction, 4) deciding on strategic goals, and
5) choosing specific strategies or courses of action. Steps 6) and 7)
entail implementing and then evaluating the strategic plan.

D. Types of Strategies — A corporate-level strategy identifies the portfolio

of businesses that comprise the company and how these businesses
relate to one another. Concentration, diversification, vertical integration,
consolidation, and geographic expansion are all examples of corporate-
level strategies. A competitive strategy identifies how to build and
strengthen the business’s competitive position in the marketplace.
Managers build their competitive strategies around their businesses’
competitive advantage—any factors that allow a company to differentiate
its product or service from those of its competitors to increase market
share. Examples of competitive strategies include cost leadership
differentiation, and focus. Functional strategies identify what each
department must do to help the business accomplish its competitive
goals.

E. Managers’ Roles in Strategic Planning — Devising a strategic plan is top

management’s responsibility. However, top executives rarely formulate
strategic plans without the input of lower-level managers. Few people
know as much about the firm’s competitive pressures, vendor
capabilities, product and industry trends, and employee capabilities and
concerns as the company’s department managers do.

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II. Strategic Human Resource Management

A. What Is Strategic Human Resource Management? — Strategic HR

management means formulating and executing human resource policies
and practices that produce the employee competencies and behaviors
the company needs to achieve its strategic aims.

B. Sustainability and Strategic Human Resource Management — This

means achieving financial performance while also achieving human
sustainability, environmental sustainability, and talent sustainability.

C. Strategic Human Resource Management Tools — Managers use several

tools to translate the company’s broad strategic goals into human
resource management policies and practices. Three important tools
include the strategy map, the HR scorecard, and the digital dashboard.

1. Strategy Map — The strategy map summarizes how each

department’s performance contributes to achieving the company’s
overall strategic goals. It helps the manager and each employee
visualize and understand the role his or her department plays in
achieving the company’s strategic plan.

2. The HR Scorecard — The HR scorecard is not a scorecard. It refers

to a process for assigning financial and nonfinancial goals or metrics
to the human resource management–related strategy map chain of
activities required for achieving the company’s strategic aims.

3. Digital Dashboards — A digital dashboard presents the manager

with desktop graphs and charts, showing a computerized picture of
how the company is doing on all metrics from the HR Scorecard
process.

III. HR Metrics and Benchmarking

A. Types of Metrics — Human resource managers use many measures. A

human resource metric is the quantitative gauge of a human resource
management activity such as employee turnover, hours of training per
employee, or qualified applicants per position.

B. Benchmarking — We must know “How are we doing?” in relation to

something. You may also want to benchmark your results—compare
high-performing companies to your own, to understand what makes them
better.

C. Strategy and Strategy-Based Metrics — Managers use strategy-based

metrics to measure the extent to which HR practices are supporting the
company’s strategic goals.

D. Workforce/Talent Analytics— Employers use workforce analytics (or

“talent analytics”) software applications to analyze their human resources
data and to draw conclusions from it.

E. Data Mining — Data mining sifts through huge amounts of employee data
to identify correlations that employers then use to improve their

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employee selection and other practices. Data mining is “the set of

activities used to find new, hidden, or unexpected patterns in data.”

F. Using HR Audits — The HR audit generally involves reviewing the

company’s human resource function (recruiting, testing, training, and so
on), usually using a checklist, as well as ensuring that the firm is
adhering to regulations, laws, and company policies. HR audits vary in
scope and focus. Typical areas audited include the following:

1. Roles and head count (including job descriptions, and employees

categorized by exempt/ nonexempt and full- or part-time).
2. Compliance with federal, state, local employment-related legislation.
3. Recruitment and selection (including use of selection tools,
background checks, and so on).
4. Compensation (policies, incentives, survey procedures, and so on).
5. Employee relations (union agreements, performance management,
disciplinary procedures, employee recognition).
6. Mandated benefits (Social Security, unemployment insurance,
workers’ compensation, and so on).
7. Group benefits (insurance, time off, flexible benefits, and so on).
8. Payroll (such as legal compliance).
9. 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?
10. Training and development (new employee orientation, workforce
development, technical and safety, career planning, and so on).
11. Employee communications (employee handbook, newsletter,
recognition programs).
12. Termination and transition policies and practices.

