Chapter 2 Developing and Implementing Strategic HRM Plans.pdf

Chapter 2
Developing and
Implementing
Strategic HRM Plans
FATIMA MYNABELLE D. BELDIA-DARIA, PhD

2.1 The Value of Planning
HR planning ensures the best fit between
employees and jobs while avoiding manpower
shortages or surpluses. There are four key steps to
the HRP process. They include analyzing present
labor supply, forecasting labor demand, balancing
projected labor demand with supply, and
supporting organizational goals.

Real-life Situation
James stumbled into his position as the human resource manager.
He had been working for Techno, Inc. for three years, and when the
company grew, James moved from a management position into a
human resource management position. Techno, Inc. is a technology
and software consulting company for the music industry.
James didn’t have a good handle on how to effectively run a human
resources (HR) department, so for much of the time he tried to figure
it out as he went. When Techno started seeing rapid growth, he hired
thirty people within a one-month period to meet the demand. Proud of
his ability to accomplish his task of meeting the business’s current
needs, James was rather pleased with himself. He had spent
numerous hours mulling over recruitment strategies, putting together
excellent compensation plans, and then eventually sifting through
résumés as a small part of the hiring process. Now the organization
had the right number of people needed to carry out its projects.

GRADUATE SCHOOL
Real-life Situation
Fast forward five months, however, and it turned out the rapid growth was only
temporary. James met with the executives of the business who told him the
contracts they had acquired were finished, and there wasn’t enough new work
coming in to make payroll next month if they didn’t let some people go. James felt
frustrated because he had gone through so much effort to hire people, and now
they would be laid off. Never mind the costs of hiring and training his department
had taken on to make this happen. As James sat with the executives to determine
who should be laid off, he felt sad for the people who had given up other jobs just
five months before, only to be laid off.
After the meeting, James reflected on this situation and realized that if he had
spoken with the executives of the company sooner, they would have shared
information on the duration of the contracts, and he likely would have hired people
differently, perhaps on a contract basis rather than on a full-time basis. He also
considered the fact that the organization could have hired an outsourcing company
to recruit workers for him. As Jason mulled this over, he realized that he needed a
strategic plan to make sure his department was meeting the needs of the
organization. He vowed to work with the company executives to find out more
about the company’s strategic plan and then develop a human resource
management (HRM) strategic plan to make sure Techno, Inc. has the right number
of workers with the right skills, at the right time in the future.

2.2 Strategic Planning
Learning Objectives
1. Explain the differences been HRM and personnel
management.
2. Be able to define the steps in HRM strategic
planning.
In the past, human resource management (HRM) was called the
personnel department. In the past, the personnel department hired
people and dealt with the hiring paperwork and processes. It is believed
the first human resource department was created in 1901 by the National
Cash Register Company (NCR). The company faced a major strike but
eventually defeated the union after a lockout.
GRADUATE SCHOOL

Personnel
Management Focus
HRM Focus
Administering of
policies Helping to achieve strategic
goals through people
More recently, however, the personnel department has divided into human
resource management and human resource development, as these
functions have evolved over the century. HRM is not only crucial to an
organization’s success, but it should be part of the overall company’s
strategic plan, because so many businesses today depend on people to
earn profits. Strategic planning plays an important role in how productive
the organization is.
Table 2.1: Examples of Differences between Personnel
Management and HRM

Personnel
Management Focus
HRM Focus
Stand-alone programs, such as
training
HRM training programs that are integrated
with company’s mission and values
Personnel department responsible for
managing people.
Line managers share joint responsibility in
all areas of people hiring and management
Creates a cost within
an organization
Contributes to the profit objectives of the
organization
Table 2.1: Examples of Differences between Personnel
Management and HRM
FATIMA MYNABELLE D. BELDIA-DARIA, PHD

Most people agree that the following duties normally fall
under HRM. Each of these aspects has its own part within
the overall strategic plan of the organization:
Staffing. Staffing includes
the development of a
strategic plan to determine
how many people you might
need to hire. Based on the
strategic plan, HRM then
performs the hiring process
to recruit and select the
right people for the right
jobs.
Staffing
Basic workplace policies.
Development of policies to help
reach the strategic plan’s goals is
the job of HRM. After the policies
have been developed,
communication of these policies on
safety, security, scheduling,
vacation times, and flextime
schedules should be developed by
the HR department. Of course, the
HR managers work closely with
supervisors in organizations to
develop these policies.
Basic Workplace
policies
Compensation and benefits.
In addition to paychecks,
401(k) plans, health benefits,
and other perks are usually
the responsibility of an HR
manager.
Compensation and
benefits.

