1
Q
All successful organizations
A
Generate value for their stakeholders. They are effective at understanding their stakeholders’ needs, their environments, and their resources and how these elements may change over time. Their leaders use strategic planning and management to set long-range goals and align organizational resources and actions to achieve those goals.
2
Q
Strategy
A
A plan of action for accomplishing an organization’s long-range goals to create value. The strategy details separate activities (tactics or initiatives) that must be coordinated over time. The strategy must look both inward, toward the strengths and vulnerabilities of the organization, and outward, toward possible external influences, opportunities, and obstacles. Growth is not a strategy but the result of a successfully designed and implemented strategy.
3
Q
There are three levels of strategy:
A
Organizational strategy focuses on the future of the organization as a single unit—a general vision of the future it seeks and its long-term goals.
Business unit strategies address questions of how and where the organization will focus to create value.
Operational strategy reflects the way in which organizational and business unit strategies are translated into action at the functional level through functional strategies. Strategic planning and management processes are repeated at each level, and unit and functional leaders must assume the same strategic mindset that the organization’s leaders have adopted.
4
Q
These levels of strategy must be…
A
Aligned.
This means that the HR strategy will be interwoven throughout the organizational and functional strategies. It must be consistent with the organizational strategy and must support other functional strategies. All policies, programs, and processes are selected and evaluated for their strategic impact. HR resources must be spent on strategic activities that add value at all points in the employment management cycle: workforce planning, talent acquisition, engagement and retention, rewards, and development of necessary skills and future leaders. The function must organize itself and acquire necessary strategic competencies, such as the abilities to manage risk and change, to use data to make better decisions, to manage a global and diverse enterprise, and, most importantly, to lead the HR function as part of a larger organization.
5
Q
Strategy must be developed with awareness of an organization’s…
A
Stakeholders and their unique perceptions of the value the organization delivers and of the organization’s context—the marketplace forces that affect strategic choices.
6
Q
Strategic planning
A
The process of setting goals and designing a path toward a competitive position. The strategic plan helps create alignment of efforts and provides a layer of control.
7
Q
Strategic management
A
Includes the actions that leaders take to move their organizations toward the goals set in strategic planning and to create value for all stakeholders. It makes incremental adjustments to the plan as needed and to the organization itself. These adjustments often represent the innovative capacity of the organization.
8
Q
Strategic management provides an organization with:
A
Consistent, long-term goals
Consistent decision making by leaders
Better competitive and external vision
Better internal vision
9
Q
Consistent, Long-term goals
A
Fewer resources will be wasted on activities that are unrelated to the goals or are ineffective in supporting attainment of the goals.
10
Q
Consistent decision making by leaders
A
Strategy provides guideposts throughout the organization, from top to bottom. Each action and each investment of resources must be assessed in light of the organization’s long-term goals.
11
Q
Better competitive and external vision
A
The process of making decisions and managing risks requires gathering and monitoring information about the external environment. This can help in determining strategic choices and can influence organizational preparation for positive and negative outcomes. We should note here that all organizations, including nonprofits, must be aware of their competitive and external environments. Nonprofits must compete for resources from sources whose priorities and capacities may change. They may need to adjust their own operational priorities and focus in response to client needs.
12
Q
Better internal vision
A
Strategic management provides a better internal vision of what resources the organization can apply to its strategic goals and how they may need to be developed or supplemented.
13
Q
Organizations that are successful at strategy have mastered certain skills. All of these critical success factors relate directly to the required competencies and responsibilities of HR:
A
Alignment of effort
Control of drift
Focus on core competencies
14
Q
Alignment of effort
A
Strategic alignment is necessary to maintain organizational focus on a defined mission and goals. As the strategy is progressively elaborated at other levels within the organization—in business divisions and/or functional areas—each unit must examine its plan against the organization’s. Will HR’s activities help move the organization toward its goal? Are HR activities attentive to the logic behind the original plan and the value of the original goal?
