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Chapter 2:
Developing and Implementing Strategic HRM Plans

The Value of Planning management (HRM) strategic plan to make sure Techno, Inc.
James stumbled into his position as the human resource has the right number of workers with the right skills, at the
manager. He had been working for Techno, Inc. for three right time in the future.
years, and when the company grew, James moved from a
management position into a human resource management 2.1 Strategic Planning
position. Techno, Inc. is a technology and software LEARNING OBJECTIVES
consulting company for the music industry.
1. Explain the differences been HRM and personnel
management.
James didn’t have a good handle on how to effectively run a
2. Be able to define the steps in HRM strategic planning.
human resources (HR) department, so for much of the time
he tried to figure it out as he went. When Techno started
In the past, human resource management (HRM) was called
seeing rapid growth, he hired thirty people within a one-
the personnel department. In the past, the personnel
month period to meet the demand. Proud of his ability to
department hired people and dealt with the hiring paperwork
accomplish his task of meeting the business’s current needs,
and processes. It is believed the first human resource
James was rather pleased with himself. He had spent
department was created in 1901 by the National Cash
numerous hours mulling over recruitment strategies, putting
Register Company (NCR). The company faced a major strike
together excellent compensation plans, and then eventually
but eventually defeated the union after a lockout. After this
sifting through résumés as a small part of the hiring process.
difficult battle, the company president decided to improve
Now the organization had the right number of people needed
worker relations by organizing a personnel department to
to carry out its projects.
handle grievances, discharges, safety concerns, and other
employee issues. The department also kept track of new
Fast forward five months, however, and it turned out the
legislation surrounding laws impacting the organization.
rapid growth was only temporary. James met with the
Many other companies were coming to the same realization
executives of the business who told him the contracts they
that a department was necessary to create employee
had acquired were finished, and there wasn’t enough new
satisfaction, which resulted in more productivity. In 1913,
work coming in to make payroll next month if they didn’t let
Henry Ford saw employee turnover at 380 percent and tried
some people go. James felt frustrated because he had gone
to ease the turnover by increasing wages from $2.50 to $5.00,
through so much effort to hire people, and now they would
even though $2.50 was fair during this time period. [1] Of
be laid off. Never mind the costs of hiring and training his
course, this approach didn’t work for long, and these large
department had taken on to make this happen. As James sat
companies began to understand they had to do more than
with the executives to determine who should be laid off, he
hire and fire if they were going to meet customer demand.
felt sad for the people who had given up other jobs just five
months before, only to be laid off.
More recently, however, the personnel department has
divided into human resource management and human
After the meeting, James reflected on this situation and
resource development, as these functions have evolved over
realized that if he had spoken with the executives of the
the century. HRM is not only crucial to an organization’s
company sooner, they would have shared information on the
success, but it should be part of the overall company’s
duration of the contracts, and he likely would have hired
strategic plan, because so many businesses today depend on
people differently, perhaps on a contract basis rather than on
people to earn profits. Strategic planning plays an important
a full-time basis. He also considered the fact that the
role in how productive the organization is.
organization could have hired an outsourcing company to
recruit workers for him. As Jason mulled this over, he realized
Most people agree that the following duties normally fall
that he needed a strategic plan to make sure his department
under HRM. Each of these aspects has its own part within
was meeting the needs of the organization. He vowed to work
the overall strategic plan of the organization:
with the company executives to find out more about the
company’s strategic plan and then develop a human resource

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Table 2.1 Examples of Differences between Personnel Management other issues is generally a responsibility that falls on the
and HRM HRM department.
Personnel Management
Focus HRM Focus In smaller organizations, the manager or owner is likely
performing the HRM functions. [2] They hire people, train
Helping to achieve strategic goals
them, and determine how much they should be paid. Larger
Administering of policies through people
companies ultimately perform the same tasks, but because
HRM training programs that are they have more employees, they can afford to employ
Stand-alone programs, integrated with company’s mission specialists, or human resource managers, to handle these
such as training and values areas of the business. As a result, it is highly likely that you,
as a manager or entrepreneur, will be performing HRM tasks,
Personnel department Line managers share joint
responsible for managing responsibility in all areas of people hence the value in understanding the strategic components of
people hiring and management HRM.

