HR ROLE AS A STRATEGIC PARTNER

Personnel/HR’s long history as a staff or advisory function has left it with a some-what impoverished reputation: Some still tend to view it as less than it is. For example, one view is that HR is strictly operational and that HR activities are not strategic at all. According to this line of reasoning, HR activities simply” ... involve putting out small fires - ensuring that people are paid on the right day; the job advertisement meets the newspaper deadline; and the same manager remembers to observe due process before sacking the new rep who didn’t work out.

A more sophisticated (but perhaps no more accurate) view of HR is that its role is simply to “fit” the company’s strategy. In this view HR’s strategic role is to adapt individual HR practices (recruiting, rewarding, and so on) to fit specific corporate and competitive strategies. By this view, top management crafts a corporate strategy – such as to buy Lotus – and then HR is told to create the HR program required to successfully implement that corporate strategy. As two strategic planning experts have argued, “the human resources management system must be tailored to the demands of business strategy.” The idea here is that for any particular organizational strategy, there is purportedly a matching human resource strategy.”

The third view of HR management is that it is an equal partner in the strategic planning process. By this view HR management’s role is not just to tailor its activities to the demands of business strategy, nor, certainly, just to carry out operational day-to-day tasks like ensuring that employees are paid. Instead, by this third view, the need to forge a company’s work force into a competitive advantage means that human resource management must be an equal partner in both the formulation and the implementation of the company’s organization wide and competitive strategies.

HR’S ROLE IN FORMULATING STRATEGY

Formulating a Company’s overall strategic plan requires identifying, analyzing, and balancing two sets of forces: the company’s external opportunities and threats on the one hand, and its internal strengths and weaknesses on the other.

This is where strategic HR management comes in. First, HR management can play a role in what strategic planners call environmental scanning, in other words, identifying and analyzing external opportunities and threats that may be crucial to the company’s success. For example, in 1995 both United Airlines and American Airlines considered and then rejected the opportunity to acquire US Air, a smaller and relatively weak airline. While both American and United had several reasons for rejecting a bid, HR considerations loomed large. Specifically, both American and United had doubts about their abilities to successfully negotiate new labor agreements with US Air’s employees, and both felt the problems of assimilating them might be too great.

Similarly, HR management is in a unique position to supply competitive intelligence that may be useful in the strategic planning process. Details regarding advanced incentive plan being used by competitors, opinion survey data from employees that elicit information about customer complaints and information about pending legislation like labor laws or mandatory health insurance are some examples.

HR also participates in the strategy formulation process by supplying information regarding the company’s internal strengths and weaknesses. For example, IBM’s decision to buy Lotus was probably promoted in part by IBM’s conclusion that its own human resources were inadequate to enable the firm to reposition itself as an industry leader in networking systems, or at least to do so quickly enough.

The strengths and weaknesses of a company’s human resources can have a determining effect on the viability of the firm’s strategic options. For example, “situations were human resource capabilities serve as a driving force in strategy formulation occur where there are unique (human) capabilities……”. Here we often find a company building its new strategy around an HR-based competitive advantage. For example, in the process of automating its factories, farm equipment manufacturer John Deere developed a work force that was exceptionally talented and expert in factory automation. This in turn prompted the firm to establish a new-technology division to offer automation services to other companies. As another example, the accounting and consulting firm Arthur Andersen developed unique human resource capabilities in training. The firm’s Illinois training facility is so sophisticated that it provides the firm with a competitive advantage, enabling it to provide fast, uniform training in house and so” ... react quickly to the changing demands of its clients.”

HR’S ROLE IN EXECUTING STRATEGY

We’ve also seen that HR management can play a pivotal role in the successful execution or implementation of a company’s strategic plan. For example, Federal Express’s competitive strategy is to differentiate itself from its competitors by offering superior customer service and guaranteed on-time deliveries. Since basically the same technologies are available to UPS, DHI, and FedEx’s other competitors, it’s Fed Ex’s work force – its human resource – who necessarily provides Fed Ex with a crucial competitive advantage. This puts a premium on the firm’s HR processes, as discussed earlier, and on the firm’s ability to create a highly committed, competent, and customer-oriented work force.