15
Q
Control of drift
A
Strategic drift is a phenomenon in which an organization fails to recognize and respond to changes in its environment that necessitate strategic change. Like a ship bound for the rocks, the organization fails to make necessary course corrections. It beats on against the current of external forces that drive it further and further from its goals. Drift is often caused by an organizational culture that is too deeply rooted in the past, in the ways things have always been done. HR can help develop leaders with vision and courage, and HR leaders can embody these values as well.
16
Q
Focus on core competencies
A
Core competencies are usually unique advantages an organization possesses, abilities that are integral to creating customer value and difficult for competitors to imitate. For example, core competencies can be technical expertise or excellence in design, marketing, or operations. A core competency can also be vision—the ability to see when and how the organization can reinvent itself. Strategic organizations know what they are good at and focus their efforts on where those competencies will have the most effect. Necessary but not core competencies can be outsourced to reliable suppliers.
17
Q
There may be a number of reasons why organizations fail to reap the benefits of strategic planning and management:
A
Taking shortcuts
Little-follow through
Overreliance on the comfortable and familiar
Insufficient commitment from management
Insufficient involvement from the rest of the organization
Inadequate communication
18
Q
Strategy can be…
A
Deliberate—carefully articulated as a plan for future actions.
Alternatively, strategy can be emergent—a predictable pattern of decisions that management makes as it uses the organization’s mission, vision, and values to respond to external conditions.
19
Q
Deliberate Strategic planning and management:
A
Formulation, during which leaders gather and analyze internal and external information to determine the organization’s current position and capabilities, opportunities, and constraints.
Development of strategic goals and tactics that will optimize success given the environment, opportunities, and constraints—the strategic plan.
Implementation of tactics—the process of strategic management. This requires clear communication of objectives to teams, coordination and support of their efforts, and control of resources.
Evaluation of results, both continually, to make sure that activities maintain strategic focus and are effective, and at designated intervals, to determine the effectiveness of the strategy itself and the need for change or improvement.
20
Q
Strategic planning and management are distinguished by…
A
The way an organization’s assets, structure, and policies are focused in an integrated manner to achieve certain goals. The organization’s parts work in harmony rather than independently or in opposition. The organization is continually mindful of results and committed to continuous improvement.
21
Q
The strategic planning process begins with…
A
Information gathering and analysis, because this leads to greater self-awareness and a better understanding of the constraints and advantages that must be reflected in the organization’s strategy. Without this level of awareness, an organization is likely to head down a road that will, at best, be much bumpier, take longer, and require detours and repairs that consume resources. At worst, a determined and blind strategic plan can drive the organization off a cliff.
22
Q
Systems thinking
A
Recognizing that organizations are composed of interacting and sometimes interdependent parts that together create a dynamic internal environment.
The internal environment is created by the varying ways that all of these units interplay. The challenge in strategic planning and management is to coordinate these parts to achieve strategic goals.
23
Q
Differentiation of Units
A
Each part of an organization’s interacting and interdependent parts is differentiated by the role it plays in the system and its own particular challenges, values, and processes
24
Q
Because the system is dynamic…
A
Changes in one part can affect the other parts.
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Due to the interconnectivity in the system, organizations must address...
The root cause of problems when actions are taken in response to identified issues. If an organization simply treats the symptoms of issues, other unintended issues may be created elsewhere in the system.
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To make things more complex, the organization is surrounded by...
An external environment as well—an environment composed of separate systems that exert their own influences over the organization.
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Because of the interconnected nature of systems, the role of feedback is...
Extremely important.
In fact, it is essential for the efficient, continued functioning of the system. Gathering feedback from the system allows one to identify deviation from the intended goal, state, or outcome and make corrective adjustments. As feedback is gathered, additional adjustments might need to be made, as an adjustment in one area could have knock-on effects elsewhere within the system. A lack of feedback or managers ignoring the feedback they are given are common causes of system failure.