Creates a cost within an Contributes to the profit objectives HRM vs. Personnel Management
organization of the organization
Human resource strategy is an elaborate and systematic plan
of action developed by a human resource department. This
1. Staffing. Staffing includes the development of a strategic definition tells us that an HR strategy includes detailed
plan to determine how many people you might need to pathways to implement HRM strategic plans and HR plans.
hire. Based on the strategic plan, HRM then performs Think of the HRM strategic plan as the major objectives the
the hiring process to recruit and select the right people organization wants to achieve, and the HR plan as the
for the right jobs. specific activities carried out to achieve the strategic plan. In
2. Basic workplace policies. Development of policies to help other words, the strategic plan may include long-term goals,
reach the strategic plan’s goals is the job of HRM. After while the HR plan may include short-term objectives that are
the policies have been developed, communication of tied to the overall strategic plan. As mentioned at the
these policies on safety, security, scheduling, vacation beginning of this chapter, human resource departments in the
times, and flextime schedules should be developed by past were called personnel departments. This term implies
the HR department. Of course, the HR managers work that the department provided “support” for the rest of the
closely with supervisors in organizations to develop organization. Companies now understand that the human
these policies. Workplace policies will be addressed side of the business is the most important asset in any
throughout the book. business (especially in this global economy), and therefore
3. Compensation and benefits. In addition to paychecks, 401(k) HR has much more importance than it did twenty years ago.
plans, health benefits, and other perks are usually the While personnel management mostly involved activities
responsibility of an HR manager. surrounding the hiring process and legal compliance, human
4. Retention. Assessment of employees and strategizing on resources involves much more, including strategic planning,
how to retain the best employees is a task that HR which is the focus of this chapter. The Ulrich HR model, a
managers oversee, but other managers in the common way to look at HRM strategic planning, provides an
organization will also provide input. overall view of the role of HRM in the organization. His
5. Training and development. Helping new employees develop model is said to have started the movement that changed the
skills needed for their jobs and helping current view of HR; no longer merely a functional area, HR became
employees grow their skills are also tasks for which the more of a partnership within the organization. While his
HRM department is responsible. Determination of model has changed over the years, the current model looks at
training needs and development and implementation of alignment of HR activities with the overall global business
training programs are important tasks in any strategy to form a strategic partnership. [3] His newly revised
organization. Succession planning includes handling the model looks at five main areas of HR:
departure of managers and making current employees 1. Strategic partner. Partnership with the entire organization
ready to take on managerial roles when a manager does to ensure alignment of the HR function with the needs
leave. of the organization.
6. Regulatory issues and worker safety. Keeping up to date on
new regulations relating to employment, health care, and

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2. Change agent. The skill to anticipate and respond to recruited and interviewed have similar qualities as the
change within the HR function, but as a company as a best people already doing the job. In addition, the HR
whole. manager will likely want to meet with the financial
3. Administrative expert and functional expert. The ability to department and executives who do the budgeting, so
understand and implement policies, procedures, and they can determine human resource needs and recruit
processes that relate to the HR strategic plan. the right number of people at the right times. In addition,
4. Human capital developer. Means to develop talent that is once the HR department determines what is needed,
projected to be needed in the future. communicating a plan can gain positive feedback that
5. Employee advocate. Works for employees currently within ensures the plan is aligned with the business objectives.
the organization. 4. Understand how technology can be used. Organizations
oftentimes do not have the money or the inclination to
According to Ulrich, [4] implementation of this model must research software and find budget-friendly options for
happen with an understanding of the overall company implementation. People are sometimes nervous about
objectives, problems, challenges, and opportunities. For new technology. However, the best organizations are
example, the HR professional must understand the dynamic those that embrace technology and find the right
nature of the HRM environment, such as changes in labor technology uses for their businesses. There are
markets, company culture and values, customers, thousands of HRM software options that can make the
shareholders, and the economy. Once this occurs, HR can HRM processes faster, easier, and more effective. Good
determine how best to meet the needs of the organization strategic plans address this aspect.
within these five main areas.
HR managers know the business and therefore know the
HRM AS A STRATEGIC COMPONENT OF THE needs of the business and can develop a plan to meet those
BUSINESS needs. They also stay on top of current events, so they know
what is happening globally that could affect their strategic
Keeping the Ulrich model in mind, consider these four
plan. If they find out, for example, that an economic
aspects when creating a good HRM strategic plan:
downturn is looming, they will adjust their strategic plan. In
1. Make it applicable. Often people spend an inordinate
other words, the strategic plan needs to be a living document,
amount of time developing plans, but the plans sit in a
one that changes as the business and the world changes.
file somewhere and are never actually used. A good
strategic plan should be the guiding principles for the
HUMAN RESOURCE RECALL
HRM function. It should be reviewed and changed as
aspects of the business change. Involvement of all Have you ever looked at your organization’s strategic plan?
members in the HR department (if it’s a larger What areas does the plan address?
department) and communication among everyone
within the department will make the plan better. The Steps to Strategic Plan Creation
2. Be a strategic partner. Alignment of corporate values in HRM strategic plans must have several elements to be
the HRM strategic plan should be a major objective of successful. There should be a distinction made here: the
the plan. In addition, the HRM strategic plan should be HRM strategic plan is different from the HR plan. Think of
aligned with the mission and objectives of the the HRM strategic plan as the major objectives the
organization as a whole. For example, if the mission of organization wants to achieve, while the HR plan consists of
the organization is to promote social responsibility, then the detailed plans to ensure the strategic plan is achieved.
the HRM strategic plan should address this in the hiring Oftentimes the strategic plan is viewed as just another report
criteria. that must be written. Rather than jumping in and writing it
3. Involve people. An HRM strategic plan cannot be without much thought, it is best to give the plan careful
written alone. The plan should involve everyone in the consideration.
organization. For example, as the plan develops, the HR
manager should meet with various people in
departments and find out what skills the best employees
have. Then the HR manager can make sure the people

