Chapter 2

Strategy and
Human
Resources
Planning

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 Learning Outcomes
After studying this chapter, you should be able to
1. Explain how human resources planning and a firm’s mission, vision,
and values are integrally linked to its strategy.
2. Understand how an organization’s external environment influences
its strategic planning.
3. Understand why it is important for an organization to do an internal
resource analysis.
4. Explain the linkages between competitive strategies and HR.
5. Understand what is required for a firm to successfully execute a
strategy and assess its effectiveness.
6. Describe how firms evaluate their strategies and HR execution.

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 Discussion Starter #1

Amazon.com has tested technology to deliver small packages to people’s

houses via drones.

 How might drone delivery change Amazon’s competitive environment?

 What changes in customers, new entrants, substitutes, and suppliers might
result?
 How would it affect the firm’s HR practices?
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 2.1 Strategic Planning and
Human Resources Planning
 Strategic planning – Procedures for making decisions
about the organization’s long-term goals and strategies
 Human resources planning (HRP) – The process of
anticipating and providing for the movement of people
into, within, and out of an organization
 Strategic human resources management – The
pattern of human resources deployments and activities
that enable an organization to achieve its strategic goals

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 Figure 2.1: Linking Strategic
Planning and Human Resources

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 2.2 Step One:
Mission, Vision, and Values
 Mission – The basic purpose of the organization
as well as its scope of operations
 Strategic vision – A statement about where the
company is going and what it can become in the
future
 Core values – The strong and enduring beliefs
and principles that guide a firm’s decisions and
are the foundation of its corporate culture

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 Video Highlight #1
Two of the most important and yet confusing
strategic decisions a business has to make are,
"What is our mission?" and "What is our vision?"
This video provides an explanation of how radically
different the two are from each other.

“What’s the Difference Between Mission and

Vision?”

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2.2a Developing a Mission Statement
 To begin crafting a business’s mission statement, one
should answer the following questions:
 What is my organization’s reason for being? What need does the
organization need to fulfill that isn’t already being met by another
firm or could be better met?
 For whom will the firm fulfill the need? Who are its customers?
 Where is the firm’s market and customers? Will the firm operate
locally, geographically, or globally?
 What core values do the people in the firm share as part of the
organization’s mission?
 How do these values differentiate the organization from other
companies?

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2.2b HR’s Role in Establishing and Reinforcing
a Firm’s Mission, Vision, and Values
 HR managers help embody the firm’s mission,
vision, and values within the organization by
doing the following:
 Communicating them frequently, both informally and
formally, via verbal and written communications
 Recruiting and hiring employees whose values are
consistent with the organization
 Translating the mission, vision, and values into job
descriptions and specific behaviors and recognizing
and rewarding employees based on them

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 2.3 Step Two: External Analysis
 SWOT analysis – A comparison of one’s strengths,
weaknesses, opportunities, and threats for strategy
formulation purposes
 Summarizes the major facts and forecasts derived from external
and internal analyses
 Environmental scanning – Systematic monitoring of
the major external forces influencing the organization
 Includes forces in the business environment (also called the
remote environment) and the competitive environment
 Business environment – Factors in the external environment that a
firm cannot directly control but that can affect its strategy and
performance

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 Figure 2.2:
The Five Forces Framework

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Figure 2.3: Primary Stakeholders
versus Secondary Stakeholders

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 Figure 2.4:
An Example of an HR Dashboard

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 Discussion Starter #2
What external forces influence a firm’s strategy?

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 2.4 Step Three: Internal Analysis
 In addition to an external analysis, organizations
must also analyze their own strengths and
weaknesses.

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 2.4a Core Capabilities
 Core capabilities – Integrated knowledge sets within an
organization that distinguish it from its competitors and deliver value
to customers
 Value creation – What a firm adds to a product or service by virtue of
making it; the amount of benefits provided by the product or service
once the costs of making it are subtracted
 Core capabilities can consist of a combination of three resources:
1. Processes – “Recipes” or standard routines for how work will be done
and results will be accomplished
2. Systems (technologies) – Include information systems, databases,
proprietary technologies, and the like
3. People – Include the knowledge, skills, and abilities of employees most
critical for executing the firm’s plan to create the most value for
customers and whose skills are difficult to replicate or replace

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 2.4b Sustaining a Competitive
Advantage Through People
 Organizations can achieve a sustained
competitive advantage if they have resources—
particularly people—that meet the following
criteria:
 The resources must be valuable.
 The resources must be rare.
 The resources must be difficult to imitate.
 The resources must be organized.

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Figure 2.5: Mapping Human Capital

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 2.4c Types of Talent and Their
Composition in the Workforce
Strategic Knowledge Workers
 Tend to have unique skills directly linked to the company’s strategy and are
difficult to replace

Core Employees
 Are valuable to a company but not particularly unique or difficult to replace

Supporting Workers
 Have skills that are less central to creating customer value and generally
available in the labor market

Complementary (External) Partners

 Have skills that are unique and specialized but not directly related to a
company’s core strategy

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 2.4d Corporate Culture
 Cultural audits – Audits of the culture and quality of
work life in an organization
 Examine values, attitudes, beliefs, and expectations

Conducting a Cultural Audit

 To conduct a cultural audit, employees can be surveyed
about how they feel about issues such as:
 How is business conducted within your organization?
 How do people communicate with one another?
 How are conflicts and crises resolved?

