Human Resource Management, 15th Edition
Reference Information for textbook
Mathis, Robert L. Human Resource Management, 15th. (Edition) [Vital Source Digital Version]. Retrieved from http://www.bookshelf, vitalsourse.com/books/
I was not sure how much of this chapter you would need so I just furnished the whole chapter. I know that one part calls for pg. 44 to be used I could not copy any of the figures but I did get what kind it is so maybe you could find the charts online somewhere.
Strategic Planning process for the Organization
2-1 Organizational Strategic Planning
Strategic planning is the process of defining organizational strategy, or direction, and allocating resources (capital and people) toward its achievement. Successful organizations engage in this core business process on an ongoing basis. The strategic plan serves as the road map that gives the organization direction and aligns resources. The strategic planning process involves several sequential steps that focus on the future of the firm; Figure 2-1 shows these steps. (Mathis 44-45)
2-1a Strategy Formulation
The strategic planning cycle typically covers a three- to five-year time frame, although some firms conduct long-term planning that can cover 10 years or more. When formulating the strategic plan, management often considers both internal and external forces that affect a company, including the conditions that exist in the industry overall. The guiding force behind the strategic planning process is the organizational mission , which is the core reason for the existence of the organization and what makes it unique. The mission statement is usually determined by the organizational founders or leaders and sets the general direction of the firm. (Mathis 45)
The planning process begins with an assessment of the current state of the business and the environmental forces that may be important during the strategic planning cycle. Analysis of strengths, weaknesses, opportunities, and threats (SWOT) is a common starting point because it allows managers to consider both internal and external conditions that the business faces. The SWOT analysis helps managers formulate a strategic plan that considers the organization’s ability to deal with the situation at hand based on its own strengths and weaknesses, as well as the external opportunities and threats that exist in the firm’s external environment. The planning process requires continuous monitoring and responding to environmental changes and competitive conditions, which means that strategic planning is an ongoing process that is never fully complete and must be constantly revisited.
Managers then determine the objectives for the planning cycle and formulate organization-level strategies to accomplish those objectives. Each function within the organization (such as the HR department) then formulates strategies that link to and support the organization-level strategies. The strategic plan is reevaluated periodically because conditions may change, and managers must react to a fluid business environment. (Mathis 45)
2-1b Good versus Bad Strategy
Many companies generate strategies that by their own admission are substandard. In one survey, McKinsey consultants asked 2,000 executives to rate their company’s strategies on a set of 10 strategic measures and found that only 35% of the executives felt their company passed more than three of the tests.3 They concluded that top management teams need to focus as much time on strategy as they do on operating issues on an ongoing basis if they are to have a useful strategy. (Mathis 45)
Suppose Company A allocates money consistently each year, making only small changes to the allocation of talent, capital, and research dollars. Company B, on the other hand, evaluates each division’s market opportunities and performance, and adjusts allocations based on that analysis. Which company should perform better? Company B does almost 40% better, although most companies function the way Company A does. Managers in Company A can shift resources to achieve their goals or run the risk that the market will do it for them.4 The following “HR Perspective: Encouraging the Evaluation and Reallocation of Strategic Assets” feature shows one way to do this analysis and reallocation.
Effective strategy often relies on managers who are willing to closely assess current conditions and develop a game plan that enables the firm to overcome obstacles and sustain success. At Walgreens, the company’s communication strategy relies on social media, blogs, and surveys to provide important information to employees on an ongoing basis.5 However, such a focus on communication does not preclude generating strategy ideas by opening up the process to stakeholders who might have been previously frozen out of strategic direction setting. For example, 3M, Rite-Solutions, Red Hat, and Wikimedia have all used or experimented with improving their strategy development through crowdsourcing, or opening up the strategic planning process to more people.7 Such an approach enables a company to improve employee engagement and be seen as a participative and responsible employer. A variation of this theme is crowdfunding, which involves aligning social responsibility efforts with the decision making that takes place in a company. Campaigns related to worthy causes that are important to external stakeholders and employees alike can be developed, and employees are given the opportunity to support these campaigns by donating money. Such efforts can be key strategic initiatives for companies that want to be more ethical. (Mathis 46)
2-2 Human Resources and Strategy
Regardless of which specific strategies are adopted for guiding an organization, having the right people is necessary to make the strategies work. If a strategy requires specific skills that are currently not available in the company, it will take time to either recruit people who have those skills or train current employees to adapt to the new strategy. Strategic HR management (HRM) provides input for strategic planning and develops specific HR initiatives to help achieve organizational goals. Getting HR involved is the key, with one study finding that the participation of HR in strategic processes is enhanced as HR’s service quality and the expectations of the contributions of HR increase. This means that the HR department must demonstrate that its support is helpful to the company. But even though considering HR in a company’s strategy seems obvious, estimates are that only 30% of HR professionals are full strategic partners. Their primary role remains one of providing input to top management. Part of this could be driven by HR’s inability to justify how it helps the bottom line or the kinds of issues on which it focuses. For instance, one of the criticisms of strategic HR research is that it pays too much attention to basic managerial issues rather than exploring how HR strategy benefits companies economically.
Some businesses are also less dependent on human capital for a competitive advantage than others, a situation that lowers the strategic impact of HR in some firms. For example, the productivity of a steel mill depends more on the efficiency of furnaces and quality of raw materials than on human resources. However, the argument can be made that every business strategy must be carried out by people, so human capital always has some impact on business success. An important concept covered later in this chapter is measuring and determining the value of human capital and HR in a given organization.
Although administrative and legally mandated tasks are important, HR’s strategic contribution should add value to the organization by improving the performance of the business. Strategic HR management refers to the appropriate use of HR management practices to gain or keep a competitive advantage. There are different areas that HR professionals can improve to help firms be more competitive, including hiring good employees, placing them in the right jobs, and rewarding them fairly. For example, JetBlue developed a corporate culture that established a clear sense of purpose and supported positive values and then hired individuals who matched this culture, which helped the company succeed. (Mathis 47)
FIGURE 2-2 Positioning HR to Be a Strategic Partner
An important element of strategic HRM is creating processes in a company that help connect employee performance with strategic objectives. For instance, some contend that HR should be a strategic partner by providing aspirations to a company and functioning as an inspiration for strategic planning. Figure 2-2 shows how these partnerships can be developed. These partnerships can be strengthened when HR professionals know what the organization does and when they make good decisions about building human capital, being willing to change, communicating the intent of HR policies, and following through on their plans.
Individual workers also need to understand relevant HR priorities so that they can better contribute by applying their skills to advance the strategic goals, so partnerships should also be fostered with employees. Employees who understand the big picture can do their jobs in ways that help the firm reach its objectives. Effective HR practices include talent development and reward systems that direct employee efforts toward the bottom line. Employees must also be prepared for strategic HR initiatives with proper training, good communication from managers, and appropriate performance standards and rewards. For instance, W. W. Grainger, the maintenance, repair, and operating products distributor located in Illinois, instituted a brand-based strategy, which required HR professionals in the firm to be engaged with planning so that employees were kept informed about change efforts.