G. Evidence-Based HR and the Scientific Way of Doing Things — Means

using data, facts, analytics, scientific rigor, critical evaluation, and
critically evaluated research/case studies to support human resource
management proposals, decisions, practices, and conclusions.

IV. Building High-Performance Work Systems

A. A high-performance work system (HPWS) is a set of human resource

management policies and practices that together produce superior
employee performance.

B. High-Performance Human Resource Policies and Practices — High-

performance work systems’ policies and practices differ from less
productive ones. Companies with HPWS use HR metrics, have large
applicant pools, use validated assessment tests, provide extensive
training for employees, and aspire to encourage employee involvement
and self-management.

V. Employee Engagement and Organizational Performance

A. Employee engagement refers to being psychologically involved in,

connected to, and committed to getting one’s jobs done.

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B. Why Is Employee Engagement Important? — It drives performance and

productivity.

C. The Employee Engagement Problem — Depending on the study, only

about 21–30% of employees nationally are engaged.

D. What Can Managers Do to Improve Employee Engagement? —

Managers can provide supportive supervision and can also make sure
employees 1) understand how their departments contribute to the
compoany’s success, 2) see how their own efforts contribute to achieving
the company’s goals, and 3) get a sense of accomplishment from
working at the firm.

E. How to Measure Employee Engagement — Gallup, Towers Watson, and

other vendors offer comprehensive employee engagement surveys
services.

VI. Employee Engagement Guide for Managers

A. How Kia Motors (UK) Improved Performance with an HR strategy Aimed

at Boosting Employee Engagement — Kia was not always a successful
automobile manufacturer.

B. The Challenges — Kia UK faced rapidly falling sales, increased financial

losses, and low levels of emlployee engagement. Employee turnover
was at 31%.

C. The New Human Resources Management Strategy — A new HR director

developed a new employee engagement strategy to improve employee
morale and address the high levels of employee turnover.

D. The Results — Employee surveys of employee engagement and of line

managers’ communications and other behaviors improved markedly.
Employee turnover fell to 15% in 2007, to 5% in 2008, and to below 2%
by the end of 2009.

KEY TERMS

Strategic plan The company’s plan for how it will match its internal
strengths and weaknesses with external opportunities and
threats in order to maintain competitive advantage.

Strategy A course of action the company can pursue to achieve its

strategic aims.

Strategic management The process of identifying and executing the

organization’s strategic plan by matching the company’s
capabilities with the demands of its environment.

Mission statement Summarizes what the company’s main tasks are today.

Corporate-level strategy Type of strategy that identifies the portfolio of business

that in total, comprise the company and the ways in which
these businesses relate to each other.

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Competitive strategy A strategy that identifies how to build and strengthen the
business’s long-term competitive position in the
marketplace.

Competitive advantage Any factors that allow an organization to differentiate its

product or service from those of its competitors to
increase market share.

Functional strategy A department’s functional strategy identifies what the

department must do in terms of specific departmental
policies and practices to help the business accomplish its
competitive goals.

Strategic human resource Formulating and executing human resource policies and
management practices that produce the employee competencies and
behaviors the company needs to achieve its strategic
aims.

Strategy map A strategic planning tool that shows the “big picture” of
how each department’s performance contributes to
achieving the company’s overall strategic goals.

HR Scorecard A process for assigning financial and nonfinancial goals 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
thus presenting a computerized picture of where the
company stands on all the metrics from the HR Scorecard
process.

Human resource metric The quantitative gauge of a human resource management

activity such as employee turnover, hours of training per
employee, or qualified applicants per position.

Strategy-based metrics Metrics that specifically focus on measuring the activities

that contribute to achieving a company’s strategic aims.

HR Audit An analysis by which an organization measures where it

currently stands and determines what it has to accomplish
to improve its HR function.

High-performance work system A set of human resource management policies and

practices that promote organizational effectiveness.

Copyright © 2020 Pearson Education Ltd.