MM ZC441-L2

BITS Pilani Hyderabad Campus

Human Resource Management

Session 2 Date: 14 - 1 2015 Total Slides: 60 By: Dr. Payal Mehta


Chapter 3 : Integrating HR Strategy with Business Strategy

Chapter 4: Human resource Planning

Text Book: Aswathappa K., Human Resource Management- Text and Cases, Tata McGraw Hill, 7th Edition, 2013.

BITS Pilani, Hyderabad Campus

Understanding the Nature of Strategic HRM

Describe the Strategic Management Process

Integrate HR Functions with Strategic Management Process

Leaning Outcome:


o Strategy: the companies long term plan for how it will balance its internal

strengths and weakness with its external opportunities and threats to

maintain a competitive advantage.

o Strategic management: refers to the process of crafting strategies , their

implementation and evaluation of their effectiveness.

o Strategies bridge where the company is now , with where it wants to be

tomorrow.

Strategic management


Traditional HRM vs. Strategic HRM Traditional HRM Strategic HRM

Responsibility for

HRM Staff specialists Line managers

Focus Employee relations Partnership with internal

and external customers

Role of HR Transactional, change

follower and respondent

Transformational, change

leader and initiator

Initiatives Slow, reactive, fragmented Fast, proactive, integrated

Time horizon Short term Short, medium, long

Control Bureaucratic roles, policies,

procedures

Organic-flexible, whatever is

necessary to succeed

Job design Tight division of labour,

independence, specialisation

Broad, flexible, cross-

training teams

Key investments Capital, products People, knowledge

Accountability Cost centre Investment centre


Strategic HR Model

Institutional/ Political forces

HRM Practices

Firm-level Outcomes (performance, satisfaction,

absenteeism, etc.)

Firm strategy

HR Behaviours HR Capital Pool (skills, abilities)

Resource dependence institutional

Resource-based view of the firm

Behavioural Approach

Cybernetic Agency/ Transaction Costs


I. Environmental Scanning

II. Identifying sources of competitive advantage

III. HR Strategy formulation

IV. HR Strategy Implementation

V. Strategy Evaluation and Monitoring

Strategic Management Process


Consist of External and Internal environment

External environment as: PEST analysis

Internal environment: SWOT analysis, organizational culture, organizational

structure, employee morale, industrial relations, unionization etc..

I: Environmental Scanning


Worksheet for Environmental Scanning


A scan of the internal and external environment is an important part of the strategic planning

process.

Environmental factors internal to the firm usually can be classified as strengths (S) or

weaknesses (W), and those external to the firm can be classified as opportunities (O) or

threats (T).

Such an analysis of the strategic environment is referred to as a SWOT analysis.

What is a SWOT Analysis?

810


The SWOT analysis provides information that is helpful in matching the

firm's resources and capabilities to the competitive environment in which it

operates.

As such, it is instrumental in strategy formulation and selection.

The following diagram shows how a SWOT analysis fits into an

environmental scan:

SWOT Analysis

811


The SWOT Framework

812

BITS Pilani, Hyderabad Campus l


A firm's strengths are its resources and capabilities that can be used for developing a

competitive advantage. Examples of such strengths include:

Patents

Strong brand names

Good reputation among customers

Cost advantages from proprietary know-how

Exclusive access to natural resources

Good access to distribution networks

Strengths

814


The absence of certain strengths are a weakness. For example, the following

may be considered weaknesses:

Lack of patent protection

A weak brand name

Poor reputation among customers

High cost structure

Lack of access to best natural resources

Lack of access to key distribution channels

Weaknesses

815


In some cases, a weakness may be the flip side of a strength.

For example, a firm has a large amount of manufacturing capacity.

While this capacity may be considered a strength that competitors do not

share, it also may be a considered a weakness if the large investment in

manufacturing capacity prevents the firm from reacting quickly to changes in

the strategic environment.