2-2a Human Resource Contributions to Strategy
The strategies developed by HR managers depend heavily on the plans and objectives created within an organization; HR departments need to be involved in strategic planning so that HR executives are aware of the overall strategic direction of a firm. Some common areas where HR can develop and implement appropriate strategies are creating HR policies at the top, middle, and lower levels of the firm that best match organizational strategies, as well as developing metrics that help determine how well strategies at the different levels are being met. To contribute in the strategic planning process, HR leaders can provide their perspectives and expertise to operating managers by doing the following:
· •Having a seat at the strategic table: Companies must include HR professionals in discussions about strategy and encourage them to provide input.
· •Being knowledgeable about business operations: Understanding how the business works and knowing the need for certain strategies are important components.
· •Focusing on the future: Strategic planning requires leaders to think about the future based on past experiences.
· •Prioritizing business goals: Efforts that have the greatest impact on the business and its objectives are emphasized first.
· •Understanding what to measure: Metrics are a vital part of assessing success, which means identifying the right metrics that are linked to business goals.
One-way HR professionals can contribute to strategy is by introducing high-performance approaches into the workplace that lead to increased performance. These HR practices often focus on enhancing participation, teamwork, and work attitudes so that employees are more engaged in their jobs. Using information collected from top HR professionals working for financial and manufacturing organizations in Jordan, a recent study found that high-performance HR practices influenced the positive relationship between the strategic role of HR and corporate financial performance. Another study found that certain strategies were linked either positively or negatively to the adoption of high-performance work systems and that adoption of these practices was related to the use of work-life balance programs. Overall, these studies show that high-performance HR practices are beneficial to companies.
There is also growing awareness that HR professionals can assist in developing strategies for organizational sustainability. Figure 2-3highlights a model summarizing HR professionals’ interests in sustainability management. An HR department can provide expertise that is needed to prepare employees to focus on sustainability, including talent acquisition, training and development, and performance management. HR professionals also focus on social concerns, so they are well suited to prepare employees to help external stakeholders. Even more important is the central leadership role the HR department plays in the creation of a positive workplace, making the HR group keenly positioned to help lead sustainability efforts. (Mathis 48-49)
2-2b Human Resources Strategies for Global Competitiveness
The globalization of business means that more organizations now operate across borders and have ties to foreign operations along with international suppliers, vendors, employees, and other business partners. A global presence can range from importing and exporting to operating as a multinational corporation (MNC) . An MNC, sometimes called a transnational corporation, is an organization that has facilities and other assets in at least one country other than its home country. (Mathis 49)
Even organizations that operate primarily in the domestic market face pressure from foreign competitors. The supply chain is often internationally dispersed, and foreign business practices influence operations in the United States. Technological advancements have eliminated many barriers that previously limited operating on a global scale. (Mathis 49)
FIGURE 2-3 The HR Department’s Contribution to Organizational Sustainability
For HR to complement the organization’s strategy, it has to consider how to merge HR strategies with those of the company. To effectively compete on an international scale, the organization needs expertise to administer HR activities in a wide range of nations. For example, the firm may decide to standardize talent development and succession planning but permit local managers to establish compensation and labor relations policies. An ideal international strategy strikes a balance between home-country and host-country policies, and it utilizes the best practices available in each. Companies must also prepare employees to have a global mindset, which is based on their ability to understand diverse cultural values and global business operations. A recent study found that a global mindset can be increased with greater global job experiences, psychological capital (or a positive outlook), and varied experiences in different countries.
Consider two international topics that are frequently the basis for HR strategies that are developed to support organizational strategy—offshoring and global staffing. Both actions require leaders to merge organizational and HR strategies.
Offshoring Strategies Competitive pressure to lower costs has resulted in many jobs being moved overseas in recent years. Offshoring occurs when a company relocates a business process or operation from one country to another. Firms can offshore the production of goods as well as the delivery of services to lower-wage countries. Call centers in India are an example of business service offshoring to countries with well-educated English-speaking workers. The movement of product and software development projects to other countries because the United States lacks the right talent is another example. Due to its advantages, offshoring is likely to increase for the foreseeable future. (Mathis 50-51)
Other factors might be considered when offshoring business operations, such as whether practices in other countries match those employed in the United States. For instance, a recent study found that some companies in China might be utilizing high-performance work systems to increase organizational performance. Another study determined that firms located in Germany are adopting positive HR practices used in other European nations and the United States. These finding show that global HR approaches can be important considerations when making offshoring decisions.
Global Staffing Strategies A wide variety of alternatives can be considered when planning for staffing global operations. The optimal solution is to combine the expertise of local employees with organization-specific knowledge of employees from the home country (headquarters). Some countries require that the organization employ a certain percentage of workers from the host country. Figure 2-4shows four strategic HR approaches to international staffing. Each organization will use a staffing model that best fits its culture and strategic goals. (Mathis 51)
Leadership development is critical in global organizations because more top management jobs require greater understanding of international management. Leading in different cultures requires greatly varied skills, and organizations can provide formal training and job assignments that develop leaders. Effective compensation and selection processes are also needed to ensure that the right individuals are attracted to and chosen for these international assignments. For instance, global firms can attract more outstanding employees with performance-based pay and generous total reward packages. Companies might also need to develop more customized HR programs that fit the preferences of the local talent in different countries, particularly because there are growing numbers of highly educated professionals in developing markets abroad (Mathis 51)
FIGURE 2-4 Strategic HR Approaches to International Staffing
Another issue in HR is planning, which is frequently a direct consequence of implementing strategies to move the organization forward. HR planning deals with determining how many people will be needed to execute an organization’s specific functions, a key concern in both global and domestic firms. The preceding “HR Competencies & Applications: Latin American Firms Face Staffing Problems” feature discusses how companies in Latin America face challenges related to HR planning.
2-3 Human Resource Planning
Human Resource planning is the process of analyzing and identifying the need for and availability of people so that the organization can meet its strategic objectives. The focus of HR planning is ensuring that the organization has the right number of people with the right capabilities at the right times and in the right places. In HR planning, an organization must consider the availability and allocation of people to jobs over longer periods of time, not just for the next month or even the next year. For example, leaders at Prudential Financial are asked to determine what jobs are emerging in the company so that work areas can be properly staffed in the future.