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Environmental scanning
May be defined as a process of systematically surveying and gathering data, from both internal and external sources, that can be analyzed to identify opportunities and threats and to strengthen strategic plans and goals.
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PESTLE analysis
Political, economic, social, technological, legal, and environmental categories.
A PESTLE analysis can be conducted on different levels: for the entire enterprise, for individual units or functions, or for specific activities. Performing this type of analysis requires HR professionals to adopt a broader and more long-range perspective than they may ordinarily use. At the same time, analysts must restrict their horizons and the directions they scan, or the organization will drown in data whose analysis may absorb too much time or whose complexity may paralyze decision making.
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The general process is similar to some of the steps used in the risk management process. PESTLE analysts:
Assemble a list of possible events or trends that exist now or could materialize within a defined time frame. This could be done through brainstorming meetings, interviews or focus groups with experts in certain areas, or literature reviews.
Identify the potential impacts on the organization. These should include positive and negative or immediate and long-range effects. Analysts should also look for possible ripple effects on apparently unconnected processes or parts of the organization.
Research the impacts more thoroughly to understand possible causes, their dimensions, and connections with other events or trends. For example, trending information may be obtained from government agencies or industry associations.
Assess the importance of the possible impacts based on the strength of the data.
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Political examples
Regulatory environment and actions
Taxation policies
Treaties and tariff structures
Immigration policies
Governance legislation
Government stability
Levels of corruption
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Economic Examples
Business forecasts
Labor availability and cost
Price for services and materials (inflation/deflation rates)
Household income
Consumer confidence
Availability and cost of capital
Income disparities
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Social examples
Demographic shifts in age, ethnic background
Education and skills profiles
Housing patterns
Patterns of discrimination
Family structure
Values
Lifestyles and purchasing habits
Media use
Effect of globalization on local culture
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Technological examples
New centers of technological training and expertise
Innovative technology and applications of technology
Unequal access to technology
New or changing technical standards
Technological vulnerability
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Legal examples
Trends in patent law and intellectual property protection
Increased civil litigation in workplaces
Increased shareholder legal actions
Unequal access to legal representation
Trends in evidence requirements and penalties
Increased cost for defense
Trends in findings for corporate negligence
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Environmental examples
Decreasing carbon consumption limits
Increased use of alternative-fuel vehicles
Need for innovative technology and practices to decrease use of resources or environmental impact
Unequal effect of environmental damage or policies
Vulnerability of reliable and potable water supplies
Increased interest in environmental impact
37
SWOT analysis
A simple and effective process for assessing an organization’s strategic capabilities in comparison to threats and opportunities identified during environmental scanning. Although we refer to SWOT as an organizational tool in this section, it can also be used to analyze the strengths and weaknesses of parts of an organization (for example, the HR function), products or services, and individual initiatives.
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The SWOT analysis process involves answering four basic questions:
S—What are the organization’s internal strengths?
W—What are the organization’s internal weaknesses?
O—What external opportunities might the organization be able to take advantage of?
T—To succeed, what external threats must the organization accept or manage?
39
Strengths and weaknesses refer to the_____, while opportunities and threats come from the______.
Internal environment; external environment.
The opportunities represent favorable or advantageous circumstances that could be used to produce a desired effect, while threats are an indication of possible danger, harm, or menace. Strengths and opportunities can be leveraged; weaknesses and threats are problems that must be solved and are often more difficult to control.
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A SWOT analysis can underscore the need for...
Addressing cultural misalignment or skill gaps before committing to a strategy.
It is often performed as companies consider entering new markets, expanding globally, or forming a strategic alliance. As with all aspects of strategic planning, a SWOT analysis of a global organization is more complicated. It must consider local variations in performance, competitive situations, exchange rates, labor supply, and various political, cultural, and legal influences in each locale.
41
Larger organizations use matrix tools, like the growth-share matrix, to find where...
The greatest value in their organizations lies.