Weaknesses - Continued

816


The external environmental analysis may reveal certain new opportunities for

profit and growth. Some examples of such opportunities include:

An unfulfilled customer need

Arrival of new technologies

Loosening of regulations

Removal of international trade barriers

Opportunities

817


Changes in the external environmental also may present threats to the firm.

Some examples of such threats include:

shifts in consumer tastes away from the firm's products

emergence of substitute products

new regulations

increased trade barriers

Threats

818


Launched in 1954

Oldest detergent used in more then 20 countries

Very strong brand communication

Available in wide variety and product size. (surf excel blue, matic, quick wash, comfort in 5 kg, 2kg, 250grm)

Solid base company of Unilever (HUL) , employee 2lks, operated in 100 countries, $868 m in R&D;

Strong competitors, (tide, nirma, ariel, oxyclean, sundry)

Substitute products (liquid detergent, bars)

Lack of control in supply chain management

No famous brand ambassador

High price of product

Changing life style

Applying tactics and surprise

Explore new geographical market

Political effects, economical effect, legislative effect; environmental effect

Chances of price war

Example: Surf excel SWOT Analysis

819


Strength:

Strong brand portfolio

Brand name

Solid base of company

Innovative aspects

Success of slogan: stain is good

Analysis:

820

Weakness: High price of the products

No famous brand ambassador

Opportunities: Changing life style of the

people

New market vertical, horizontal

Increasing the volume of the production

Seasonal weather and fashion influences

Technology innovation and development

Threats:

Political effect

Legislative effect

Environmental effect

Introduction of local product

Change in life style

Chances of price war

Economic crisis


For the first six months we did not have internet connection. We would go to Anil Lalls house with two floppies and he would upload the site..... remembers Sanjeev

Bikchandani the founder of www.naukri.com. But then was the internet boom. Uploading content on web became a lot easier for us. There was growing number of

internet users. We knew that the idea would click. But there were other constraints. With little finance in hand and limited technical resources, running the business

was difficult. But we were all committed and wanted to make this business successful. So we started posting jobs from different magazines and newspapers on our

website. The recruiters came to know about us from the applications received by them- stating with reference to your advertisement in naukri.com. The recruiters

started discussing, Hey, what is this naukri.com Within 6 months of the launch, a direct mail letter was sent to HR managers and recruiters. For Rs. 350/- you could

list a job on the site. For Rs. 6,000/- you could get annual subscription which gave you unlimited listings through the year. And thus naukri.com began to get business.

Low business, maybe Rs. 2-2.5 lakhs, but in a year two, more direct mails were sent out. Revenues increased between 8-9 times in one year. The job market was

growing and the MNCs were entering Indian market.

The year was 1999. Investment bankers were throwing off their ties and setting up .com businesses. Sanjeev Bikhchandani too started getting feelers, we would like

to invest in your company, they said. His initial reaction was: I dont need your money. We are breaking even now. Next year, we will continue to grow, bring in Rs.

50-60 lakhs and make profits. And I will be Happy.

The truth was happy as a small company, operating from home. After years of struggle, the company could finally see the word profit in its horizon. I didnt want to

sign complex agreements, have somebody breathing down my neck and be under pressure for growth. I was comfortable, leading an uncomplicated life. Around that

time, he came across international magazines talking about dotcoms, like Yahoo! And its listing on stock market. I figured out that something was happening in here.

But I said I dont want money anyway: neither from Stock markets IPO nor from investment bankers, no matter what the valuation.

But then, funded competition launched. The advertising budget of jobsahead.com (just the launch) was twice as large as naukris annual turnover. They had deep

pockets. When that happened Sanjeev realized that the game has changed. And something has to be done to keep the market share intact.