HR plans can include several approaches. Actions may include shifting employees to other jobs in the organization, laying off employees or otherwise cutting back the number of employees, retraining current employees, and/or increasing the number of employees in certain areas. Factors to consider include the current employees’ knowledge, skills, abilities (KSAs), and career aspirations as well as vacancies expected as the result of retirements, promotions, transfers, and discharges. To do this, HR professionals work with executives and managers. Human capital solutions are also available that enable HR managers to identify how to develop talent to allow the organization to reach its strategic goals. (Mathis 53)
2-3a Human Resources Planning Process
The steps in the HR planning process are shown in Figure 2-5. Notice that the process begins with considering the organizational plans and the environmental analysis that went into developing strategies. The process includes an environmental analysis to identify the context in which HR is operating. Strengths, weaknesses, opportunities, and threats are considered. Then the possible available workforce is evaluated by identifying both the internal and the external workforce. (Mathis 53)
Population shifts, and demographic changes can affect an organization’s strategy. For example, by 2042, non-Hispanic whites will no longer comprise the majority of the U.S. population.32 Such workforce demographics will affect the labor available to organizations. It also means that diversity management will remain an important HR issue.
Where an organization locates its operations plays a role in how well it will perform. But more importantly, an understanding of geographic advantages and disadvantages can help managers develop appropriate plans. The strengths and weaknesses of the organization also represent internal factors that either create or destroy value. When assessing the internal environment, managers should evaluate the quantity and quality of employees, HR practices, and the organizational culture.
The strength of the talent pipeline is a particularly important internal consideration as the organization plans its HR future. Fulfilling strategic objectives is difficult without employees who can provide sufficient skills and talent. Leadership development and succession planning programs ensure that high-quality talent will be available to carry out business strategies. For instance, effective development programs can reduce the high failure rate of people in leadership positions. Selecting individuals with the right talents and teaching them leadership skills can also improve the quality of leaders and promote strategic success. Succession planning is the process of identifying a plan for the orderly replacement of key employees. The discussion will now turn to how these and other concerns are incorporated into HR planning. (Mathis 55)
2-4 Planning for External Workforce Availability
If a network technology company plans to double its number of client accounts from 100 to 200 in a three-year period, the firm must also identify how many and what types of new employees will be needed to staff the expanded services, locations, and facilities. These new employees will probably be obtained from outside the current pool of employees, which means that the company and its HR department will need to be aware of the forces that impact external labor markets. Several specific factors that affect the external pool of potential employees are highlighted next.
2-4a Economic and Governmental Factors
Like the issues discussed in this chapter’s “HR Headline” feature, the general economic cycles of recession and boom affect HR planning. Factors such as interest rates, inflation, and economic decline or growth affect the availability of workers and should be considered when organizational and HR plans and objectives are formulated. There is a considerable difference between finding qualified applicants in a 4% unemployment market compared to a 9% unemployment market. As the unemployment rate rises, the number of qualified people looking for work increases, which often makes it easier for companies to fill some jobs. However, the people who are hired may receive lower pay and benefits because companies have more hiring options and leverage. As the unemployment rate decreases, there are fewer potential employees who are available, meaning that companies must provide more attractive compensation to recruit qualified employees.
A broad array of government regulations affects the labor supply and therefore HR planning. As a result, HR planning must be done by individuals who understand the legal requirements of various government regulations. In the United States and other countries, tax legislation at local, state, and federal levels affects HR planning. Pension provisions and Social Security legislation may change retirement patterns and funding options. Elimination or expansion of tax benefits for job-training expenses might alter some job-training activities associated with workforce expansions. In summary, an organization must consider a variety of economics factors and government policies, regulations, and laws during the HR planning process, focusing on those that specifically affect the company.
2-4b Geographic and Competitive Evaluations
When making HR plans, employers must consider many geographic and competitive concerns. The net migration into a region is important. For example, in the past decade, the populations of some U.S. cities in the South, Southwest, and West have grown rapidly and provide sources of labor. However, areas in the Northeast and Midwest have experienced declining populations or net outmigration, which affects the number of people available to be hired.
Direct competitors are another important external force to consider in HR planning. Failure to consider the competitive labor market and to offer pay scales and benefits comparable with those of organizations in the same general industry and geographic location may cost a company dearly in the long run. Finally, the impact of international competition must be considered as part of environmental scanning. Global competition for labor intensifies as global competitors shift jobs and workers around the world, something that is seen when jobs from the United States are outsourced to countries with cheaper labor. (Mathis 55-56)
2-4c Changing Workforce Considerations
Significant changes in the workforce, both in the United States and globally, must be considered when examining the outside workforce during HR planning. Shifts in the composition of the workforce, combined with the use of different work patterns, have created workplaces and organizations that are notably different from those of the past. For instance, many employers provide flexible workplaces that enable employees to balance their work and personal responsibilities, but recent evidence suggests that some firms are scaling back these opportunities because their businesses have become leaner due to the recent recession.33 When scanning the potential and future workforce, it is important to consider a number of variables, including:
· •Aging of the workforce
· •Growing diversity of workers
· •Female workers and work-life balance concerns
· •Availability of contingent workers
· •Outsourcing possibilities
When assessing these factors, it is important to analyze how they affect the current and future availability of workers with specific capabilities and experience. For instance, in a number of industries, the median age of highly specialized professionals is more than 50 years, and the supply of potential replacements with adequate education and experience is not sufficient to replace such employees as they retire. Many firms have planned for workforce shortages because of the brain drain created by the retirement of existing older workers.
2-5 Planning for Internal Workforce Availability
Analyzing the jobs that will need to be done and the capabilities of people who are currently available in the organization to do them is the next step in HR planning. The needs of the organization must be compared to the existing labor supply, as well as the potential labor supply available outside the firm.
2-5a Current and Future Jobs Audit
The starting point for evaluating internal workforce strengths and weaknesses is an audit of the jobs that are expected in the planning period. A comprehensive analysis of all current jobs provides a basis for forecasting what jobs will need to be done in the future. Much of the data required for the audit should be available from existing staffing and organizational databases. The following are key questions addressed during the internal jobs assessment:
· •What jobs exist now, and how essential is each job?
· •How many individuals are performing each job?
· •What are the reporting relationships of jobs?
· •What are the vital KSAs (knowledge, skills, and abilities) needed in the jobs?
· •What jobs will be needed to implement future organizational strategies?
· •What are the characteristics of those anticipated jobs?
2-5b Employee and Organizational Capabilities Inventory
As HR planners gain an understanding of the current and future jobs that will be necessary to carry out organizational plans, they can conduct a detailed audit of current employees and their capabilities. The basic data on employees should be available in the organization’s HR records.
An inventory of organizational skills and capabilities may consider a number of elements. The following are especially important:
•Individual employee demographics (age, length of service in the organization, time in present job)
•Individual career progression (jobs held, time in each job, education and training levels, promotions or other job changes, pay rates)
•Individual performance data (work accomplishments, growth in skills, working relationships)
Detailed information about each individual employee’s skills are stored in an HRIS database. Since this data may affect employees’ careers, its use must meet the same standards of job-relatedness and nondiscrimination as those met when the employee was initially hired. Security measures must ensure that sensitive information is available only to those who have a specific appropriate use for it.