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Table 2.2 Lifecycle Stages and HRM Strategy

Life Cycle Training and Labor / Employee
Stage Staffing Compensation Development Relations

Meet or exceed labor market Define future skill

Attract best technical and rates to attract needed requirements and begin Set basic employee-relations
Introduction professional talent. talent. establishing career ladders. philosophy of organization.

Recruit adequate numbers and Mold effective management

mix of qualifying workers. Plan Meet external market but team through management
management succession. Manage consider internal equity development and Maintain labor peace,
rapid internal labor market effects. Establish formal organizational employee motivation, and
Growth movements. compensation structures. development. morale.

Encourage sufficient turnover to

minimize layoffs and provide
new openings. Encourage Control labor costs and
mobility as reorganizations shift Maintain flexibility and maintain labor peace.
Maturity jobs around. Control compensation costs. skills of an aging workforce. Improve productivity.

Improve productivity and

Plan and implement workforce achieve flexibility in work
reductions and reallocations; rules. Negotiate job security
downsizing and outplacement Implement tighter cost Implement retraining and and employment-adjustment
Decline may occur during this stage. control. career consulting services. policies.

Conduct a Strategic Analysis again put the organization in the growth phase. Table 2.2
A strategic analysis looks at three aspects of the individual "Lifecycle Stages and HRM Strategy" explains some of
HRM department: the strategies that may be different depending on the
1. Understanding of the company mission and values. It is organizational life cycle.
impossible to plan for HRM if one does not know the 3. Understanding of the HRM department mission and
values and missions of the organization. As we have values. HRM departments must develop their own
already addressed in this chapter, it is imperative for the departmental mission and values. These guiding
HR manager to align department objectives with principles for the department will change as the
organizational objectives. It is worthwhile to sit down company’s overall mission and values change. Often the
with company executives, management, and supervisors mission statement is a list of what the department does,
to make sure you have a good understanding of the which is less of a strategic approach. Brainstorming
company mission and values. about HR goals, values, and priorities is a good way to
2. Another important aspect is the understanding of the start. The mission statement should express how an
organizational life cycle. You may have learned about the organization’s human resources help that organization
life cycle in marketing or other business classes, and this meet the business goals. A poor mission statement might
applies to HRM, too. An organizational life cycle refers read as follows: “The human resource department at
to the introduction, growth, maturity, and decline of the Techno, Inc. provides resources to hiring managers and
organization, which can vary over time. For example, develops compensation plans and other services to assist
the employees of our company.”
When the organization first begins, it is in the 4. A strategic statement that expresses how human
introduction phase, and a different staffing, resources help the organization might read as follows:
compensation, training, and labor/employee relations “HR’s responsibility is to ensure that our human
strategy may be necessary to align HRM with the resources are more talented and motivated than our
organization’s goals. This might be opposed to an competitors’, giving us a competitive advantage. This
organization that is struggling to stay in business and is will be achieved by monitoring our turnover rates,
in the decline phase. That same organization, however, compensation, and company sales data and comparing
can create a new product, for example, which might that data to our competitors.” [5] When the mission