SWOT :Naukri.com


Strengths: Committed promoters, economical pricing,

Weakness: Little finances and technological resources, complacency and

contentment with limited growth

Opportunity: Internet boom, rising number of internet users, recruiters

awareness about Naukri through applicants, growing job market, MNCs entering Indian market, investment bankers willing to invest into .com business

Threat: Competition from funded companies, heavy advertising expenditure by

funded companies

Solution


Sources as quality, price, brand positioning, timely delivery and customer

service.

Competitive Advantage Core capabilities Intellectual Capital

II. Identify Sources of Competitive Advantage


Devolved Informal learning Developing awareness of learning opportunities

Empowered informal learning Creating a learning environment (i,.e. a context conducive to social capital)

Learning as socialization Delivering formal training, learning and development interventions

Engineering Creating and controlling communities-of-practice and social networks

III. Identify HRM Strategies

Indirect Interventions

Direct Interventions

Human Capital Social Capital


Implementation through HR plans, policies and practices.

Monitoring as establishing targets, measuring performance, analyzing the

deviation and executing the modifications.

IV. Implementing HR Strategies V. Monitor and Evaluation


Allows identification, prioritisation and exploitation of opportunities.

Provides an objective view of management problems.

Represents a framework for improved co-ordination and control of activities.

Minimises the effects of adverse conditions and changes.

Allows major decisions to better support established objectives.

Allows more effective allocation of time and resources to identified opportunities.

Allows fewer resources and lesser time to be devoted to correcting erroneous or adhoc decisions.

Creates a framework for internal communication among personnel.

Helps to integrate the behaviours of individuals into a total effort.

Provides a basis for the clarification of individual responsibilities.

Gives encouragement to forward thinking.

Provides a co-operative, integrated and enthusiastic approach to tackling problems and opportunities.

Encourages a favourable attitude towards change.

Gives a degree of discipline and formality to the management of a business.

Benefits of Strategic Management


In strategy formulation

HR manager supplies competitive intelligence that is useful

In strategy implementation

Encouraging proactive behaviour

Explicit communication goals

Stimulate critical thinking

Productivity

Quality and Service

Proficient strategic management

HR Role in Strategic Management


Strategy management

SWOT

Role of HRM in aligning with Business strategy

Summary


Chapter 4: Human resource Planning


Understand the nature and importance of HRP

Identify and describe factors affecting HRP

Describe the stages in HRP process

List pre-requisites for effective HRP

Learning Objectives


Human resource planning is the process by which an organization ensures that it

has the right number and kind of people, at the right places, at the right time,

capable of effectively and efficiently completing those tasks that will help the

organization achieve its overall objectives.

It is the process of formulating plans to fill future openings based on an analysis

of positions that are expected to be filled and whether these will be filled by inside

or outside candidates

Human Resource Planning


1. Forecast personnel requirements

2. Cope with changes

3. Use existing manpower productivity

4. Promote employees in a systematic way

5. Facilitating in succession planning

Objectives of Human Resource Planning


Factors Affecting HRP

Organisational

Growth Cycle

and Planning

Type and

Strategy of

Organisation

Time

Horizons

Type and

Quality of

Forecasting

Information

Nature of

Jobs being

Filled

Outsourcing

Environmental

Uncertainties

HRP


1. Environmental scanning

2. Forecasting & analyzing demand for HR

3. Forecasting & analyzing supply of HR

4. Developing action plans to match HR demand & supply

HRP Process


HRP Process

Organisational Activities

and Policies

HR Supply Forecast HR Needs Forecast

HR Programming

HRP Implementation

Control and Evaluation

of Programme

Shortage

Recruitment

Selection, etc

Surplus

Restricted Hiring

Reduced Hours

VRS, Layoff, etc

Environment


Systematic process of studying & monitoring the external environment of the

organization in order to pinpoint opportunities & threats.

Involves long range analysis of employment.

Factors include economic factors, competitive trends, technological changes,

socio-cultural changes, politico-legal considerations, labour force composition &

supply, & demographic trends.