Managers and HR staff members can gather data on individual employees and aggregate details into a profile of the organization’s current workforce. This profile may reveal many of the current strengths and deficiencies of people in the organization. For instance, a skills mismatch may be identified in which some workers are either overqualified or underqualified for their jobs. The profile may also highlight potential future problems. For example, if many workers lack some specialized expertise, such as advanced technical skills, the organization may find it difficult to take advantage of changing technological opportunities. Or if a large number of experienced employees are in the same age bracket, their eventual retirements that will likely occur about the same time might lead to future gaps in the organization. (Mathis 56-58)
2-6 Forecasting HR Supply and Demand
Forecasting uses information from the past and present to predict future conditions. When forecasting future HR conditions, the information comes from workforce availability and requirements. Projections for the future are, of course, subject to error. Fortunately, experienced people usually are able to forecast with enough accuracy to positively affect long-range organizational planning. (Mathis 58)
2-6a Forecasting Methods and Periods
Forecasting methods may be either judgmental or mathematical, as Figure 2-7 shows. Methods for forecasting human resources range from a manager’s best guess to rigorous and complex computer simulation. Despite the availability of sophisticated judgmental and mathematical models and techniques, forecasting is still a combination of quantitative methods and subjective judgment. The facts must be evaluated and weighed by knowledgeable individuals, who use the mathematical models as tools and make judgments to arrive at decisions.
HR forecasting should be done over three planning periods: short range, intermediate range, and long range. The most commonly used planning period of six months to one year focuses on short-range forecasts for the immediate HR needs of an organization. Intermediate- and long-range forecasting are much more difficult processes. Intermediate-range plans usually project one to three years into the future, and long-range plans extend beyond three years. (Mathis 58)
2-6b Forecasting the Demand (Need) for Human Resources
The demand for employees can be calculated for an entire organization and/or for individual units in the organization. For example, a forecast might indicate that a firm needs 125 new employees next year or that it needs 25 new people in sales and customer service, 45 in production, 20 in accounting and information systems, 2 in HR, and 33 in the warehouse. The unit breakdown obviously allows HR planners to better pinpoint the specific skills needed than does the aggregate method.
Demand for human resources can be forecast by considering specific openings that are likely to occur. The openings (or demands) are made when new jobs are created, or current jobs are changed. Additionally, forecasts must consider when employees leave positions because of promotion, transfer, turnover, and termination.
An analysis is used to develop decision rules (or fill rates) for each job or level. For example, a decision rule for a financial institution might state that 50% of branch supervisor openings will be filled through promotions from customer service tellers, 25% through promotions from personal bankers, and 25% from new hires. Forecasters must be aware of multiple effects throughout the organization because as people are promoted from within, their previous positions become available. Continuing the example, forecasts for the need for customer service tellers and personal bankers would also have to be developed. The overall purpose of the forecast is to identify needs for Human Resources by number and type for the forecasting period. (Mathis 58-59)
FIGURE 2-7 HR Forecasting Methods
2-6c Forecasting the Supply (Availability) of Human Resources
Once HR needs have been forecast, the availability of qualified individuals must be determined. Forecasting availability considers both external and internal supplies. Although the internal supply may be somewhat easier to calculate, it is important to calculate the external supply as accurately as possible.
External Supply The external supply of potential employees available to the organization can be identified. Government estimates of labor force populations, trends in the industry, and many more complex and interrelated factors must be considered. Such information is often available from state or regional economic development offices. The following items may be included:
· •Net migration into and out of the area
· •Individuals entering and leaving the workforce
· •Individuals graduating from colleges and other schools
· •Changing workforce composition and patterns
· •Economic forecasts for the next few years
· •Technological developments and shifts
· •Actions of competing employers
· •Government regulations and pressures
· •Circumstances affecting persons entering and leaving the workforce
Internal Supply Figure 2-8 shows in general terms how internal supply can be calculated for a specific employer. Estimating internal supply considers the number of external hires and the employees who move from their current jobs into others through promotions, lateral moves, and demotions. It also considers that the internal supply is influenced by transfer and promotion policies, and retirement policies, among other factors. In forecasting internal supply, data from replacement charts and succession planning efforts are used to project potential personnel changes, identify possible backup candidates, and keep track of attrition (resignations, retirements, etc.) for each department in an organization. (Mathis 59-60)
FIGURE 2-8 Estimating Internal Labor Supply for a Given Unit (Mathis 60)
Positive HR planning can be a source of competitive advantage for organizations. This is true because planning helps companies identify their future needs and how to get the right employees to satisfy these needs, thus making the hiring process more efficient. The “HR Competencies & Applications: Using Workforce Planning to Improve Hiring” feature discusses how organizations can enhance the efficiency of their hiring efforts with solid HR planning. (Mathis 61)
2-7 Workforce Supply ≠ Demand
Since the objective of strategic planning is to anticipate and react to future events and conditions, managers should evaluate and revise the strategic plan on a periodic basis. Some have called into question the value of strategic planning in light of economic volatility. However, organizations would fare much worse with no plan in place. Surprises are not good when hiring a workforce, and planning helps reduce surprises.
Attracting and retaining the right talent is an ongoing challenge as the needs of the business change over time. The United States has continued to move from a manufacturing economy to a service economy. This shifting economic base leads to structural mismatches between workers and jobs. Workers with the wrong skills are unable to fill the technical and health service jobs employers need. Ongoing retraining can help overcome some of these problems if strategic planning has identified them. Organizations need to plan for both the quantity and the quality of the workforce over the planning horizon. Having sufficient workers with the right qualifications is essential if the strategic plan is to be achieved. If the firm employs too many people for its needs, a talent surplus exists, and if too few, a talent shortage. Because of rapidly changing conditions, the organization may face a surplus in some parts of the business and a shortage in others. Figure 2-9 shows the tactics organizations might use to deal with workforce supply imbalances. (Mathis 62)
FIGURE 2-9 Managing Talent Supply Imbalances
2-7a Managing a Talent Surplus
A talent surplus can be managed within a strategic HR plan in a number of ways. The reasons for the surplus will guide the ultimate steps taken by the organization. If the workforce has the right qualifications but sales revenue has fallen, the primary strategies would involve retaining the best workers and cutting costs. However, if the workforce is not appropriately trained for the jobs needed, the organization may lay off those employees who cannot perform the work. Managers may use various strategies in a progressive fashion to defer workforce reductions until necessary. (Mathis 62-63)
2-7a Managing a Talent Surplus
A talent surplus can be managed within a strategic HR plan in a number of ways. The reasons for the surplus will guide the ultimate steps taken by the organization. If the workforce has the right qualifications but sales revenue has fallen, the primary strategies would involve retaining the best workers and cutting costs. However, if the workforce is not appropriately trained for the jobs needed, the organization may lay off those employees who cannot perform the work. Managers may use various strategies in a progressive fashion to defer workforce reductions until absolutely necessary.