The vertical axis of the growth-share matrix indicates the rate of growth in this area, while the horizontal axis indicates the size of market share. The assumptions are that a growth trend (rather than stasis or decline) predicts greater value and a larger market share indicates a stronger competitive position. A business line that is growing and has a dominant share (a “star”) has high value. A static but dominant business line (a “cash cow”) creates value reliably but shows little opportunity for growth. “Dogs” are consuming resources without offering strong value or future growth. “Question marks” could be winners or losers; their future is unclear.
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Scenario analysis
helps an organization compare the impact of changes in the environment on the organization’s outputs. This allows planners to identify those environmental factors that have the greatest potential for positive or negative impact and to apply the principles of risk management to strategy formulation.
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Before a strategy can be mapped, a destination must be chosen. This destination is an image of...
How the organization defines its purpose (its mission), the future it hopes to see (its vision), and the principles it agrees will guide its behavior (its values).
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These strategic statements serve many purposes:
In times of crisis they guide management’s thinking and decisions. Individual initiatives can be held up against the mission statement to see if they are truly aligned with the organization’s strategy. Employees will understand expectations and will be more likely to behave, on a daily basis, in accordance with the organization’s values.
They reflect the type of organizational culture that will be required to attain the mission and vision and to support the values described. In some cases a shift in strategy may necessitate a change in culture. These statements can sketch the outlines of this new culture.
They can contribute to the employer’s brand and make recruiting and onboarding (assimilating new employees into the organization) more focused and effective.
Stakeholders can see how they are included and can challenge leaders to fulfill these pledges.
45
Mission statement
Specifies what activities the organization intends to pursue and what course management has charted for the future—a concise statement of the organization’s strategy.
The mission statement could name one or more of the key stakeholders—employees, customers, vendors, shareholders and investors, the community—and it communicates a sense of purpose and describes the value the organization intends to deliver to the stakeholders. The language of the statement often expresses a sense of priorities.
46
Vision statement
A vivid, guiding image of the organization’s desired future—the future it hopes to attain through its strategy.
The vision statement is the ultimate picture of what leadership envisions for the organization. The key to a solid vision is that it conjures up a similar picture for each member of the organization. The purpose of the vision statement is to inspire and motivate. It can be aspirational.
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Organizational values
Are beliefs that are important to an organization and often dictate employee behavior. Robert Grant, in Contemporary Strategy Analysis, defines values as principles to guide decisions and actions. Organizations sometimes allow their values to be defined by the employees.
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If there is a gap between the organization’s present values and those that will sustain its mission...
Then the organization will have to set itself to the challenge of changing its culture.
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The process of developing mission, vision, and values statements is reiterated...
At the business unit and functional levels. Each unit considers its own work in light of the organization’s strategic statements and expresses its own mission, vision, and values
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The mission statement may include...
general goals that suggest how the organization will focus its resources. These goals are influenced by the deeper understanding of the organization and its surroundings and start moving the organization and its people in the intended direction. They describe general, longer-term, desired outcomes of the strategy.
51
Like the development of strategic statements, the process of setting goals...
Must be repeated on a unit or functional level, including the HR functional level. This supports alignment of the functional/unit goals with the organization’s goals. In other words, it creates a line of sight from the organization’s strategic goals to the goals and objectives of the organization’s functions and units.
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From Organization to Unit/Functional Goals: Increased Productivity
Unit/Function: HR
Unit/Function Goal: Improve quality and efficiency of talent supply chian
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From Organization to Unit/Functional Goals: Reduced cost of production
Unit/Function: Production
Unit/Function Goal: Optimize global processes for each production line
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From Organization to Unit/Functional Goals: New Market Penetration
Unit/Function: Marketing
Unit/Function Goal: Implement market entry in country x
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From Organization to Unit/Functional Goals: Decreased cost of sales
Unit/Function: Sales
Unit/Function Goal: Increase amount of individual sales
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From Organization to Unit/Functional Goals: Improved foreign exchange management
Unit/Function: Finance and administration
Unit/Function Goal: Implement currency hedging strategy
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From Organization to Unit/Functional Goals: Improved return on investment
Unit/Function: Research and Development
Unit/Function Goal: Reduce time to patent
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From Organization to Unit/Functional Goals: Information integration across functions and global locations
Unit/Function: Information technology
Unit/Function Goal: Make critical performance data visible to management in real time.