Environmental Scanning


Ex., competitive pressures are likely to increase resulting in enhanced productivity requirements &

HRP objective may be to increase employee productivity by 5% in 2 yrs. which will require the firm

to determine current employee productivity (output / employees)

Attempts to answer 2 questions:

Which jobs need to be filled (or vacated) during the next 12 months?

How & where will we get people to fill (or vacate) these jobs?

Demand & supply of labour in loose & tight labour market

Major impact of the shortage of skilled workforce (tight labour market) in India has been on staff cost

(increased by 35% in 2005)

Fast growing sectors like retail, ITeS, telecom are new & do not have historical talent to bank on & hence

they are hiring from other sectors with skill sets that are relevant to their industries

Environmental Scanning


FORECASTING makes use of information from the past & present to identify expected future

conditions.

Forecasts are not perfectly accurate & as the planning scope becomes shorter the accuracy of

forecasts increases

HR demand forecasts may be internal / external

External factors as competition (foreign and domestic), economic climate, laws and regulatory bodies,

change in technology and social factors.

Internal factors include budge constraints, production levels, new product and services, organizational

structure etc..

Forecasting HR Demand


1. Management Judgment

Top-Down Approach

Bottom Up Approach

Methods of Demand Estimation


2. RATIO-TREND ANALYSIS

RATIO between output & manpower deployed to achieve that output is established

at a given point of time

Eg., revenue per employee, sales vol. per salesperson, service contract per engineer, units produced per employee, etc.,

Historical ratio between:

Some causal factor (sales volume)

No. of employees required (number of salesperson)



Example: Hotel management staff open 20 more bedrooms. As per past

trend, 55 bedroom requires 60 staff, hence ratio of staff to bedroom is 1.09

For more 20 bedrooms 21.8=22 staff required

So total 22 + 60= 82 staff required



3. REGRESSION ANALYSIS

Drawing a statistical comparison of past relationship among variables

Statistical relationship between no. of patients (business factor) & employment level of nurses in

a nursing home may be useful in forecasting the no. of employees that will be needed if the no.

of patients increases by say 20%



LINEAR REGRESSION ANALYSIS

Relationship between two variables which is directly & precisely proportional

Production output & manpower are the two variables & the relationship between these two is plotted on a graph by drawing a line of best fit

Analysis aims at providing a measure of the extent to which changes in the values of two variables are correlated with one another


X

a

b Y

Manpow

er

Production level

x

x

x

x

x x

x


4. Delphi Technique

Experts go through several rounds of estimates with no face-to-face meeting

Incorporates future plans & knowledge of experts related to mkt., industry &

technical development



5. Work-Study Technique:

1.Planned output for next year : 20000 units

2. Standard hours per unit : 5

30 Planned hours for the year : 100000

4. Productive hours per man/year

(allowing normal OT, absenteeism and idle time) : 2000

5. Number of direct workers required : 50



The supply analysis covers:

1. Existing human resource

2. Internal supply forecasts relate to conditions inside the org. such as age

distribution of workforce, terminations, retirements, etc. Example- employee

replacement chart

3. External supply forecasts relate to external labour market conditions &

estimates of supply of labour to be available to the firm in the future in different

categories

Forecasting & Analyzing HR Supply


2 types

Skills inventory: describes the skills & knowledge of non-managerial employees & is used

primarily for making placement & promotion decisions

Management inventory: contains the same information as in skills inventory, but only for

managerial employees which describes the work history, strengths, weaknesses, promotion

potential, career goals

1. Present Employees


Uses of a Human Resource Information Systems (HRIS)

Employee and Labour Relations

Union Negotiation Costing Auditing Records Attitude Survey Results Exit Interview Analysis Employee Work History

HR Planning and Analysis

Organisation Charts Staffing Projections Skills Inventories Turnover Analysis Absenteeism Analysis Restructuring Costing Internal Job Matching Job Description Tracking