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statement is written in this way, it is easier to take a Many organizations and departments will use a strategic
strategic approach with the HR planning process. planning tool that identifies strengths, weaknesses,
5. Understanding of the challenges facing the opportunities, and threats (SWOT analysis) to determine
department. HRM managers cannot deal with change some of the issues they are facing. Once this analysis is
quickly if they are not able to predict changes. As a result, performed for the business, HR can align itself with the needs
the HRM manager should know what upcoming of the business by understanding the business strategy. See
challenges may be faced to make plans to deal with those Table 2.3 "Sample HR Department SWOT Analysis for
challenges better when they come along. This makes the Techno, Inc." for an example of how a company’s SWOT
strategic plan and HRM plan much more usable. analysis can be used to develop a SWOT analysis for the HR
department.
Identify Strategic HR Issues
In this step, the HRM professionals will analyze the Once the alignment of the company SWOT is completed,
challenges addressed in the first step. For example, the HR can develop its own SWOT analysis to determine the
department may see that it is not strategically aligned with the gaps between HR’s strategic plan and the company’s strategic
company’s mission and values and opt to make changes to its plan. For example, if the HR manager finds that a
departmental mission and values as a result of this department’s strength is its numerous training programs, this
information. is something the organization should continue doing. If a
weakness is the organization’s lack of consistent
Table 2.3 Sample HR Department SWOT Analysis for Techno, Inc. compensation throughout all job titles, then the opportunity
Hiring talented people to review and revise the compensation policies presents itself.
In other words, the company’s SWOT analysis provides a
Company growth basis to address some of the issues in the organization, but it
Technology implementation for business
can be whittled down to also address issues within the
processes department.

Excellent relationship between HRM and Prioritize Issues and Actions

Strengths management/executives Based on the data gathered in the last step, the HRM manager
No strategic plan for HRM should prioritize the goals and then put action plans together
to deal with these challenges. For example, if an organization
No planning for up/down cycles identifies that they lack a comprehensive training program,
No formal training processes plans should be developed that address this need. An
important aspect of this step is the involvement of the
Lacking of software needed to manage business management and executives in the organization. Once you
processes, including go-to-market staffing have a list of issues you will address, discuss them with the
Weaknesses strategies management and executives, as they may see other issues or
Development of HRM staffing plan to meet other priorities differently than you. Remember, to be
industry growth effective, HRM must work with the organization and assist
the organization in meeting goals. This should be considered
HRM software purchase to manage training,
in every aspect of HRM planning.
staffing, assessment needs for an unpredictable
business cycle
Draw Up an HRM Plan
Continue development of HRM and executive Once the HRM manager has met with executives and
relationship by attendance and participation in management, and priorities have been agreed upon, the plans
key meetings and decision-making processes are ready to be developed. Sometimes companies have great
Develop training programs and outside strategic plans, but when the development of the details
development opportunities to continue occurs, it can be difficult to align the strategic plan with the
Opportunities development of in-house marketing expertise more detailed plans. An HRM manager should always refer
to the overall strategic plan before developing the HRM
Economy
strategic plan and HR plans.
Threats Changing technology

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Even if a company does not have an HR department, HRM 2.2 Writing the HRM Plan
strategic plans and HR plans should still be developed by LEARNING OBJECTIVE
management. By developing and monitoring these plans, the
1. Describe the steps in the development of an HRM plan.
organization can ensure the right processes are implemented
to meet the ever-changing needs of the organization. The
The writing of an HRM strategic plan should be based on the
strategic plan looks at the organization as a whole, the HRM
strategic plans of the organization and of the department.
strategic plan looks at the department as a whole, and the HR
Once the strategic plan is written, the HR professional can
plan addresses specific issues in the human resource
begin work on the HR plan. This is different from the
department.
strategic plan in that it is more detailed and more focused on
the short term.
KEY TAKEAWAYS