Most people agree that the following duties normally fall
under HRM. Each of these aspects has its own part within
the overall strategic plan of the organization:
Retention. Assessment of
employees and
strategizing on how to
retain the best employees
is a task that HR
managers oversee, but
other managers in the
organization will also
provide input.
Retention.
Training and development. Helping new
employees develop skills needed for
their jobs and helping current employees
grow their skills are also tasks for which
the HRM department is responsible.
Determination of training needs and
development and implementation of
training programs are important tasks in
any organization. Succession planning
includes handling the departure of
managers and making current employees
ready to take on managerial roles when a
manager does leave.
Training and
development.
Regulatory issues and
worker safety. Keeping up
to date on new regulations
relating to employment,
health care, and other
issues is generally a
responsibility that falls on
the HRM department.
Regulatory issues
and worker safety.

In smaller organizations, the manager or owner is
likely performing the HRM functions.
They hire people, train them, and determine how
much they should be paid. Larger companies
ultimately perform the same tasks, but because
they have more employees, they can afford to
employ specialists, or human resource managers,
to handle these areas of the business. As a
result, it is highly likely that you, as a manager or
entrepreneur, will be performing HRM tasks,
hence the value in understanding the strategic
components of HRM.

2.3 HRM vs. Personnel Management
Human resource strategy is an elaborate and
systematic plan of action developed by a human
resource department. This definition tells us that
an HR strategy includes detailed pathways to
implement HRM strategic plans and HR plans.
Think of the HRM strategic plan as the major
objectives the organization wants to achieve, and
the HR plan as the specific activities carried out to
achieve the strategic plan. In other words, the
strategic plan may include long-term goals, while
the HR plan may include short-term objectives that
are tied to the overall strategic plan.
Human resource departments in the past were called
personnel departments. This term implies that the
department provided “support” for the rest of the
organization.

Newly Revised Model looks at Five
Main areas of HR:
1. Strategic partner. Partnership with the entire
organization to ensure alignment of the HR function
with the needs of the organization.
2. Change agent. The skill to anticipate and respond to
change within the HR function, but as a company as a
whole.
3. Administrative expert and functional expert. The
ability to understand and implement policies,
procedures, and processes that relate to the HR
strategic plan.
4. Human capital developer. Means to develop talent
that is projected to be needed in the future.
5. Employee advocate. Works for employees currently
within the organization.
According to Ulrich, implementation of this model must happen with an understanding of the overall company objectives, problems, challenges,
and opportunities. For example, the HR professional must understand the dynamic nature of the HRM environment, such as changes in labor
markets, company culture and values, customers, shareholders, and the economy. Once this occurs, HR can determine how best to meet the needs
of the organization within these five main areas.

HRM as a Strategic Component of the Business
Keeping the Ulrich model in mind, consider these four aspects when creating a good
HRM strategic plan:

HRM as a Strategic Component of the Business
1. Often people spend an inordinate amount of time
developing plans, but the plans sit in a file
somewhere and are never actually used. A good
strategic plan should be the guiding principles for the
HRM function. It should be reviewed and changed as
aspects of the business change. Involvement of all
members in the HR department (if it’s a larger
department) and communication among everyone
within the department will make the plan better.
2.Alignment of corporate values in the HRM strategic
plan should be a major objective of the plan. In
addition, the HRM strategic plan should be aligned with
the mission and objectives of the organization as a
whole. For example, if the mission of the organization
is to promote social responsibility, then the HRM
strategic plan should address this in the hiring criteria.
3. An HRM strategic plan cannot be written alone. The
plan should involve everyone in the organization. For
example, as the plan develops, the HR manager should
meet with various people in departments and find out
what skills the best employees have. Then the HR
manager can make sure the people recruited and
interviewed have similar qualities as the best people
already doing the job. In addition, the HR manager will
likely want to meet with the financial department and
executives who do the budgeting, so they can determine
human resource needs and recruit the right number of
people at the right times.
4. Organizations oftentimes do not have the money or the inclination
to research software and find budget-friendly options for
implementation. People are sometimes nervous about new technology.
However, the best organizations are those that embrace technology
and find the right technology uses for their businesses. There are
thousands of HRM software options that can make the HRM processes
faster, easier, and more effective. Good strategic plans address this
aspect.
Make it applicable
Be a strategic partner
Involve people.
Understand how technology can be
used.
Keeping the Ulrich model in mind, consider these four aspects when creating a good
HRM strategic plan:

2.3.1 The Steps to Strategic
Plan Creation
HRM strategi plans must have several elements to
be successful. There should be a distinction made
here: the HRM strategic plan is different from the
HR plan. Think of the HRM strategic plan as the
major objectives the organization wants to achieve,
while the HR plan consists of the detailed plans to
ensure the strategic plan is achieved. Oftentimes
the strategic plan is viewed as just another report
that must be written. Rather than jumping in and
writing it without much thought, it is best to give
the plan carefulconsideration.