HR management supports strategic implementation in numerous other ways. For example, HR is today heavily involved in the execution of most firms downsizing and restructuring strategies, through out placing employees, instituting pay-for-performance plans, reducing health care costs, and retraining employees. And in an increasingly competitive global marketplace, instituting HR practices that build employee commitment can help improve a firm’s responsiveness, as explained earlier.

HR PLANNING

WHAT IS HR PLANNING?

§  HR planning is one of the most important elements in a successful human resource management program because it is a process by which an organization ensures that it has the right number and kinds of people, at the right time, capable of effectively and efficiently completing those tasks that will help the organization to achieve its overall strategic objectives.

§  HR planning ultimately translates the organization's overall goals into number and types of employees needed to meet those goals.

§  HR planning cannot exist in isolation. It must be linked to the organization’s overall strategy, i.e. there is a clear linkage between the Organizational strategy and the HR planning. Therefore, senior HR managers need to understand the overall business strategy as the HR planning is linked with it.

§ 

LINKING ORGANIZATIONAL STRATEGY TO HR PLANNING

	Mission	Spells out who the company is, what it does, and where it’s headed.
	Objectives and Goals	Setting goals and objective.
	Strategy	Determining how the goals and objectives will be achieved.
	Structure	Determining what job need to be done and by whom.
	People	Matching skills, knowledge and abilities to require the job,

IMPORTANCE OF HR PLANNING

·         Achieve goals and objectives

·         Plan staffing and development activities

·         Achieve economies in hiring

·         Make major labour market demands

·         Anticipate and avoid staff shortages/surpluses

·         Control/reduce labour costs

·         Utilize employee capabilities effectively

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Like any good plans, HR plans are built on premises-basic assumptions about the future. The purpose of forecasting is to develop these basic premises. If you are planning for HR requirements, you’ll usually need three sets of forecasts:

·         One for HR Needs;

·         One for the supply of Inside Candidates; and

·         One for the supply of Outside Candidates;

THE HUMAN RESOURCE PLANNING PROCESS

	STRATEGIC PLANNING
	HR PLANNING
FORECASTING DEMAND FOR HUMAN RESOURCES	COMPARISON OF REQUIREMENTS AND AVAILABILITY	FORECASTING SUPPLY OF           HUMAN RESOURCES
DEMAND =SUPPLY	SURPLUS OF WORKERS	SHORTAGE OF WORKERS
NO ACTION	RESTRICTED HIRING, EARLY RETIREMENT, RETRENCHMENT	RECRUITMENT & SELECTION

FACTORS IN FORECASTING HR NEEDS

Managers should consider several factors when forecasting personnel needs. From a practical point of view, the demand for your product or service is paramount. Thus, in a manufacturing firm, sales are projected first. Then the volume of production required to meet these sales requirements is determined. Finally, the staff needed to meet this volume of output is estimated. In addition, the following factors should also be considered:

• Projected Turnover (as a result of resignations or terminations).
• Quality and the nature of your employees in relation to what you see as the changing needs of your organization.
• Decisions to upgrade the quality of products or services or enter into new markets.
• Technological changes resulting in increased productivity.

• The financial resources available to your department.

TECHNIQUES FOR DETERMINING HR REQUIREMENTS

Trend Analysis	Trend analysis means study of a firm’s past employment needs over a period of years to predict future needs.
Ratio Analysis	A forecasting technique for determining future staff needs by using ratios between sales volume and number of employees needed.
Regression Analysis	Statistical relationship between business activity and employees.
Managerial Judgment	It’s rare that any historical trend, ratio, or relationship will continue unchanged into the future. Judgment is thus needed to modify the forecast based on factors you believe will change in the future.

TECHNIQUES FOR FORECASTING THE SUPPLY OF INSIDE CANDIDATES

Markov Analysis	A method for tracking the pattern of employee movements through various jobs.
Qualifications Inventories	Manual or computerized systematic records listing employees’ performance records, educational background, promotability, interests, special skills, and so on to be used in forecasting inside candidates for promotion.
Personnel Replacement Charts	Company records showing present performance and promotability of inside candidates for the most important positions.
Succession Planning	A process of ensuring suitable supply of successors for current and future senior or key jobs arising from business strategy, so that the careers of individuals can be planned and managed to optimize the organization’s needs and individuals’ aspirations.