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Function and unit goals generate programs and specific initiatives...
"The ways we will achieve our goals.” For these more-specific activities, the function defines short-term objectives that are specific and time-based (i.e., have endpoints at which time the activity will be assessed).
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Value drivers
Are actions, processes, or results that are needed to deliver a desired value.
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Balanced scorecard
Some organizations use a balanced scorecard approach to identify their key performance indicators (KPIs) and to make sure that the objectives used to measure performance are strategically aligned to the various sources of value to the organization and are balanced.
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KPIs in the original balanced scorecard (developed by Robert Kaplan and David Norton) are identified under four key areas:
Finance. Financial KPIs may vary, but for HR they could include budgeting for recruiting services or controlling overtime expenses. Achieving these goals is of interest to management, employees, and shareholders.
Customers. This perspective captures the ability of the organization to provide quality goods and services and satisfy its customers. It might be measured by the number of managers using a self-service system to set up new employees, processing rates for changes in compensation or corrections in benefits, or employee satisfaction with dispute resolution services.
Internal business processes. This perspective focuses on the internal business results that lead to financial success and satisfied customers. For HR, key internal processes may be managing talent acquisition and retention, employee development, and providing consultation to other functions.
Learning and growth. This perspective looks at actions that will prepare the future organization for success—for example, by strengthening the employer brand to attract talent, making sure that employees have the most current skills, or implementing knowledge management systems.
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The principle of balance holds, however. The definition of a successful strategy should not be based only on...
Financial Metrics
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The purpose of a balanced scorecard is to achieve balance in three key areas:
Between financial and nonfinancial indicators of success
Between internal and external constituents in the organization
Between lagging and leading indicators of performance
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The most effective evaluation of strategy focuses on...
Leading indicators of performance rather than lagging indicators.
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Leading Indicator
Is predictive in that action in this area can change future performance and help achieve success.
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Lagging indicator
Describes the effects that have already occured and cannot be changed.
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An organization in the midst of a strategic initiative to improve performance may find a...
Disconcerting disconnect between strong leading and poor lagging indicators. If the organization continues to improve its leading indicators, however, it will eventually turn its lagging indicators around.
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To measure performance, targets must be set for each...
KPI
Metrics can indicate the desired level of performance; they are measurements against a defined scale or a ratio of one aspect to another. For example, a metric could be the number of employees using an employee assistance program or the amount of money spent on hiring a single employee.
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A performance objective focuses an organization on...
Achieving certain levels of performance.
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The acronym SMARTER is used to describe the seven qualities that characterize effective objectives. The letters have been assigned to different words over the years, but SMARTER is usually seen as describing objectives that are:
S - specific - focused on a narrowly defined activity rather than a generalization
M - measureable - Capable of objective measurement. (Note that even intangibles can be measured objectively once a measurement system is established.)
A - Achievable - Requiring effort but within reach given effort and the right tools and support.
R - relevant - producing an outcome that is in the line of sight with the goal
T - Time-based - subject to evaluation within a reasonable and defined time frame
E - Evaluated - assessed at the designated time or interval, often continuously in the form of progress or pulse checks
R - Revised - changed to reflect what has been learned. The objective-setting process is repeated to make sur ethat hte activities chosen are still the right activities and that the targets for results are achievable but also push performance to higher levels.
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Benchmarking
Compares performance levels and/or processes of one entity with those of another to identify performance gaps and set goals aimed at improving performance.
Frequently how organizations decide on a specific metric.
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The benchmarking process includes the following steps:
Defining KPIs
Measuring current performance
Identifying appropriate benchmarks and securing their performance data
Identifying performance gaps between oneself and the benchmark organization
Setting objectives and implementing any necessary support activities
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Benchmarks may be internal or external. Internal benchmarks...