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Figure 2.6: Four Basic Types of
Organizational Culture

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Figure 2.7: Model of HR Forecasting

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 2.4e Forecasting (slide 1 of 3)
Forecasting a Firm’s Demand for Employees
Quantitative Approaches
 Trend analysis – A quantitative approach to forecasting labor demand
based on a factor such as sales
 More sophisticated statistical planning methods include modeling or
multiple predictive techniques.
Qualitative Approaches
 Management forecasts – The opinions (judgments) of supervisors,
department managers, experts, or others knowledgeable about the
organization’s future employment needs
 Delphi technique – Attempts to decrease the subjectivity of forecasts by
soliciting and summarizing the judgments of a preselected group of
individuals

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 2.4e Forecasting (slide 2 of 3)
Forecasting the Supply of Employees
Staffing Tables and Markov Analyses
 Staffing table – A table that shows a firm’s jobs, along with the numbers
of employees currently occupying those jobs and future (monthly or
yearly) employment requirements
 Markov analysis – A method for tracking the pattern of employee
movements through various jobs in a firm
 Quality of fill – A metric designed to measure how well new hires that fill
positions are performing on the job
Skill Inventories and Management Inventories
 Skill inventories – Files of personnel education, experience, interests,
skills, and so on that allow managers to quickly match job openings with
employee backgrounds.
 Management inventories – Data gathered on managers

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Figure 2.8: Hypothetical Markov
Analysis for a Retail Company

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 2.4e Forecasting (slide 3 of 3)
Forecasting the Supply of Employees (cont’d)
Replacement Charts and Succession Planning
 Replacement charts – Listings of current jobholders and people
who are potential replacements if an opening occurs
 Succession planning – The process of identifying, developing,
and tracking key individuals for executive positions
 Succession planning and replacement charts are often
developed in conjunction with talent reviews.
 Talent reviews – Strategic meetings to determine if a company has
the human resources it needs to compete in the future

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 Figure 2.9:
An Executive Replacement Chart

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 Figure 2.10:
Assessing a Firm’s Human Capital

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2.5 Step Four: Formulating a Strategy
 Strategy formulation builds on a SWOT analysis.
 A SWOT analysis can help a company move from
formulating a strategy, to devising a plan, to
capitalizing on opportunities, to counteracting on
threats, to alleviating internal weaknesses.

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 Figure 2.11: An Example of a
SWOT Analysis for Liz Claiborne

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 2.5a Corporate Strategy
 A firm’s corporate strategy includes the markets
in which it will compete, against whom, and how.
 Growth and diversification
 Mergers and acquisitions
 Strategic alliances and joint ventures

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 2.5b Business Strategy
 Business strategy is more focused on how the
company will compete against rival firms to
create value for customers.
 Companies can increase the value they offer
customers by decreasing the costs of their goods and
services (low-cost strategy) or by increasing the
benefits their products provide (differentiation
strategy).

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 Discussion Starter #3
 Explain the difference between a firm’s
corporate strategy and business strategy.
 Why do firms need to look at both aspects?

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 2.6 Step Five:
Executing a Firm’s Strategy
 Execution is the process of combining the
elements of human capital (alignment and
ability) and organizational capital (agility and
architecture).

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Figure 2.12: The 4As Framework
of Execution Capability

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2.6a HR’s Role in Strategy Execution
Remaining Agile
 HR agility can be achieved in two primary ways:
1. Coordination agility – The ability to rapidly reallocate resources to new
and changing needs
2. Resource agility – Having resources that can be used in different ways
and people who can perform different functions in different ways

Reconciling Supply and Demand

 Part of remaining agile includes reconciling the firm’s demand for its
products with its supply of employees.
 Demand considerations are based on forecasted trends in business
activity.
 Supply considerations involve determining where and how candidates
with the required qualifications can be found to fill a firm’s vacancies.
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 2.7 Step Six: Evaluation
 To evaluate their performance, firms need to
establish a set of “desired” objectives as well as
the metrics they will use to monitor how well
their organizations delivered against those
objectives.
 The objectives can include achieving a certain level of
production, revenue, profit, market share, market
penetration, customer satisfaction, and so forth.

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 2.7a Evaluating a Firm’s
Strategic Alignment
 HR policies and practices need to achieve two types of
fit:
1. Vertical fit/alignment – Focuses on the connection between the
business’s objectives and the major initiatives undertaken by HR
2. Horizontal fit/alignment – Focuses on ensuring that the
business’s HR practices are all aligned with one another
internally to establish a configuration that is mutually reinforcing
 Balanced scorecard (BSC) – A measurement
framework that helps managers translate strategic goals
into operational objectives

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Figure 2.13: Assessing Horizontal Fit

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 Figure 2.14:
Building the Metrics Model

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 Group Activity
To understand the important relationship between HR
functions and competitive advantage, divide into groups of
three and answer the following questions:
 Why are HR functions important?
 What do you understand from the term competitive
advantage?
 What is the relationship between HR functions and
competitive advantage?
 How can HR functions be used to gain competitive
advantage in a market? Cite examples.

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