2.3.2 Conduct a Strategic Analysis
1. Understanding of the company mission and values. It is impossible to plan for HRM if one does not
know the values and missions of the organization. As we have already addressed in this chapter, it is
imperative for the HR manager to align department objectives with organizational objectives. It is
worthwhile to sit down with company executives, management, and supervisors to make sure you have
a good understanding of the company mission and values.
An organizational life cycle refers to the introduction, growth, maturity, and decline of the
organization, which can vary over time. For example, when the organization first begins, it is in the
introduction phase, and a different staffing, compensation, training, and labor/employee relations
strategy may be necessary to align HRM with the organization’s goals. This might be opposed to an
organization that is struggling to stay in business and is in the decline phase. That same organization,
however, can create a new product, for example, which might again put the organization in the growth
phase.

2. Understanding of the HRM department mission and values. HRM departments must develop their own
departmental mission and values. These guiding principles for the department will change as the
company’s overall mission and values change.
Often the mission statement is a list of what the department does, which is less of a strategic approach.
Brainstorming about HR goals, values, and priorities is a good way to start. The mission statement should
express how an organization’s human resources help that organization meet the business goals.
A poor mission statement might read as
follows: “The human resource department
at Techno, Inc. provides resources to hiring
managers and develops compensation
plans and other services to assist the
employees of our company.”
A strategic statement that expresses how human resources help
the organization might read as follows: “HR’s responsibility is to
ensure that our human resources are more talented and
motivated than our competitors’, giving us a competitive
advantage. This will be achieved by monitoring our turnover
rates, compensation, and company sales data and comparing that
data to our competitors.”

3. Understanding of the challenges facing the department. HRM managers cannot deal with change
quickly if they are not able to predict changes. As a result, the HRM manager should know what
upcoming challenges may be faced to make plans to deal with those challenges better when they come
along. This makes the strategic plan and HRM plan much more usable.

Life Cycle Stage Staffing Compensation Training and Development Labor / Employee Relations
Introduction
Attract best technical and professional
talent.
Meet or exceed labor market
rates to attract needed talent.
Define future skill requirements and
begin establishing career ladders.
Set basic employee- relations
philosophy of organization.
Growth
Recruit adequate numbers and mix of
qualifying workers. Plan management
succession. Manage rapid internal labor
market
Meet external market but consider
internal equity effects. Establish
formal compensation structures.
Mold effective management team
through management development
and organizational development.
Maintain labor peace, employee
motivation, and morale.
Maturity
Encourage sufficient turnover to minimize
layoffs and provide new openings.
Encourage mobility as reorganizations shift
jobs around.
Control compensation costs.
Maintain flexibility and skills of an
aging workforce.
Control labor costs and maintain
labor peace. Improve productivity.
Decline
Plan and implement workforce reductions
and reallocations; downsizing and
outplacement may occur during this stage.
Implement tighter cost control.
Implement retraining and career
consulting services.
Improve productivity and achieve
flexibility in work rules. Negotiate job
security and employment-
adjustment policies
Table 2.2 Lifecycle Stages and HRM Strategy

2.3.3 Identify Strategic HR Issues
In this step, the HRM professionals will analyze the challenges addressed in the first step. For example, the
department may see that it is not strategically aligned with the company’s mission and values and opt to make
changes to its departmental mission and values as a result of this information.
Many organizations and departments will use a strategic planning tool that
identifies strengths, weaknesses, opportunities, and threats (SWOT analysis)
to determine some of the issues they are facing. Once this analysis is
performed for the business, HR can align itself with the needs of the business
by understanding the business strategy.
Once the alignment of the company SWOT is completed, HR can develop its
own SWOT analysis to determine the gaps between HR’s strategic plan and the
company’s strategic plan. For example, if the HR manager finds that a
department’s strength is its numerous training programs, this is something
the organization should continue doing. If a weakness is the organization’s
lack of consistent compensation throughout all job titles, then the opportunity
to review and revise the compensation policies presents itself. In other words,
the company’s SWOT analysis provides a basis to address some of the issues
in the organization, but it can be whittled down to also address issues within
the department.