Might be based on the organization’s own historical performance or on the performance of specific divisions that are seen as star performers.
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External benchmarks...
External benchmarks might be drawn from professional or trade associations or government agencies and are considered standards or best practices; other organizations may also provide performance benchmarks because they are recognized sources of best practices.
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The process of comparing one’s own organization with another helps management...
Identify challenging goals and obstacles that must be overcome to achieve those goals. Benchmarking helps ensure that organizations are not simply measuring performance but improving it. It also encourages growth by focusing the organization’s attention outside itself and its current practices.
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Benchmarking is a practical evaluation tool, but only if it...
Employs realistic benchmarks that are not culturally biased.
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During the second phase of the strategic planning process, the organization considers...
Where it wants to go (vision) and what it knows about itself and its environment (results of environmental scanning). Then it develops options for how to get there. The options themselves must be analyzed to determine their potential for delivering the desired performance, the associated risks, and their requirements. The outcome of this phase is a strategy or set of strategies that have “fit.”
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Strategic fit
The consonance or compatibility of an organization’s strategy with its external and internal environments, especially with regard to the goals and values it chooses and the resources and capabilities that can be deployed toward strategic goals.
When strategic fit exists, an organization’s activities are consistent with the strategy, they interact with and reinforce each other, and they are “optimized” to reach the strategic goal. “Optimized” means that the organization will do whatever it needs to get there.
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Strategies vary greatly but are similar in one aspect. Each organization’s strategy must describe:
How an organization can create what Michael Porter calls a strategic position, a position in which it enjoys a competitive edge over its rivals—its business strategy.
Where an organization will compete in terms of markets and industries—its corporate strategy. This defines the scope of the organization.
(Based on these strategic choices, functional leaders, including HR, will plan their own strategies, generating ideas for activities that will support the organization’s strategic intent and selecting those with the right cost-benefit and risk profiles.)
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Business strategy addresses the way...
In which the enterprise will relate to its industry and marketplace—how it will define its particular value to its customers.
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There are two ways an organization can create competitive advantage, and both involve change:
The first involves change in the external environment: in customer demand, prices, or technology.
The second involves change inside the organization itself. If there is only stasis—in the industry or market or in the organization—there is no opportunity. Generally, these industries become commodity markets.
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External changes can create competitive advantage for organizations that can...
React swiftly to the changes as they arise by employing real-time strategic planning.
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Internal changes refer to an organization’s ability to...
Create change, to innovate. The innovation may be technological, but it may also be the discovery of an unmet customer need, an entirely new way to appeal to customers, or the creation of new processes or business models.
The innovation may also be identified by examining particulars of specific locations within the organization and adjusting based on the outcomes of that analysis. Changes of these sorts are often capable of resurrecting an industry or enterprise in the decline phase of industry or organizational evolution.
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“Blue ocean” strategies are an extreme example of creating competitive advantage through...
Innovation.
In conventional “red ocean” strategies, businesses compete in an existing marketplace. They win by taking share from their competitors, usually through differentiation or lower cost. In contrast, enterprises pursuing a blue ocean strategy create a completely new arena, often within an existing industry. The originators of the term, W. Chan Kim and Renée Mauborgne, describe blue oceans as “the unknown market space, untainted by competition.” Businesses have competitive advantage because there are no other competitors—at least, for a while. Kim and Mauborgne offer as examples the introduction of the minivan by Chrysler and the user-friendly Apple computer that helped create the home computing market.
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One of the early models of strategies built on competitive advantage was proposed by...
Michael Porter in 1985.
There are two basic types of competitive advantage strategies, cost leadership and differentiation.
Each can be applied with a broad focus—to the entire marketplace—or the organization can decide to focus on a particular industry or market segment. In other words, organizations can have a broad cost leadership or differentiation strategy or a focused cost leadership or differentiation strategy.