 Personnel management and HRM are different ways of HOW WOULD YOU HANDLE THIS?
looking at the job duties of human resources. Twenty
Compensation Is a Touchy Subject
years ago, personnel management focused on
administrative aspects. HRM today involves a strategic
As the HR manager, you have access to sensitive data, such as pay
process, which requires working with other departments,
information. As you are looking at pay for each employee in the
managers, and executives to be effective and meet the
marketing department, you notice that two employees with the same job
needs of the organization.
title and performing the same job are earning different amounts of money.
 In general, HRM focuses on several main areas, which As you dig deeper, you notice the employee who has been with the
include staffing, policy development, compensation and company for the least amount of time is actually getting paid more than
benefits, retention issues, training and development, and the person with longer tenure. A brief look at the performance
regulatory issues and worker protection. evaluations shows they are both star performers. You determine that two
 To be effective, the HR manager needs to utilize different managers hired the employees, and one manager is no longer
technology and involve others. with the organization. How would you handle this?
 As part of strategic planning, HRM should conduct a
strategic analysis, identify HR issues, determine and The six parts of the HRM plan include the following:
prioritize actions, and then draw up the HRM plan. 1. Determine human resource needs. This part is heavily involved
EXERCISES with the strategic plan. What growth or decline is
expected in the organization? How will this impact your
1. What is the difference between HR plans and HRM
workforce? What is the economic situation? What are
strategic plans? How are they the same? How are they
your forecasted sales for next year?
different?
2. Determine recruiting strategy. Once you have a plan in place,
2. Of the areas of focus in HRM, which one do you think is
it’s necessary to write down a strategy addressing how
the most important? Rank them and discuss the reasons
you will recruit the right people at the right time.
for your rankings.
3. Select employees. The selection process consists of the
interviewing and hiring process.
[1] Michael Losey, “HR Comes of Age,” HR Magazine, March 15, 1998, 4. Develop training. Based on the strategic plan, what training
accessed July 11, 2011, needs are arising? Is there new software that everyone
http://findarticles.com/p/articles/mi_m3495/is_n3_v43/ai_20514399.
must learn? Are there problems in handling conflict?
[2] Jan de Kok and Lorraine M. Uhlaner, “Organization Context and
Human Resource Management in the Small Firm” (Tinbergen Institute Whatever the training topics are, the HR manager should
Discussion Papers 01-038/3, Tinbergen Institute, 2001), accessed August address plans to offer training in the HRM plan.
13, 2011, http://ideas.repec.org/s/dgr/uvatin.html. 5. Determine compensation. In this aspect of the HRM plan,
[3] David Ulrich and Wayne Brockbank, The HR Value
the manager must determine pay scales and other
Proposition (Boston: Harvard Business Press, 2005), 9–14.
[4] David Ulrich, “Evaluating the Ulrich Model,” Acerta, 2011, accessed compensation such as health care, bonuses, and other
July 11, 2011, http://www.goingforhr.be/extras/web-specials/hr- perks.
according-to-dave-ulrich#ppt_2135261. 6. Appraise performance. Sets of standards need to be
[5] Gary Kaufman, “How to Fix HR,” Harvard Business Review,
developed so you know how to rate the performance of
September 2006, accessed July 11, 2011, http://hbr.org/2006/09/how-to-
fix-hr/ar/1. your employees and continue with their development.

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Figure 2.3

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

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Involvement of other departments, managers, and executives and it can be less expensive to hire someone for only a
should take place to obtain an accurate estimate of staffing specified period of time.
needs for now and in the future.
No matter how it is done, recruitment is the process of
Many HR managers will prepare an inventory of all current obtaining résumés of people interested in the job. In our next
employees, which includes their educational level and step, we review those résumés, interview, and select the best
abilities. This gives the HR manager the big picture on what person for the job.
current employees can do. It can serve as a tool to develop
employees’ skills and abilities, if you know where they are Select
currently in their development. For example, by taking an After you have reviewed résumés for a position, now is the
inventory, you may find out that Richard is going to retire time to work toward selecting the right person for the job.
next year, but no one in his department has been identified Numerous studies have been done, and while they have
or trained to take over his role. Keeping the inventory helps various results, the majority of studies say it costs an average
you know where gaps might exist and allows you to plan for of $45,000 to hire a new manager. [1] While this may seem
these gaps. exaggerated, consider the following items that contribute to
the cost:
HR managers will also look closely at all job components and 1. Time to review résumés
will analyze each job. By doing this analysis, they can get a 2. Time to interview candidates
better picture of what kinds of skills are needed to perform a 3. Interview expenses for candidates
job successfully. Once the HR manager has performed the 4. Possible travel expenses for new hire or recruiter
needs assessment and knows exactly how many people, and 5. Possible relocation expenses for new hire
in what positions and time frame they need to be hired, he or 6. Additional bookkeeping, payroll, 401(k), and so forth
she can get to work on recruiting, which is also called a 7. Additional record keeping for government agencies
staffing plan. 8. Increased unemployment insurance costs
9. Costs related to lack of productivity while new employee
Recruit gets up to speed
Recruitment is an important job of the HR manager.
Knowing how many people to hire, what skills they should Because it is so expensive to hire, it is important to do it right.
possess, and hiring them when the time is right are major First, résumés are reviewed and people who closely match the
challenges in the area of recruiting. Hiring individuals who right skills are selected for interviews. Many organizations
have not only the skills to do the job but also the attitude, perform phone interviews first so they can further narrow the
personality, and fit can be the biggest challenge in recruiting. field. The HR manager is generally responsible for setting up
Depending on the type of job you are hiring for, you might the interviews and determining the interview schedule for a
place traditional advertisements on the web or use social particular candidate. Usually, the more senior the position is,
networking sites as an avenue. Some companies offer the longer the interview process takes, even up to eight
bonuses to employees who refer friends. No matter where weeks. [2] After the interviews are conducted, there may be
you decide to recruit, it is important to keep in mind that the reference checks, background checks, or testing that will need
recruiting process should be fair and equitable and diversity to be performed before an offer is made to the new
should be considered. employee. HR managers are generally responsible for this
aspect. Once the applicant has met all criteria, the HR
Depending on availability and time, some companies may manager will offer the selected person the position. At this
choose to outsource their recruiting processes. For some point, salary, benefits, and vacation time may be negotiated.
types of high-level positions, a head hunter will be used to Compensation is the next step in HR management.
recruit people nationally and internationally. A head hunter is
a person who specializes in matching jobs with people, and Determine Compensation
they usually work only with high-level positions. Another What you decide to pay people is much more difficult than it
option is to use an agency that specializes in hiring people for seems. Pay systems must be developed that motivate
a variety of positions, including temporary and permanent employees and embody fairness to everyone working at the
positions. Some companies decide to hire temporary organization. However, organizations cannot offer every
employees because they anticipate only a short-term need, benefit and perk because budgets always have constraints.