Reduction in Work Hours or Compensation To retain qualified employees, managers may temporarily institute reduced work hours. Selected groups of employees may have their workweek reduced, or all employees could be asked to take a day or week off without pay. For example, a small family-owned company asked its 15 full-time workers to take a day off without pay each week to keep all of them on the payroll and avoid layoffs. When the economy improved, these skilled employees were available to handle the increased workload.
Across-the-board pay cuts can reduce labor costs while retaining some skilled employees. It is important that pay cuts start at the very top of the organization so that employees do not bear all of the hardship. Uniform pay cuts can be seen as a shared sacrifice for the survival of the firm. Organizations may also reduce employee benefits, such as eliminating matching 40l(k) contributions or raising employee health insurance premiums. To maintain employee loyalty and a sense of fairness, HR personnel should closely monitor the situation and reinstate pay and benefit levels when the economic outlook improves.
Attrition and Hiring Freezes Attrition occurs when individuals quit, die, or retire and are not replaced. Using attrition with no additional hiring means that no one loses a job, but those who remain must handle the same workload with fewer people. Unless turnover is high, attrition will eliminate only a relatively small number of employees in the short run, but it can be a viable alternative over a longer period of time. Therefore, for greater impact, employers may combine attrition with a freeze on hiring. Employees usually accept this approach more readily than they do other downsizing methods.
Voluntary Separation Programs If employees volunteer to leave, organizations can reduce the workforce while also minimizing legal risks. Firms often entice employees to volunteer by offering additional severance, training, and benefit payments. Early retirement buyouts are widely used to encourage more senior workers to leave organizations early. As an incentive, employers may offer expanded health coverage and additional buyout payments so that the employees will not be penalized economically until their pensions and Social Security benefits take effect. These programs are viewed as a way to accomplish workforce reductions without resorting to layoffs.
Voluntary separation programs appeal to employers because they can significantly reduce payroll costs over time. Although the organization faces some up-front costs, it does not incur as many continuing payroll costs. Using such programs is also viewed as a more humane way to reduce staff than terminating long-serving, loyal employees. In addition, as long as buyouts are truly voluntary, an organization offering them is less exposed to age discrimination suits. One drawback is that some employees the company would like to retain might take advantage of a buyout. (Mathis 63)
Workforce Downsizing This workforce process has been given many names, including downsizing, rightsizing, and reduction in force (RIF), but it almost always means cutting employees. Layoffs on a broad scale have occurred with frightening regularity in recent years. Trimming underperforming units or employees as part of a plan that is based on sound organizational strategies may make sense. After a decade of many examples and studies, it is clear that downsizing has worked for some firms.36 However, it does not increase revenues; it is a short-term cost-cutting measure that can result in a long-term lack of talent. When companies cannibalize the human resources needed to change, restructure, or innovate, disruption follows for some time.37 Also, downsizing can hurt productivity by leaving “surviving” employees overburdened and demoralized.
Many HR professionals believe that their organizations have mishandled layoffs in the past by getting rid of too many employees, not getting rid of enough, or letting the wrong ones go. Groupthink (a herd mentality), framing effects (thinking about decisions only in certain ways), focusing on inappropriate criteria, and making decisions too quickly can lead to some of these poor decisions.38 Best practices for companies to successfully carry out layoffs include the following:
· •Identify the work that is core to sustaining a profitable business.
· •Identify the knowledge, skills, and competencies needed to execute the business strategy.
· •Protect the bottom line and the corporate brand.
· •Constantly communicate with employees.
· •Pay attention to the survivors.
A common myth is that individuals who are still employed after downsizing are so grateful to have a job that they won’t cause any problems in the workplace. However, some observers draw an analogy between those who survive downsizing and those who survive wartime battles. Bitterness, anger, disbelief, and shock all are common reactions. For those who survive workforce cuts, the culture and image of the firm as a “lifetime” employer often are gone forever.
Companies may offer severance benefits, outplacement services, and employee assistance programs to cushion the shock of layoffs and protect the company from litigation. Severance benefits are temporary payments made to laid-off employees to ease the financial burden of unemployment. One common strategy is to offer laid-off employees severance benefits that require the employees to release the organization from legal claims. Severance benefits are typically based on length of service with the company, often one or two weeks’ pay per year of service. Outplacement services and employee assistance programs are provided to give displaced employees support and assistance. This support often includes personal career counseling, résumé-preparation services, interviewing workshops, and referral assistance. Such services can be provided by outside firms that specialize in outplacement assistance and whose fees usually are paid by the employer, or they can be provided by the HR staff. Helping laid-off workers gain new employment can ease the financial burden on employees and preserve the company’s image (Mathis 64)
2-7b Legal Considerations for Workforce Reductions
HR must be involved during workforce adjustments to ensure that the organization does not violate any of the nondiscrimination or other laws governing workforce reductions. Selection criteria for determining which employees will be laid off must comply with Title VII of the Civil Rights Act as well as the Age Discrimination in Employment Act and the Americans with Disabilities Act. A careful analysis and disparate impact review should be conducted before final decisions are made.
There is no legal requirement to provide severance benefits, and loss of medical benefits is a major problem for laid-off employees. However, under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA), displaced workers can retain their group medical coverage for up to 18 months for themselves and for up to 36 months for their dependents, if they pay the premiums themselves.
Employers must also comply with the Older Workers Benefit Protection Act (OWBPA) when implementing RIFs. The OWBPA requires employers to disclose the ages of both terminated and retained employees in layoff situations, and a waiver of rights to sue for age discrimination must meet certain requirements. The worker must be given something of value (“consideration”), typically severance benefits, in exchange for waiving the right to sue. When a group of employees is laid off, workers over age 40 in this group must be granted 45 days in which to consider accepting severance benefits and waiving their right to sue.
To ensure employees have adequate notice of plant closings or mass layoffs, a federal law was passed—the Worker Adjustment and Retraining Notification (WARN) Act. This law requires private and commercial organizations that employ 100 or more full-time workers who have worked more than six months in the previous year to give a 60-day notice before implementing a layoff or facility closing that involves more than 50 people. However, workers who have been employed less than six months in the prior year, as well as part-time staff members working fewer than 20 hours per week, are not counted toward the total of 50 employees. Despite not being formally counted to determine implementation of the law, these individuals should still be given some form of notice. The WARN Act imposes heavy fines on employers who do not follow the required process and fail to give proper notice. (Mathis 64-65)
2-7c Managing a Talent Shortage
Managing a shortage of employees seems simple enough—just hire more people. However, as mentioned earlier, there can be mismatches between the qualifications needed by employers and the skills possessed by available workers. The list of the 10 hardest jobs to fill in the United States includes engineers, nurses, certain teachers, IT staff, and skilled trades. For these jobs, there may not always be sufficient qualified workers to hire. Companies can use a number of alternative tactics to manage a talent shortage, as Figure 2-10 shows.