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Cost Leadership
Firms that pursue a strategy of cost leadership aim at capturing market share within their industry by virtue of lowest price. There are many paths to cost leadership.
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In cost leadership, firms commit to:
Creating economies of scale, by which cost decreases with every increase in output.
Sharing knowledge and information so that workers acquire necessary skills and critical tasks are completed more quickly.
Redesigning processes to root out actions that do not produce value, that create delays and expense, or that are duplicative.
Designing products and services that can be replicated easily.
Lowering operating costs (such as investing in energy efficiencies, using cheaper labor, or locating near markets to lower transportation costs).
Adjusting capacity to demand quickly (for example, being able to shift work to different production centers or idle production lines).
Creating a supportive workforce—effective managers and motivated workers.
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Differentiation
Firms that pursue a strategy of differentiation aim for being able to charge a higher price by offering something different or by offering the same thing in a different way from competitors in their industry or market—or by creating the perception that a product is different through superior marketing.
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Porter noted that to fulfill differentiation strategies, firms need to be good at...
Product design and performance, product and customer support, marketing, merchandising, integration, and quality.
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Focus Strategies
Focus strategies apply cost leadership or differentiation within narrow industry segments or niches. For example, a financial services company may choose to focus on only high-net-worth individuals.
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Since functional strategies must be aligned with the organization’s strategy, an enterprise’s decision to pursue cost leadership or differentiation will have a clear effect on...
HR Strategy.
The goal of HR’s functional strategy is to execute the business strategy. HR can influence one of the organization’s primary levers for successful implementation of strategy—employees.
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According to Robert Grant, corporate strategy:
"Defines the scope of the firm in terms of the industries and markets in which it competes.” The decisions here often center on growth and integration, although sometimes the strategy will involve shrinking and shedding parts to refocus on a core business.
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The choice of a growth strategy will be made after...
Thorough analysis of the comparative returns on investment, the risks involved, and the ability to satisfy strategic goals. (Note that growth is not a strategy but a strategic goal. When we use the term “growth strategy” here, we mean the way in which an organization intends to grow.)
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Growth Strategy: Strategic Alliance
Companies agree to share assets, such as technology or sales capabilities, to accomplish a goal. The relationship may have varying degrees of tightness and formality. Some alliances involve customers, partners, or competitors.
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Growth Strategy: Joint Venture
Two or more companies invest together in forming a new company that is jointly owned.
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Growth Strategy: Equity Partnership
One firm acquires partial ownership through purchase of shares. The relationship may be general (sharing proportionally in control, profits, and liabilities) or limited (no managerial authority, liability limited to investment). Partnership agreements define such issues as leadership and division of profits and losses.
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Growth Strategy: Merger & Acquisition
A firm purchases the assets of a local firm outright, resulting in expanding the acquiring company’s employee base and facilities. Integration of acquired companies often involves significant cultural, systems, and management challenges. Data privacy can be a big issue.
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Growth Strategy: Franchising
A trademark, product, or service is licensed for an initial fee and ongoing royalties. Often used in the fast-food industry. Similar to licensing as a low-risk entry strategy, although control over franchisee behavior is greater.
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Growth Strategy: Licensing
A local firm is granted the rights to produce or sell a product. A low-risk entry strategy; avoids tariffs and quotas imposed on exports. However, there is little control of the licensee’s activities and results.
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Growth Strategy: Contract Manufacturing
A firm arranges for a local manufacturer to produce components or products as a means of lowering labor costs.
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Growth Strategy: Management Contract
Another company is brought in to manage and run the daily operations of the local business. Decisions about financing and ownership reside with the host-country owners.
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Growth Strategy: Turnkey Operation
An existing facility and its operations are acquired and run by the purchaser without major changes.
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Growth Strategy: Greenfield Operation
A company builds a new location from the ground up. This represents a major task and a commitment to completely staff and equip the new location.
