Human Resource Management

BITS Pilani
Hyderabad Campus

Session 2

Date: 14 - 1 2015

Total Slides: 60

By: Dr. Payal Mehta

BITS Pilani
Hyderabad Campus

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.

Leaning Outcome:
Understanding the Nature of Strategic HRM

Describe the Strategic Management Process

Integrate HR Functions with Strategic Management Process

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Strategic management
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.

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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, crosstraining teams

Key investments

Capital, products

People, knowledge

Accountability

Cost centre

Investment centre
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Strategic HR Model
Institutional/
Political forces

Firm strategy

Resource
dependence
institutional

Resource-based
view of the firm
HRM Practices
Cybernetic Agency/
Transaction Costs
HR Capital Pool
(skills, abilities)

HR Behaviours

Behavioural
Approach
Firm-level Outcomes
(performance, satisfaction,
absenteeism, etc.)

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Strategic Management Process

I.

Environmental Scanning

II. Identifying sources of competitive advantage

III. HR Strategy formulation
IV. HR Strategy Implementation
V. Strategy Evaluation and Monitoring

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I: Environmental Scanning
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..

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Worksheet for Environmental Scanning

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What is a SWOT Analysis?

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.

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SWOT Analysis
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:

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The SWOT Framework

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l
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Campus

Strengths
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

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Weaknesses
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
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Weaknesses - Continued
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.

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Opportunities
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

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Threats
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

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Example: Surf excel SWOT Analysis

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

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Analysis:
Strength:
Strong brand
portfolio
Brand name
Solid base of
company
Innovative aspects
Success of slogan:
stain is good

Weakness:
High price of the products
No famous brand ambassador

Threats:

Political effect
Legislative effect
Opportunities:
Environmental effect
Changing life style of the
people
Introduction of local
New market vertical, horizontal
product
Increasing the volume of the
production
Change in life style
Seasonal weather and fashion Chances of price
influences
war
Technology innovation and
development
Economic crisis
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SWOT :Naukri.com
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.

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Solution
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

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II. Identify Sources of Competitive Advantage

Sources as quality, price, brand positioning, timely delivery and customer
service.
Competitive Advantage
Core capabilities
Intellectual Capital

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III. Identify HRM Strategies

Indirect
Interventions

Direct
Interventions

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

Human Capital

Social Capital
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IV. Implementing HR Strategies

V. Monitor and Evaluation
Implementation through HR plans, policies and practices.

Monitoring as establishing targets, measuring performance, analyzing the

deviation and executing the modifications.

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Benefits of Strategic Management

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.

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HR Role in 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
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Summary
Strategy management

SWOT
Role of HRM in aligning with Business strategy

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BITS Pilani
Hyderabad Campus

Chapter 4: Human resource Planning

Learning Objectives
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

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Human Resource Planning

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

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Objectives of 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

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Factors Affecting HRP

Organisational
Growth Cycle
and Planning
Type and
Strategy of
Organisation

Environmental
Uncertainties

HRP
Time
Horizons

Outsourcing

Type and
Quality of
Forecasting
Information

Nature of
Jobs being
Filled

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HRP Process

1.

Environmental scanning

2.

Forecasting & analyzing demand for HR

3.

Forecasting & analyzing supply of HR

4.

Developing action plans to match HR demand & supply

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HRP Process
Environment

Organisational Activities
and Policies

HR Needs Forecast

HR Supply Forecast

HR Programming

HRP Implementation

Control and Evaluation

of Programme
Surplus
Restricted Hiring
Reduced Hours
VRS, Layoff, etc

Shortage
Recruitment
Selection, etc

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Environmental Scanning
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.

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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
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Forecasting HR Demand
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..

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Methods of Demand Estimation

1.

Management Judgment
Top-Down Approach
Bottom Up Approach

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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)

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Methods of Demand Estimation

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

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Methods of Demand Estimation

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%

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Methods of Demand Estimation

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
x

a
Manpower

x
x

b
Production level

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Methods of Demand Estimation

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

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Methods of Demand Estimation

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

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Forecasting & Analyzing HR Supply

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

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1. Present Employees
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

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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

HRIS

Equal Employment
Affirmative Action Plan
Applicant Tracking
Workforce Utilisation
Availability Analysis

Staffing
Recruitment Sources
Applicant Tracking
Job Offer Refusal Analysis

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

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2. Internal Supply
Techniques are:

1. Inflows and Outflows

2. Turnover rate
3. Conditions of work and absenteeism
4. Productivity level
5. Movement among jobs

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1. Inflows and Outflows:

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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

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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

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3. Methods of Forecasting External HR Supply

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

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HR Plan Implementation
Strategy HR Initiative

Strategies for Managing

Shortages

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

Strategies for Managing

Surplus

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

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MANAGERIAL SUCCESSION PLANNING

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

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BITS Pilani, Hyderabad Campus

Action Decisions in HR 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

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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

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Action Decisions in HR Planning

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

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Summary
Human Resource Planning

Methods of Forecasting
HR Demand and Supply methods
Succession planning

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