Human resource (HR) strategy parallels and facilitates implementation of the strategic business plan. HR strategy is the set of priorities a firm uses to align its resources, policies, and programs with its strategic business plan. It requires a focus on planned major changes in the business and on critical issues such as the following: What are the HR implications of the proposed business strate- gies? What are the possible external constraints and requirements? What are the implications for management practices, management development, and management succession? What can be done in the short term to prepare for longer-term needs? In this approach to the strategic management of human resources, a firm’s business strategy and its HR strategy are interdependent. 7 Figure 5–1 is a model that shows the relationship of HR strategy to the broader business strategy. 8 Briefly, the model shows that planning proceeds
Figure 5–1
The relationship of HR strategy to the broader strategy of a business.
Execute—
bottom-up
Plan—
top-down
HR METRICS
What measures assess the key drivers of individual, team, and organizational performance?
How do we compete?
What must we execute well?
How do we delight our internal and external customers?
What competencies, incentives, and work practices support high performance?
Source: HR in alignment. (2004). DVD produced by the Society for Human Resource Management Foundation, Alexandria, VA. Retrieved from www. shrm.org/Foundation.
top-down, while execution proceeds bottom-up. There are four links in the model, beginning with the fundamental question “How do we compete?” As we noted earlier, firms may compete on a number of nonindependent dimen- sions, such as innovation, quality, cost leadership, or speed. From that, it becomes possible to identify business or organizational processes that the firm must execute well in order to compete (e.g., speedy order fulfillment). When processes are executed well, the organization delights its internal and external customers through high performance. This may occur, for example, when an employee presents a timely, cost-effective solution to a customer’s problem.
To manage and motivate employees to strive for high performance, the right competencies, incentives, and work practices must be in place. Execu- tion proceeds bottom-up, as these appropriate competencies, challenging in- centives, and work practices inspire high performance, which makes everyone happy. This, in turn, means that business processes are being executed efficiently, enabling the organization to compete successfully for business in the marketplace.
At a general level, high-performance work practices include the following five features: 9
� Pushing responsibility down to employees operating in flatter organiza- tions.
� Increased emphasis on line managers as HR managers.
� Instilling learning as a priority in all organizational systems.
� Decentralizing decision making to autonomous units and employees.
� Linking performance measures for employees to financial performance indicators.
HR metrics serve as a kind of overlay to the model itself. HR metrics should reflect the key drivers of individual, team, and organizational performance.
When they do, the organization is measuring what really matters.
Workforce Plans
Workforce plans parallel the plans for the business as a whole. They focus on questions such as these: What do the proposed business strategies imply with respect to human resources? What kinds of internal and external constraints will (or do) we face? For example, the projected retirements of large numbers of older workers are an internal constraint on the ability of some firms to expand, 10 while a projected shortfall in the supply of college graduate electrical engineers (relative to the demand for them by employers) is an external constraint. What are the implications for staffing, compensation practices, training and develop- ment, and management succession? What can be done in the short run (tacti- cally) to prepare for long-term (strategic) needs? Workforce plans must be consistent with the broader HR strategy of an organization, which, in turn, must be consistent with the overall strategy of the business. Figure 5–2 shows the relationship between business planning—long-range, mid-range, and annual—
and parallel processes that occur in workforce planning.
As Figure 5–2 shows, workforce plans focus on firm-level responses to people-related business issues over multiple time horizons. What are some examples of such issues, and how can managers identify them? People-related
business concerns, or issues, might include, “What types of skills must managers possess to run the business 3–5 years from now, and how do we make sure we’ll have them?” At a broader level, issues include the impact of rapid technological change, more complex organizations (in terms of products, locations, customers, and markets) more frequent responses to external forces such as legislation and litigation, demographic changes, and increasing multinational competition. In this scenario, environmental changes drive issues, issues drive actions, and ac- tions encompass programs and processes used to design and implement them. 11 Realistically, HR concerns become business concerns and are dealt with only when they affect the line manager’s ability to function effectively. 12 Such concerns may result from an immediate issue, such as downsizing or a labor shortage, or from a longer-term issue that can be felt as if it were an immediate issue, such as management development and succession planning. On the other hand, people-related business issues such as workforce diversity, changing re- quirements for managerial skills, no-growth assumptions, mergers, retraining
Figure 5–2
Impact of three levels of business planning on workforce planning.
BUSINESS PLANNING PROCESS
WORKFORCE PLANNING PROCESS
Strategic Planning:
Long-Range Perspective
Operational Planning:
Middle-Range Perspective
Budgeting:
Annual Perspective
Issues Analysis Forecasting
Requirements
Action Plans Corporate philosophy
Environmental scan Strengths and constraints Objectives and goals Strategies
Planned programs Resources required Organizational strategies Plans for entry into new businesses, acquisitions, divestitures
Budgets Unit, individual performance goals
Program scheduling and assignment Monitoring and control of results
Business needs External factors Internal supply analysis Management implications
Staffing levels Staffing mix (qualitative) Organization and job design
Available/projected resources Net requirements
Staffing authorizations Recruitment
Promotions and transfers
Organizational changes Training and
development Compensation and benefits Labor relations
needs, and health and safety are issues that relate directly to the competitive- ness of an organization and threaten its ability to survive. In short, progressive firms recognize that people-related business issues will have powerful impacts on their strategic business and workforce plans for the foreseeable future.
We will have more to say about workforce plans in a later section, but first we need to address the design of jobs and the kinds of personal characteristics that they require. These are the subjects of the next sections of the chapter. We begin by considering whether the concept of a job is still relevant in today’s world of work.