FIGURE 2-10 Ways to Manage a Talent Shortage
One tactic is having existing employees work overtime. This strategy can work on a short-term basis but is not a solution for a longer-term talent shortage. Workers may appreciate the extra hours and pay for a while, but eventually fatigue sets in, productivity and quality may drop, and injuries and absenteeism may increase.
Outsourcing involves transferring the management and performance of a business function to an external service provider. Organizations in the United States outsource a wide variety of noncore functions to reduce costs or to obtain skills and expertise not available in the organization. (Mathis 65-66)
Alternate work arrangements are nontraditional schedules that provide flexibility to employees and include job sharing and telecommuting. These are creative solutions to attract and retain skilled employees who want flexibility. Employees can be given more freedom in determining when and how they will perform their jobs. Overall, these arrangements have become popular and widely used in many organizations, but certain programs such as job sharing, and sabbaticals are used less frequently today than in the past. Retirees may be rehired on a part-time or temporary basis to fill talent gaps. The advantage is that these individuals are already trained and can be productive immediately. Care must be taken not to interfere with pension payments or other benefits tied to retirement. (Mathis 66)
Contingent employees, that is, noncore employees working for a company on a temporary or as-needed basis, can provide short-term help. Professional employer organizations can lease employees to the firm, which is often a good solution for technical talent. Independent contractors can be hired when needed to fill talent shortages. The use of independent contractors must be managed closely to ensure compliance with wage and hour, safety, and employee benefit statutes. When using contingent workers, special efforts are needed to assimilate them into the workforce and avoid an “us-and-them” mentality. Contingent workers fill an important need, and managers can maximize their contributions through good employee relations practices.
Reducing turnover of qualified employees should be part of an ongoing effort to maintain a talented workforce. Special attention may be required in times of talent shortages to retain skilled employees. Providing these individuals desirable compensation and a desirable workplace can improve retention of qualified workers. (Mathis 66)
2-8 Human Resources Planning in Mergers and Acquisitions
The purpose of a merger or acquisition is to generate growth by combining two existing companies and creating a more competitive company. Recent evidence suggests that companies frequently use mergers and acquisitions (M&As), and more efforts more planned for the future. Thus, HR professionals should be involved in managing these business ventures.
HR departments can contribute to the strategic success of M&As through sound HR planning. Unfortunately, many mergers and acquisitions don’t live up to their full potential. Due diligence is even more complex when the M&A involves companies in different countries. For instance, cultural differences in global operations, poor leadership, and inappropriate workplace practices can cause problems during M&As. A significant number of failed ventures can also trace their roots to HR issues that were not properly addressed such as loss of key staff, culture clashes, and poor communication. To ensure successful integration, HR should be involved before, during, and after the deal is completed. Figure 2-11 shows HR activities and focus during each stage of the merger process. (Mathis 66)
FIGURE 2-11 HR Activities during M&A
2-8a Before the Deal
To determine whether the two organizations should combine, a rigorous process of due diligence is conducted. Due diligence is a comprehensive assessment of all aspects of the business being acquired. Financial, sales and marketing, operations, and human resource staffs can all be involved before the final decision is made to merge with or acquire the company. Each function determines the assets and liabilities of the target company to ascertain whether there are serious risks to the buyer. HR professionals can review broad issues related to legal compliance and labor contract obligations. HR should also assess what HR policies have been used in a firm, the available talent, and the organizational culture (Mathis 67)
(A process can be developed tor due diligence that can be used over and over again for greater consistency. In addition, a document can be created that summarizes the details of the M&A process, including assessments of compensation, the associated expenses, and overall HR findings. These efforts can help companies identify potential problems early on and enable managers to plan for an orderly transition. A thorough, objective analysis of HR-related issues is therefore critical to making good business decisions. Organizations should also invite HR professionals and other key stakeholders to help with M&A efforts early on in the process, and the implications for employees should be reviewed constantly (Mathis 67)
2-8b During Integration
After the deal is closed, the focus of HR activity switches to the orderly transition of basic HR processes such as payroll and benefits migration. During the first 60 days after the acquisition, HR must deliver high-quality administrative and operational support to employees and managers. Immediate concerns often focus on basic services needed to run the operations. Frequent communication, employee hotlines, and guidance for managers all contribute to employee retention and loyalty during the chaotic early days of the transition. Managers focus on identifying key talent and establishing initiatives to retain needed employees. Attractive compensation and job assignments can be offered to retain employees during integration.
Integrating HR information systems is important to provide managers with information about employee capabilities, performance, and potential. The acquiring organization cannot make optimum human resource assessments without access to employees’ historical information. An inventory of knowledge, skills, and expertise along with performance information provide the data needed to make suitable assignments for employees from both organizations. Gathering all relevant HR information in a single database helps managers analyze and compare employee skills and make informed decisions about which employees should be retained.
As the businesses are merged, culture-based conflicts can emerge. For example, when HP and Compaq merged, cultural differences were recognized and addressed. HP had a culture that fostered innovation by giving employees autonomy and opportunities for professional development. Compaq, on the other hand, was a fast-paced company that made decisions quickly. The merger was successful because the best parts of the culture in each company were blended. Changing the organizational culture depends on changing behavior in the organization. Four important factors in changing culture include:
· •Define the desired behaviors. Provide behavioral examples of how people are expected to act and tie these behaviors to the performance management system.
· •Deploy role models. Select leaders who exemplify the desired behaviors and make them visible throughout the organization.
· •Provide meaningful incentives. Reward the role models with recognition to reinforce their behavior and to signal to the rest of the organization.
· •Provide clear and consistent messages. Align what you say with what you do and reward. (Mathis 67-68)
· To realize the expected benefits of a merger, the months following the initial integration are important. Cultural changes started in the early days must be maintained. Practical issues regarding talent management and development along with combined compensation systems will solidify the new united organization. Failure to effectively blend the workforces and move beyond competing interests can harm the merger. Continued change efforts are needed to bring all employees to a one organization mentality. Breaking down the barriers between the previous practices used in each company and implementing the best from both firms will give employees a sense of value and importance. Ultimately, the outcomes of the deal depend on how HR issues are addressed.
· M&As can be challenging strategic moves for companies. They can be particularly tough for employees because they often must deal with new cultural values. The following “HR Perspective: A Tale of Two Cultures: Vocon and Conant Architects” feature illustrates how M&As can be performed in a way that helps employees adjust.