Hiring talented people
Company growth
Technology implementation for
business processes
Excellent relationship between
HRM and management/executives
Strengths
No strategic plan for HRM
No planning for up/down cycles
No formal training processes
Lacking of software needed to
manage
business processes, including go-to-
market
staffing strategies
Weaknesses
Development of HRM staffing plan to
meet industry growth
HRM software purchase to manage
training, staffing, assessment needs for
an unpredictable business cycle
Continue development of HRM and
executive relationship by attendance and
participation in key meetings and
decision-making processes
Develop training programs and outside
development opportunities to continue
development of in-house marketing
expertise
Opportunities
Economy
Changing technology
Threats
Table 2.2: Sample HR Department SWOT Analysis for Techno, Inc.

Personnel management and HRM are different ways of looking at the job duties of human resources.
Twenty years ago, personnel management focused on administrative aspects. HRM today involves a
strategic process, which requires working with other departments, managers, and executives to be
effective and meet the needs of the organization.
In general, HRM focuses on several main areas, which include staffing, policy development,
compensation and benefits, retention issues, training and development, and regulatory issues and
worker protection.
To be effective, the HR manager needs to utilize technology and involve others.
As part of strategic planning, HRM should conduct a strategic analysis, identify HR issues, determine
and prioritize actions, and then draw up the HRM plan.
Key Takeaways

1. What is the difference between HR plans and HRM
strategic plans? How are they the same? How are they
different?
2. Of the areas of focus in HRM, which one do you think is
the most important? Rank them and discuss the reasons for
your rankings.
Exercises

2.4 Writing the HRM Plan
1. Describe the steps in the development of an HRM plan.
Learning Objective
How Would You Handle This?
As the HR manager, you have access to sensitive data, such as pay information. As you are
looking at pay for each employee in the marketing department, you notice that two employees
with the same job title and performing the same job are earning different amounts of money. As
you dig deeper, you notice the employee who has been with the company for the least amount of
time is actually getting paid more than the person with longer tenure. A brief look at the
performance evaluations shows they are both star performers. You determine that two different
managers hired the employees, and one manager is no longer with the organization. How would
you handle this?
Compensation Is a Touchy Subject

Fig. 2.2: As you can see from this figure, the company strategic plan ties into the HRM strategic plan,
and from the HRM strategic plan, the HR plan can be developed.

The six parts of the HRM plan include the following:
1. Determine human resource needs. This part is heavily involved with the
strategic plan. What growth or decline is expected in the organization?
How will this impact your workforce? What is the economic situation?
What are your forecasted sales for next year?
2. Determine recruiting strategy. Once you have a plan in place, it’s
necessary to write down a strategy addressing how you will recruit the
right people at the right time.
3. Select employees. The selection process consists of the interviewing and hiring process.
4. Develop training. Based on the strategic plan, what training needs are arising? Is there new software that
everyone must learn? Are there problems in handling conflict? Whatever the training topics are, the HR
manager should address plans to offer training in the HRM plan.
5. Determine compensation. In this aspect of the HRM plan, the manager must determine pay scales and
other compensation such as health care, bonuses, and other perks.
6. Appraise performance. Sets of standards need to be developed so you know how to rate the performance
of your employees and continue with their development.
Each chapter of this text addresses one area of the HR plan, but the next sections provide some basic
knowledge of planning for each area.

2.4.1 Determine Human Resource Needs
The first part of an HR plan will consist of determining how many people are needed.
This step involves looking at company operations over the last year and asking a lot of
questions:
1. Were enough people hired?
2. Did you have to scramble to hire people at the last minute?
3. What are the skills your current employees possess?
4. What skills do your employees need to gain to keep up with technology?
5. Who is retiring soon? Do you have someone to replace them?
6. What are the sales forecasts? How might this affect your hiring?
These are the questions to answer in this first step of the HR plan process. As you can imagine, this cannot
be done alone. Involvement of other departments, managers, and executives should take place to obtain an
accurate estimate of staffing needs for now and in the future.

