consultants Towers and Perrin. They tended to get involved only when management began integrating the two companies into one. By comparison, close to two thirds of the [survey] participants are involved in M&A due diligence now. 11How human resource managers assist top management with mergers illustrates how functional managers (and particularly human resource managers) can support the company s strategic aims.
DUE DILIGENCE STAGE Before finalizing a deal, the merger partners usually perform due diligence. These reviews assure they know what they re getting into. For the human resource team, due diligence includes reviewing things like employee compensation and benefits, labor relations, pending employee litigation, human resource policies and procedures, and key employees.12 For example, do the target firm s health insurance contracts have termination clauses that could eliminate coverage for all employees if you lay off too many after the merger?13
INTEGRATION STAGE Critical human resource issues during the first few months of a merger or acquisition include choosing the top management, communicating changes effectively to employees, and retaining key talent.14Several human resource consulting companies, such as Towers Perrin, assist firms with merger-related human resource management services. Their services help to illustrate human resource managers roles in facilitating a merger.
* Manage the deal costs.Towers Perrin consultants identify and quantify people- related issues. These range from pension issues to redundancy costs and stock options.
* Manage the messages. We support our clients in rapidly developing and deploying an employee communication strategy.
* Secure the top team and key talent.Towers Perrin helps clients to identify key talent, and then develop suitable retention strategies.
* Define and implement an effective HR service delivery strategy.Towers Perrin helps clients plan how to implement the delivery of HR services, such as in combining payroll systems.
* Develop a workable change management plan. Especially in cross-border transactions, we assist companies in understanding and managing the cultural differences they face as part of the deal.
* Design and implement the right staffing model.Towers Perrin helps companies design the organization structure and determine which employee is best for which role.
* Aligning total rewards. When integration [of pay plans] is desirable, we help companies benchmarking and integration of compensation and benefit programs. 15
produce the employee competencies and behaviors the company needs to achieve its strategic aims. Figure 3-6 shows the link between human resource strategy and the company s strategic plans.
The basic idea behind strategic human resource management is this: In formu- lating human resource management policies and activities, the aim must be to produce the employee skills and behaviors that the company needs to achieve its strategic goals.
Figure 3-7 graphically outlines this idea. Management formulates a strategic plan and measurable strategic goals or aims. These plans and aims imply certain workforce requirements,in terms of the employee skills and behaviors required to achieve the firm s strategic aims. Given these workforce requirements, human resource manage- ment formulates HR strategies (policies and practices) to produce the desired workforce skills, competencies, and behaviors.
FIGURE 3-6 Linking Company- Wide and HR Strategies
Source: © Gary Dessler, Ph.D., 2010.
Company s competitive environment
Company s strategic situation
Company s internal strengths and weaknesses
Organizational performance Economic, political, demographic, competitive, and technological trends
Company s HR (and other functional) strategies
What are the basic policies
HR will pursue to ensure that the recruiting, selecting, training, appraising, and compensation systems support the company s strategic plan?
Company s strategic plan For example
Should we expand geographically?
Cut costs?
Diversify?
FIGURE 3-7 The Practices Behaviors Strategy Pyramid
What are our strategic goals or aims?
What employee behaviors and skills do we need to achieve
our strategic aims?
What HR policies and practices will enable us to produce the necessary employee
behaviors and skills?
strategic human resource management Formulating and executing human resource policies and practices that produce the employee competencies and behaviors the company needs to achieve its strategic aims.
Human Resource Strategies and Policies
Managers call the specific human resource management policies and practices they use to support their strategic aims human resource strategies.16The Shanghai Portman s human resource strategy aimed to produce the service-oriented employee behaviors the hotel needed to improve significantly the hotel s level of service. Its HR policies included installing the Ritz-Carlton Company s human resource system, having top management personally interview each candidate, and selecting only employees who cared for and respected others. The accompanying HR as a Profit Center feature presents another example.
Strategic Human Resource Management Tools
Managers use several tools to translate the company s broad strategic goals into human resource management policies and activities. Three important tools include the strategy map, the HR Scorecard, and the digital dashboard.