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Even governmental agencies need to be concerned with Perform a Performance Appraisal

compensation as part of their HR plan. For example, in 2011, The last thing an HR manager should plan is the performance
Illinois State University gave salary increases of 3 percent to appraisal. A performance appraisal is a method by which job
all faculty, despite state budget cuts in other areas. They performance is measured. The performance appraisal can be
reasoned that the pay increase was needed because of the called many different things, such as the following:
competitive nature of hiring and retaining faculty and staff. 1. Employee appraisal
The university president said, “Our employees have had a 2. Performance review
very good year and hopefully this is a good shot in the arm 3. 360 review
that will keep our morale high.” [3] 4. Career development review

The process in determining the right pay for the right job can No matter what the name, these appraisals can be very
have many variables, in addition to keeping morale high. beneficial in motivating and rewarding employees. The
First, as we have already discussed, the organization life cycle performance evaluation includes metrics on which the
can determine the pay strategy for the organization. The employee is measured. These metrics should be based on the
supply and demand of those skills in the market, economy, job description, both of which the HR manager develops.
region, or area in which the business is located is a Various types of rating systems can be used, and it’s usually
determining factor in compensation strategy. For example, a up to the HR manager to develop these as well as employee
company operating in Seattle may pay higher for the same job evaluation forms. The HR manager also usually ensures that
than their division in Missoula, Montana, because the cost of every manager in the organization is trained on how to fill out
living is higher in Seattle. The HR manager is always the evaluation forms, but more importantly, how to discuss
researching to ensure the pay is fair and at market value. job performance with the employee. Then the HR manager
Employees can develop their skills while getting paid for it. tracks the due dates of performance appraisals and sends out
Training is the next step in the HR planning process. e-mails to those managers letting them know it is almost time
to write an evaluation.
Develop Training
Once we have planned our staffing, recruited people, selected HUMAN RESOURCE RECALL
employees, and then compensated them, we want to make
Have you ever been given a performance evaluation? What
sure our new employees are successful. One way we can
was the process and the outcome?
ensure success is by training our employees in three main
KEY TAKEAWAYS
areas:
1. Company culture. A company culture is the organization’s  Human resource planning is a process that is part of the
way of doing things. Every company does things a bit strategic plan. It involves addressing specific needs within
differently, and by understanding the corporate culture, the organization, based on the company’s strategic
the employee will be set up for success. Usually this type direction.
of training is performed at an orientation, when an  The first step in HR planning is determining current and
employee is first hired. Topics might include how to future human resource needs. In this step, current
request time off, dress codes, and processes. employees, available employees in the market, and future
2. Skills needed for the job. If you work for a retail store, your needs are all analyzed and developed.
employees need to know how to use the register. If you
 In the second step of the process, once we know how
have sales staff, they need to have product knowledge to
many people we will need to hire, we can begin to
do the job. If your company uses particular software,
determine the best methods for recruiting the people we
training is needed in this area.
need. Sometimes an organization will use head hunters to
3. Human relations skills. These are non-job-specific skills
find the best person for the job.
your employees need not only to do their jobs but also
 After the recruiting process is finished, the HR manager
to make them all-around successful employees. Skills
will begin the selection process. This involves setting up
needed include communication skills and interviewing
interviews and selecting the right person for the job. This
potential employees.
can be an expensive process, so we always want to hire
the right person from the beginning.
 HR managers also need to work through compensation
plans, including salary, bonus, and other benefits, such as