Health, Safety and Security

Safety Training Accident Records Material Data Records

Compensation and Benefits

Pay Structures Wage/Salary Costing Flexible Benefit Administration Vacation Usage Benefits Usage Analysis

HR Development

Employee Training Profiles Training Needs Assessments Succession Planning Career Interests and Experience

Staffing

Recruitment Sources Applicant Tracking Job Offer Refusal Analysis

Equal Employment

Affirmative Action Plan Applicant Tracking Workforce Utilisation Availability Analysis

HRIS


Techniques are:

1. Inflows and Outflows

2. Turnover rate

3. Conditions of work and absenteeism

4. Productivity level

5. Movement among jobs

2. Internal Supply


1. Inflows and Outflows:


2. Turnover rate:

LABOUR WASTAGE ANALYSIS

Traditionally LW is measured by the employee turnover index (% wastage index)

(No. of employees leave in year / avg. employees) x 100

Turnover classified into:

Avoidable separations (resignations & dismissal)

Unavoidable separations (retirement, death, & marriage)

Turnover rate = [(No. of separation / M] x 100


3. Conditions of work and absenteeism

= {(number of persons days lost)/ (average number of persons* number of

working days)}*100

4. Productivity level

5. Movement among jobs


INTERRELATED FACTORS THAT MUST BE CONSIDERED IN PROJECTING EXTERNAL HR SUPPLY

Government estimates of population available for work

Net migration into and out of the area

Numbers entering the workplace

Numbers leaving the workplace

Numbers graduating from schools / colleges

Changing workforce composition

Technological shifts

Industrial shifts

Trends in the industry (actions of competing employers)

Economic forecasts

Government regulations & pressures such as job reservations for certain groups

3. Methods of Forecasting External HR Supply


HR Plan Implementation

Strategy HR Initiative

Strategies for Managing

Shortages

Strategies for Managing

Surplus

Recruit new permanent employees

Offer incentives to postpone retirement

Re-hire retirees part-time Attempt to reduce turn-over Work current staff overtime Subcontract work to another

company

Hire temporary employees Redesign job process so that

fewer employees are needed

Hiring freeze Do not replace those who leave Offer VRS schemes Reduce work hours Leave of absence Across the board pay-cuts Layoffs Reduce outsourced work Employee training Switch to variable pay plan Expand operators


A systematic & deliberate process of identifying, developing & tracking key individuals within

the firm to prepare them for assuming senior & top-level positions in future.

Eg., SAIL poaching from global players & preparing a defence system wherein 2nd & 3rd

line of command is being prepared; IBM, ExxonMobil, GE, etc., have already hired its

CEO for 2010

Eg., Godrej, Marico (fly. owned business) in India have drop dead succession plan which

keeps the wheel moving where a promoter of the fly-owned firm may always be around

to guide the company

MANAGERIAL SUCCESSION PLANNING


After the supply of and demand for workers has bee n analyzed, the two

forecasts must be compare d. Whenever there is a gap between the two

estimates, a course of action must be c hosen.

If the supply of workers is less than the demand, then it can be filled with

present employees who are willing to work overtime

Action Decisions in HR Planning


If there is a shortage of skilled employees, then train and /or promote

present employees; recruit less skilled employees; recall employees who

were previously laid off.

Possible solutions to an employee surplus are:- attrition, early retirements,

demotions, layoffs, terminations



Organizations are using more Part-time workers, subcontractors and independent

professionals as a response to intense global competition, rapid technological change

and information is the key to successful HR planning. A human resource

information system (HRIS) is an integrated way to acquire, store, analyze and control

information flow through an organization.

A highly developed HRIS can increase the efficiency and response times of tracking

applicants, skills inventory, career planning and employee service programs ears caused

by recent workforce reductions



Human Resource Planning

Methods of Forecasting

HR Demand and Supply methods

Succession planning

Summary

MM ZC441-L2

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