2-9 Measuring the Effectiveness of Human Resources and Human Capital
Effectiveness for organizations is a measure of the ability of a program, project, or task to produce a specific desired effect or result that can be measured. Efficiency is the degree to which operations are carried out in an economical manner. Efficiency can also be thought of as a short-term measure that compares inputs and costs directly against outputs and benefits. (Mathis 68)
There are many ways of measuring the financial impact of the HR practices, and there are many challenges associated with doing so. Return on investment (ROI) is a common measure used by financial professionals to assess the value of an investment. For example, if a firm invests $20,000 for a supervisory training program, what does it gain in lower worker compensation costs, lower legal costs, higher employee productivity, and lower employee turnover? The benefits of HR practices are not always immediately visible, which is what makes measuring HR’s impact such a challenge. However, successful efforts can usually be made to assess HR practices.
A long-standing myth perpetuates the notion that one cannot really measure the value of HR practices. That myth has hurt HR’s credibility because it suggests that either HR efforts do not add value, or they are too far removed from business results to matter. That notion is, of course, untrue. HR, like all other functions, must be evaluated by considering the results of its actions and the value it adds to the organization. Unfortunately, the perceptions of managers and employees in many organizations are mixed because HR has not historically measured and documented its contributions or communicated those results. Further, accounting practices treat expenditures on human capital and talent development as expenses rather than capital investments. This practice encourages top management to view employees as consumers of capital rather than as a long-term investment.
People-related costs are typically the largest controllable expense in organizations. Effective management of these costs can make a positive difference in the survival of the organization. Collecting and analyzing HR information can pinpoint waste and improper allocation of human resources. It is important that HR managers understand financial and operational measures that drive the business and relate decisions to key performance indicators (KPIs). Metrics, benchmarking, balanced scorecards, and audits can help firms track HR performance and measure the value of different business practices. (Mathis 69-70)
2-9a HR Metrics and Analytics
HR metrics are specific measures of HR practices. They are performance indicators of various HR issues, like absenteeism and turnover rates. Metrics are typically used to assess HR practices and results within the organization over time. A metric can be developed using cost, quantity, quality, timeliness, and other designated goals. Metrics can be developed to track HR efficiency and effectiveness. A pioneer in developing HR measurements, Jac Fitz-Enz, has identified a wide range of HR metrics. A number of key HR metrics are shown in Figure 2-12.47
Specific measures of HR practices
HR and line managers collect and share the data needed to track performance. Data to track these measures come from several sources within the organization. Financial data are required to determine costs for various HR activities, and performance and turnover data can be found in HR and operations records. The real value in using metrics comes from the interpretation of the data that can lead to improvements in HR practices. Information and historical data are studied to determine the reasons for current performance levels and to learn how to improve these levels in the future. (Mathis 70)
A key challenge that many HR groups face is having enough professionals on staff who know how to properly use HR analytics. Analytics involve using various metrics and complex modeling techniques to answer questions about HR functions. HR analytics can be defined as an evidence-based approach to making HR decisions on the basis of quantitative tools and models. (Mathis 70)
Unlike financial reporting, there is not yet a standard for the implementation and reporting of HR measures. Managers choose what and how to report to employees, investors, and other interested parties. This lack of consistency in HR reporting makes it difficult to evaluate an organization and to compare HR practices across organizations. Though there have been efforts to develop consistent ways of reporting HR metrics, some of these efforts have been met with opposition. The following should be considered when developing HR metrics and analytics:
· •Accurate data can be collected.
· •Measures are linked to strategic and operational objectives. (Mathis 70-71)
FIGURE 2-12 Key HR Metrics
· •Calculations can be clearly understood.
· •Measures provide information valued by executives.
· •Results can be compared both externally and internally.
· •Measurement data drive HR management efforts.
2-9b Human Resources and Benchmarking
Benchmarking is the process of comparing an organization’s business results to industry standards or best practices. An organization compares itself to “best-in-class” organizations that demonstrate excellence for a specific process. Benchmarking is focused on external practices that the organization can use to improve its own processes and practices. When implementing benchmarking, managers should be careful to find organizations with similar contexts, cultures, operations, and size so that comparisons are realistic. Practices that would work effectively in an organization of 500 employees might not transfer very well to an organization with 5,000 employees. The organization should also select benchmarks that will have the greatest impact on organizational performance. (Mathis 71)
Many HR professionals report that their organizations collect benchmark data on a planned, periodic basis, while others collect it on an as-needed basis. Major obstacles to using benchmarks are uncertainty about how to collect the information and what information to collect. Using benchmarking, HR effectiveness is best determined by measures on a year-to-year basis. This way, an organization can track improvements and results by implementing specific HR practices. While benchmarking helps a firm compare its results to those of other organizations, it does not provide the reasons behind the findings. Thus, benchmarking is only a starting point, not the end point, for improving HR practices.
2-9c Human Resources and the Balanced Scorecard
One-way companies can effectively measure their strategic performance and HR practices involves using the balanced scorecard. The balanced scorecard is a framework organization use to report on a diverse set of performance measures. This method balances financial and nonfinancial measures so that managers focus on long-term drivers of performance and organizational sustainability. As shown in Figure 2-13, the balanced scorecard measures performance in four areas:
Financial measures: Traditional financial measures such as profit and loss, operating margins, utilization of capital, return on investment, and return on assets are needed to ensure that the organization manages its bottom line effectively.
Internal business processes: Product and service quality, efficiency and productivity, conformance with standards, and cycle times can be measured to ensure that the operation runs smoothly and efficiently.
FIGURE 2-13 Balanced Scorecard Framework
· •Customer relations: Customer satisfaction, loyalty, and retention are important to ensure that the organization is meeting customer expectations and can depend on repeat business from its customers.
· •Learning and growth activities: Employee training and development, mentoring programs, succession planning, and knowledge creation and sharing provide the necessary talent and human capital pool to ensure the future of the organization.
Results in each of these four areas determine if the organization is progressing toward its strategic objectives. For example, some firms have noticed that when survey results show a decline in employee satisfaction, several months later there are declines in customer loyalty and repeat customer sales. Further, investing money in employee leadership development training can be linked to lower employee turnover and reduced time to hire managers from outside the organization. Using the balanced scorecard therefore requires considerable time and effort to identify the appropriate HR measures in each of the areas and determine how they tie to strategic organizational success. The balanced scorecard should also be linked to a company’s strategic objectives and focus on results that support these goals. (Mathis 72-73)
2-9d Human Capital Effectiveness Measures
HR measures outcomes that traditional accounting typically does not explore. Human capital often provides both the biggest value and the biggest cost to organizations; therefore, many metrics reflect people-related costs. Measuring the benefits of human capital is equally important because it shows how effective HR practices help an organization and its employees. As noted previously, human capital refers to the collective value of the competencies, knowledge, and skills of the employees in the organization. This capital is the renewable source of creativity and innovativeness in the organization but is not reflected in its financial statements.