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health care. This aspect is important, since most unique, as most résumé-scanning software programs can only
organizations want to use compensation to attract and search for specific keywords and are not able to assess the job
retain the best employees. fit or tie the criteria directly to the overall strategic plan. The
 The HR manager also develops training programs to project uses IBM India’s spoken web technology, in which
ensure the people hired have the tools to be able to do the prospective employee answers a few questions, creating
their jobs successfully. the equivalent of voice résumé. Then using these voice
EXERCISES résumés, the hiring manager can easily search for those
prospects who meet the needs of the organization and the
1. Of the parts of HR planning, which do you think is most objectives of the strategic plan.
difficult, and why? Which would you enjoy the most, and
why? Some of the challenges noted with this software include the
2. Why is it important to plan your staffing before you start recognition of language and dialect issues. However, the IBM
to hire people? human resources solution is still one of the most
3. What is the significance of training? Why do we need it sophisticated of such tools to be developed. “Services is very
in organizations? people-intensive. Today, there is talk of a war for talent, but
attracting the right kind of people is a challenge, yet
[1] Susan Herman, Hiring Right: A Practical Guide (Thousand Oaks, CA:
unemployment is very high. Our solution applies
Sage, 1993), xv. sophisticated analytics to workforce management,” says
[2] John Crant, “How Long Does an Interview Process Take?” Manish Gupta, director at IBM Research-India. [2]
Jobsinminneapolis.com, December 2, 2009, accessed October 28, 2010,
http://www.jobsinminneapolis.com/articles/title/How-Long-Does-an-
Interview-Process-Take/3500/422.
It is likely that this is only the beginning of the types of
[3] Stephanie Pawlowski, “Illinois State University to Get Salary Bump,” technology that allow HR professionals to tie their HR plans
WJBC Radio, July 11, 2011, accessed July 11, directly to a strategic plan with the touch of a few buttons.
2011, http://wjbc.com/illinois-state-university-faculty-to-get-salary-bump.

Link HRM Strategic Plan to Company Plan

2.3 Tips in HRM Planning Understanding the nature of the business is key to being
LEARNING OBJECTIVE successful in creating a strategic plan for HRM. Because every
1. Explain the aspects needed to create a usable and business is different, the needs of the business may change,
successful HRM plan. depending on the economy, the season, and societal changes
in our country. HR managers need to understand all these
As you have learned from this chapter, human resource aspects of the business to better predict how many people are
strategic planning involves understanding your company’s needed, what types of training are needed, and how to
strategic plan and HR’s role in the organization. The planning compensate people, for example. The strategic plan that the
aspect meets the needs of the strategic plan by knowing how HR manager writes should address these issues. To address
many people should be hired, how many people are needed, these issues, the HR manager should develop the
and what kind of training they need to meet the goals of the departmental goals and HR plans based on the overall goals
organization. This section gives some tips on successful HR of the organization. In other words, HR should not operate
strategic planning. alone but in tandem with the other parts of the organization.
The HRM plan should reflect this.
FORTUNE 500 FOCUS
Monitor the Plan Constantly
Like many Fortune 500 companies throughout the world, Oftentimes a great strategic plan is written, taking lots of
IBM in India finds that picking the best prospects for job time, but isn’t actually put into practice for a variety of
postings isn’t always easy. By using advanced analytics, reasons, such as the following:
however, it aims to connect the strategic plan, staffing needs, 1. The plan wasn’t developed so that it could be useful.
and the hiring process using a simple tool. The project was 2. The plan wasn’t communicated with management and
originally developed to assign people to projects internally at others in the HRM department.
IBM, but IBM found this tool able to not only extract 3. The plan did not meet the budget guidelines of the
essential details like the number of years of experience but organization.
also make qualitative judgments, such as how good the
person actually is for the job. [1] This makes the software