2.4.2 Recruit
Recruitment is an important job of the HR manager.
Knowing how many people to hire, what skills they
should possess, and hiring them when the time is
right are major challenges in the area of recruiting.
Hiring individuals who have not only the skills to do
the job but also the attitude, personality, and fit
can be the biggest challenge in recruiting.
Depending on the type of job you are hiring for, you
might place traditional advertisements on the web or
use social networking sites as an avenue. Some
companies offer bonuses to employees who refer
friends. No matter where you decide to recruit, it is
important to keep in mind that the recruiting
process should be fair and equitable and diversity
should be considered.
Depending on availability and time, some companies
may choose to outsource their recruiting processes.
For some types of high-level positions, a head hunter
will be used to recruit people nationally and
internationally. A head hunter is a person who
specializes in matching jobs with people, and they
usually work only with high-level positions. Another
option is to use an agency that specializes in hiring
people for a variety of positions, including temporary
and permanent positions. Some companies decide to
hire temporary employees because they anticipate only
a short-term need, and it can be less expensive to hire
someone for only a specified period of time. No matter
how it is done, recruitment is the process of obtaining
résumés of people interested in the job.

2.4.3 Select
After you have reviewed résumés for a position, now is the time to work toward
selecting the right person for the job.
1. Time to review résumés
2. Time to interview candidates
3. Interview expenses for candidates
4. Possible travel expenses for new hire or recruiter
5. Possible relocation expenses for new hire
6. Additional bookkeeping, payroll, 401(k), and so forth
7. Additional record keeping for government agencies
8. Increased unemployment insurance costs
9. Costs related to lack of productivity while new employee gets up to speed
Because it is so expensive to hire, it is important to do it right. First, résumés are reviewed and people who closely match the
right skills are selected for interviews. Many organizations perform phone interviews first so they can further narrow the field.
The HR manager is generally responsible for setting up the interviews and determining the interview schedule for a particular
candidate.

2.4.5 Develop Training
Once we have planned our staffing, recruited people, selected employees, and then compensated
them, we want to make sure our new employees are successful. One way we can ensure success is
by training our employees in three main areas:
1. Company culture. A company culture is the organization’s way of doing things. Every company
does things a bit differently, and by understanding the corporate culture, the employee will be set up
for success. Usually this type of training is performed at an orientation, when an employee is first
hired. Topics might include how to request time off, dress codes, and processes.
2. Skills needed for the job. If you work for a retail store, your employees need to know how to use
the register. If you have sales staff, they need to have product knowledge to do the job. If your
company uses particular software, training is needed in this area.
3. Human relations skills. These are non-job-specific skills your employees need not only to do their
jobs but also to make them all-around successful employees. Skills needed include communication
skills and interviewing potential employees.

2.4.6 Perform a Performance Appraisal
The last thing an HR manager should
plan is the performance appraisal, it is
definitely worth a mention here, since it
is part of the strategic plan. A
performance appraisal is a method by
which job performance is measured. The
performance appraisal can be called
many different things, such as the
following:
Employee appraisal
Performance review
360 review
Career development review
No matter what the name, these appraisals can be very
beneficial in motivating and rewarding employees. The
performance evaluation includes metrics on which the
employee is measured. These metrics should be based on the
job description, both of which the HR manager develops.
Various types of rating systems can be used, and it’s usually
up to the HR manager to develop these as well as employee
evaluation forms.
The HR manager also usually ensures that every manager in
the organization is trained on how to fill out the evaluation
forms, but more importantly, how to discuss job performance
with the employee. Then the HR manager tracks the due dates
of performance appraisals and sends out e-mails to those
managers letting them know it is almost time to write an
evaluation.

Human Resource Recall
Have you ever been given a performance
evaluation? What was the process and the
outcome?

Human resource planning is a process that is part of the strategic plan. It involves addressing
specific needs within the organization, based on the company’s strategic direction.
The first step in HR planning is determining current and future human resource needs. In this
step, current employees, available employees in the market, and future needs are all analyzed
and developed.
In the second step of the process, once we know how many people we will need to hire, we
can begin to determine the best methods for recruiting the people we need. Sometimes an
organization will use head hunters to find the best person for the job.
After the recruiting process is finished, the HR manager will begin the selection process. This
involves setting up interviews and selecting the right person for the job. This can be an
expensive process, so we always want to hire the right person from the beginning.
HR managers also need to work through compensation plans, including salary, bonus, and
other benefits, such as health care. This aspect is important, since most organizations want
to use compensation to attract and retain the best employees.
The HR manager also develops training programs to ensure the people hired have the tools to
be able to do their jobs successfully.

Exercises
1. Of the parts of HR planning, which do
you think is most difficult, and why?
Which would you enjoy the most, and
why?
2. Why is it important to plan your
staffing before you start to hire people?
3. What is the significance of training?
Why do we need it in organizations?

THANK YOU!

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