Revenue per employee is a basic measure of human capital effectiveness. The formula is revenue/head count (full-time employee equivalents). It is a measure of employee productivity and shows the sales revenue generated by each full-time employee. This measure is commonly used in government reporting (see Bureau of Labor Statistics [BLS] on the Internet) as well as by other organizations to track productivity over time. If revenues increase but employee head count remains constant, productivity will increase.
A widely used financial element that can be applied to measure the contribution and cost of HR activities is return on investment (ROI) , a calculation showing the value of investments in human capital. It can also be used to show how long it will take for the activities to show results. The following formula can be used to calculate the potential ROI for a new HR practice (Mathis 73)
Calculation showing the value of investments in human capital
|A + B|
A = Operating costs for a new or enhanced system for the time period
B = One-time cost of acquisition and implementation
C = Value of gains from productivity improvements for the time period
ROI is stressed because it is used in many other organizational functions and is the “language” used by financial staff and top management. It allows managers to choose from among various investment opportunities to determine the best use of funds.
Human capital value added (HCVA) is an adjusted operating profitability figure calculated by subtracting all operating expenses except labor expenses from revenue and dividing by the total full-time head count. It shows the operating profit per full-time employee. Because labor is required to generate revenues, employment costs are added back into operating expenses. The formula for HCVA is: (Mathis 73)
Calculated by subtracting all operating expenses except labor expenses from revenue and dividing by the total full-time head count
|revenue − (operating expenses [compensation + benefit costs])|
|full-time head count|
Human capital return on investment (HCROI) directly shows the amount of profit derived from investments in labor, which represents the leverage the company has on labor cost. The formula for HCROI uses the same adjusted operating profitability figure as are used for HCVA, but it is divided by the human capital cost:
Human economic value added (HEVA) shows the wealth created per employee. It shows how much more valuable the organization has become because of its investment in human capital. Wealth is the net operating profit of a firm after the cost of capital is deducted. The cost of capital is the minimum rate of return demanded by shareholders. When a company is making more than the cost of capital, it is creating wealth for shareholders. An HEVA approach requires that all policies, procedures, measures, and methods use cost of capital as a benchmark against which their return is judged. HR decisions can be subjected to the same analysis. The formula for HEVA is:
Wealth created per employee
|net profit after taxes − cost of capital|
|full-time head count|
A variety of financial measures can be assessed to show the contribution human capital makes to organizational results. Without such measures, it would be difficult to know what is going on in the organization, identify performance gaps, and provide feedback. Managers should require the same level of rigor in measuring HR practices as they do for other functions in the organization. Regardless of the time and effort given to HR measurement and metrics, an important consideration is that HR effectiveness and efficiency is being measured regularly so that managers know how HR practices positively impact the company. (Mathis 74)
2-9e Human Resources Audit
One means for assessing HR performance is through an HR audit, which is similar to a financial audit. An HR audit is a formal research effort to assess the current state of an organization’s HR practices. This audit is used to evaluate how well activities in each of the HR areas (staffing, compensation, health and safety, etc.) have been performing so that management can identify areas for improvement. An HR audit often helps smaller organizations without a formal HR professional identify issues associated with legal compliance, administrative processes and record keeping, employee retention, and other areas. (Mathis 74-75)
2-9e Human Resources Audit
One means for assessing HR performance is through an HR audit, which is similar to a financial audit. An HR audit is a formal research effort to assess the current state of an organization’s HR practices. This audit is used to evaluate how well activities in each of the HR areas (staffing, compensation, health and safety, etc.) have been performing so that management can identify areas for improvement. An HR audit often helps smaller organizations without a formal HR professional identify issues associated with legal compliance, administrative processes and record keeping, employee retention, and other areas.
A formal research effort to assess the current state of an organization’s HR practices
There are many levels of HR audit, including these common ones:
· •Compliance audit: Checks record keeping on state and federal documentation requirements
· •Benefit programs audit: Reviews regulatory compliance, benefits administration, and reporting
· •I-9 audit: Reviews compliance with immigration regulations and the I-9 form requirement
· •Specific program audit: Reviews specific HR subareas such as compensation, EEO, or training
· •Full HR audit: Reviews all of the above plus any and all other HR functions51
Audits frequently involve a questionnaire and interviews to collect information about programs, and they may be performed by outside entities for more objective evaluation. They can provide useful assessments about how well HR practices meet established standards and requirements. (Mathis 74-75)
· •The strategy an organization follows is its proposition for identifying how to compete successfully and thereby survive and grow.
· •HR should be involved in developing and implementing strategic initiatives throughout the organization.
· •Strategic planning is a core business process that results in a road map of organizational direction.
· •Strategic HR management refers to the use of practices to gain or keep a competitive advantage by aligning individual employee performance with the organization’s strategic objectives.
· •Environmental scanning helps pinpoint strengths, weaknesses, opportunities, and threats that the organization will face during the planning horizon.
· •HR functions may involve merging organizational and HR strategies with offshoring and global staffing strategies.
· •HR planning must identify the demand for people and the supply of individuals available.
· •Managing a talent surplus may require reducing work hours, downsizing through use of attrition and hiring freezes, implementing voluntary separation programs, and downsizing the workforce.
· •Managing a talent shortage may be addressed through overtime, reducing turnover, using contingent workers, and outsourcing.
· •HR plays a crucial role in mergers and acquisitions, particularly in dealing with integration and organizational culture issues.
· •HR effectiveness must be measured using HR metrics that consider both strategic and operational effectiveness.
· •Benchmarking allows an organization to compare its practices against best practices in different organizations, and HR audits can be used to get a comprehensive overview of HR activities.
· •The balanced scorecard can be a useful framework to measure and combine organizational performance measures.
· •An HR audit is valuable in providing an overall perspective or a perspective of several specific areas.
500+ words are a good guideline to help you to be substantive enough to provide a reasonable amount of interest and effort for this activity.
Spelling and grammar is also worth a significant portion of your grade. Do not overlook these important components.
Week 3 Discussion
As the Chief Human Resource Officer of Community State University, your legal team has just contacted you. They informed you that your organization has been selected to undergo a Federal I-9 audit. You decided to do a spot check on 5 random departments and noticed that numerous I-9’s was completed incorrectly. You only have one month before the auditors arrive to do an entire I-9 audit on over 100 departments and the president of the university expects a strategic plan on how to tackle this issue in 2 days.
For the first part of your post, briefly describe the immigration forms and documents needed to work in the United States. Research and review an I-9 Form and list the documents you would produce to establish legal U.S. status.
For the second part of your post, use Figure 2-1 Strategic Planning process for the Organization (Mathis, 2017, p. 44) to recommend a plan of action to correct the deficient forms described in the scenario above. Remember this plan will be presented to the University president, should include a short and long- term solution for the I-9 completion process.
For the third part of your post, analyze whether the I-9 Form and other documents are enough to establish legal status in the U.S. and are adequate protection for employers. Justify one additional safeguard that could be added to protect the employer from unknowingly hiring an illegal immigrant.