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4. The plan did not match the strategic outcomes of the Be Aware of Legislative Changes
organization. One of the major challenges in HRM is having an awareness
5. There was lack of knowledge on how to actually of what is happening from a legal perspective. Because most
implement it. budgets are based on certain current laws, knowing when the
law changes and how it will affect department budgets and
There is no point in developing a plan that isn’t going to be planning (such as compensation planning) will create a more
used. Developing the plan and then making changes as solid strategic plan. For example, if the minimum wage goes
necessary are important to making it a valuable asset for the up in your state and you have minimum wage workers,
organization. A strategic plan should be a living document, in reworking the budget and communicating this change to your
that it changes as organizational or external factors change. accounting team is imperative in providing value to the
People can get too attached to a specific plan or way of doing organization. We will discuss various legislation throughout
things and then find it hard to change. The plan needs to this book.
change constantly or it won’t be of value.
KEY TAKEAWAYS
Measure It
A good strategic plan and HR plan should discuss the way As has been the theme throughout this chapter, any
“success” will be measured. For example, rather than writing, HRM plan should be directly linked to the strategic plan
“Meet the hiring needs of the organization,” be more specific: of the organization.
“Based on sales forecasts from our sales department, hire ten  A plan should be constantly updated and revised as things
people this quarter with the skills to meet our ten job in the organization change.
openings.” This is a goal that is specific enough to be  A good strategic plan provides tools to determine
measured. These types of quantitative data also make it easier whether you met the goal. Any plan should have
to show the relationship between HR and the organization, measureable goals so the connection to success is
and better yet, to show how HR adds value to the bottom obvious.
line. Likewise, if a company has a strategic objective to be a  Changes in a strategic plan and in goal setting are
safe workplace, you might include a goal to “develop training necessary as the internal and external environments
to meet the needs of the organization.” While this is a great change. An HR manager should always be aware of
goal, how will this be measured? How will you know if you changes in forecasts, for example, so the plan can change,
did what you were supposed to do? It might be difficult to too.
measure this with such a general statement. On the other  Legislative changes may impact strategic plans and
hand, a goal to “develop a safety training workshop and have budgets as well. It’s important to make sure HR managers
all employees complete it by the end of the year” is specific are keeping up on these changes and communicating
and can be measured at the end to determine success. them.
EXERCISES
HUMAN RESOURCE RECALL
1. What are some ways an HR manager can keep up on
What are some of your personal goals? Are these goals legislative changes? Do a web search and list specific
measureable? publications that may help keep the HR manager aware
of changes.
Sometimes Change Is Necessary 2. Why is it important to be able to measure strategic plans?
It can be difficult to base an entire plan on forecasted What might happen if you don’t?
numbers. As a result, an HRM department that is willing to
change quickly to meet the needs of the organization proves
its worthiness. Consider a sales forecast that called for fifteen [1] Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst,
July 11, 2011, accessed July 11,
new hires, but you find out months later the organization is 2011, http://www.istockanalyst.com/business/news/5283887/ibm-
having a hard time making payroll. Upon digging deeper, you automates-parsing-of-resumes.
find the sales forecasts were over exaggerated, and now you [2] Sridhar Chari, “IBM Automates Parsing of Resumes,” iStock Analyst,
have fifteen people you don’t really need. By monitoring the July 11, 2011, accessed July 11,
2011, http://www.istockanalyst.com/business/news/5283887/ibm-
changes constantly (usually done by asking lots of questions automates-parsing-of-resumes.
to other departments), you can be sure you are able to change
your strategic plan as they come.

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2.4 Cases and Problems 

To make the most from a strategic plan, it’s important
CHAPTER SUMMARY to write the goals in a way that makes them measurable.
CHAPTER CASE
 Human resource management was once called the
personnel department. In the past, hiring people and We Merged…Now What?
working with hiring paperwork was this department’s Earlier this month, your company, a running equipment
job. Today, the HRM department has a much broader designer and manufacturer called Runners Paradise, merged
role, and as a result, HR managers must align their with a smaller clothing design company called ActiveLeak.
strategies with the company’s strategies. Your company initiated the buyout because of the excellent
 Functions that fall under HRM today include staffing, design team at ActiveLeak and their brand recognition,
creation of workplace policies, compensation and specifically for their MP3-integrated running shorts. Runners
benefits, retention, training and development, and Paradise has thirty-five employees and ActiveLeak has ten
working with regulatory issues and worker protection. employees. At ActiveLeak, the owner, who often was too
 Human resource strategy is a set of elaborate and busy doing other tasks, handled the HRM roles. As a result,
systematic plans of action. The company objectives and ActiveLeak has no strategic plan, and you are wondering if
goals should be aligned with the objectives and goals of you should develop a strategic plan, given this change. Here
the individual departments. are the things you have accomplished so far:
 The steps to creating an HRM strategic plan include  Reviewed compensation and adjusted salaries for the
conducting a strategic analysis. This entails having an sake of fairness. Communicated this to all affected
understanding of the values and mission of the employees.
organization, so you can align your departmental strategy  Developed job requirements for current and new jobs.
in the same way.  Had each old and new employee fill out a skills inventory
 The second step is to identify any HR issues that might Excel document, which has been merged into a database.
impact the business.  From this point, you are not sure what to do to fully
 The third step, based on the information from the first integrate the new organization.
and second steps, is to prioritize issues and take action. 1. Why should you develop an HRM strategic plan?
Finally, the HRM professional will draw up the HRM 2. Which components of your HR plan will you have to
plan. change?
 The HRM plan consists of six steps. The first is to 3. What additional information would you need to create
determine the needs of the organization based on sales an action plan for these changes?
forecasts, for example. Then the HR professional will TEAM ACTIVITIES
recruit and select the right person for the job. HRM 1. Work in a group of three to five people. Choose a company
develops training and development to help better the and perform a SWOT analysis on that organization and be
skills of existing employees and new employees, too. The prepared to present it to the class.
HR manager will then determine compensation and 2. Based on the SWOT analysis you performed in the first
appraise performance of employees. Each of these parts question, develop new objectives for the organization.
of the HRM plan is discussed in its own separate chapter
in greater detail. NOTES:
 As things in the organization change, the strategic plan
should also change.

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