STRATEGY MAP The strategy mapprovides an overview of how each department s performance contributes to achieving the company s overall strategic goals. It helps the manager understand the role his or her department plays in helping to execute the company s strategic plan.
Figure 3-8 presents a strategy map example, in this case for Southwest Airlines.
Recall that Southwest has a low-cost leader strategy. The strategy map for Southwest succinctly lays out the hierarchy of main activities required for Southwest Airlines to succeed. At the top is achieving company-wide, strategic financial goals. Then the strategy map shows the chain of activities that help Southwest Airlines achieve these goals. For example, as we saw earlier in this chapter, to boost revenues and profitabil- ity Southwest needs to fly fewer planes (to keep costs down), maintain low prices, and maintain on-time flights.
In turn (further down the strategy map), on-time flights and low prices require fast turnaround. And, fast turnaround requires motivated ground and flight crews. The strategy map helps each department (including HR) visualize what it needs to do to support Southwest s low-cost strategy. Managers can access their companies strategy maps while on the go. They can use the ActiveStrategy Company s ActiveStrategy Enterpriseto create and automate their strategy maps, and to access them through iPhone or similar devices.18
THE HR SCORECARD Many employers quantify and computerize the strategy map s activities. The HR Scorecard helps them to do so. The HR Scorecardis not a scorecard. It refers to 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.19 (Metrics for Southwest might include airplane turnaround time, percent of on-time flights, and ground crew productivity.) Simply put, the idea is to take the strategy map and to quantify it.
HR AS A PROFIT CENTER
Albertsons Example
Several years ago, Albertsons Markets had to improve performance, and fast. With 2,500 stores and 230,000 workers, it faced competition not only from grocery chains, but also from Walmart and online sites. Albertsons overall strategic aims included reducing costs, maximizing financial returns, becoming more customer- focused, and energizing employees. Albertsons turned to its human resource man- agers to help achieve these strategic aims. Its new human resource strategy entailed new screening, training, pay, and other human resources policies and practices, and using more technology to reduce its HR activities costs.17 The Albertsons human resource team s efforts helped Albertsons to cut costs, and to boost customer service by hiring and motivating customer-focused applicants.
5 Briefly describe three impor- tant strategic human resource management tools.
FIGURE 3-8 Strategy Map for Southwest Airlines
Source: Based on TeamCHRYSALIS.
com, accessed July 2006; http://
mcknightkaney.com/Strategy_Maps_
Primer.html, accessed August 3, 2011;
http://www.strategymap.com.au/
home/StrategyMapOverview.htm accessed August 3, 2011
Strategy in Brief
Customer-Based Results Required to Produce Desired Strategic/Financial Results
Internal
Business Processes Required to Produce Desired Financial Results
Organizational and Employee Capabilities Required to Support Desired Internal Business Processes Strategic/Financial Results
Low cost leader, high-quality customer service, operational efficiency
Profitability
Lower costs Increased revenues
More customers
Low fares On-time flights
Fly fewer planes Minimize meals and frills
Minimize plane turnaround on ground
Highly engaged ground crews
Supportive, high-performance HR practices
Managers use special scorecard software to facilitate this. The computerized scorecard process helps the manager quantify the relationships between (1) the HR activities (amount of testing, training, and so forth), (2) the resulting employee behaviors (customer service, for instance), and (3) the resulting firm-wide strategic outcomes and performance (such as customer satisfaction and profitability).20 DIGITAL DASHBOARDS The saying a picture is worth a thousand words explains the purpose of the digital dashboard. A digital dashboard presents the manager with desktop graphs and charts, showing a computerized picture of how the company is doing on all the metrics from the HR Scorecard process. As in the illustration on the next page, a top Southwest Airlines manager s dashboard might display real-time trends for various strategy map activities. These might include fast turnaround, attracting and keeping customers, and on-time flights. This gives the manager time to take corrective action. For example, if ground crews are turning planes around slower today, financial results tomorrow may decline unless the manager takes action. Figure 3-9 summarizes the three strategic planning tools.
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 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, and so a computerized picture of where the company stands on all those metrics from the HR Scorecard process.