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Growth Strategy: Brownfield Operation
A company repurposes, through expansion or redevelopment, an abandoned, closed, or underutilized industrial or commercial property.
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If the strategy involves the integration of two potentially different entities...
Leaders must be identified within the organization who possess the requisite skills, knowledge, and abilities. If the new operation is in a different country, the policies and procedures may have to be adjusted to meet local laws, business practices, and local culture. Even in strategies that require little integration with the organization, such as franchising or contract manufacturing, HR may be involved in the organization’s ethical obligations to audit workplace practices.
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Growth strategies are often fueled by divestiture:
The selective “pruning” of parts of the organization that are underperforming or that are no longer in line with the organization’s strategy.
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Divestiture offers a number of benefits to the parent company:
The perceived value of a subsidiary or its opportunities may be increased. Sometimes the parent company may not have the necessary talent to take the “child company” to its next level of growth.
Investment may be recouped through the sale of a high-value subsidiary and the cash used to increase the parent’s value in other ways.
The enterprise’s activities may be refocused on new priorities, perhaps as the result of competitive threats and/or opportunities.
Risk that might derive from financial positions (such as poor cash flows or high debt load) or strategic outlooks (such as declining market growth or the possibility of a hostile takeover) can be managed.
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One of the major challenges in divestiture is making sure that the:
organization retains key talent during and after the process. HR supports employee retention by developing and implementing communication plans for different groups of employees, both those retained and those going to the buyer. The best time to communicate with employees identified for separation is usually as soon as those employees are identified. The objective then is to retain and engage these employees to preserve the value of the deal.
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Respondents in an Ernst & Young survey indicated that the most effective retention tactics were:
Providing enhanced severance protection if employees are laid off soon after the close of the deal.
Making managers accountable for employee retention.
Benchmarking compensation and benefits.
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The general steps for divestiture include:
Identify the candidate for divestiture
Identify a target buyer
Restructure
Execute the deal
(Throughout this process, HR can help capture what the organization has learned from its decisions and actions, analyze the experiences, and communicate useful lessons for future divestiture activities.)
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Identify the candidate for divestiture
The candidate might be a valuable but strategically unaligned business, or it might be a subsidiary competing in a market with low growth potential or competing ineffectively in the market. HR plays a role in this stage by performing due diligence as a seller: identifying potential risks connected with divesting particular candidates—for example, loss of talent, impact on employee career development opportunities or on labor contracts. HR can also participate in a SWOT analysis of the candidate.
113
Identify a target buyer
The strongest candidate will be an enterprise that needs the strengths and opportunities the divested subsidiary can provide and that can address potential weaknesses in the workforce. Some parent companies want to be sure that employees will thrive in the new company. HR can provide accurate information about the value of the workforce and can work on behalf of the employees to obtain favorable compensation and development opportunities.
114
Restructure
Even before an actual sale or spin-off, the parent company should prepare the subsidiary for its new identity by defining new leadership, board composition, and organizational structure. This will increase the value and potential of the carved-out or spun-off subsidiary. Again, HR plays an important role here. It may help identify and prepare strong leaders for the subsidiary (without harming the talent of the parent company). Leaders may be drawn from other parts of a global organization. HR will also be involved in designing incentive offers for the subsidiary’s new leaders.
115
Execute the deal
Transition service agreements are often established to support the new entity. Agreements might cover financial (treasury and tax), legal, IT, business processes, and HR—including such capabilities as HRIS, payroll, and benefits. HR can assemble a balanced transition team, composed of parent and subsidiary employees, to empower departing employees without ceding control over sensitive decisions.
116
During the implementation phase of strategy, strategic intent is...
Translated into specific plans of action, usually at the functional and cross-functional levels. The success of the organizational and functional strategies rests on communicating the value of the strategies to all members and on effectively managing the implementation of plans. During the evaluation phase, results must be measured against agreed metrics and communicated to the organization.
117
The HR budget has two parts:
An operational budget that funds ongoing activities and a strategic budget that funds projects that are aligned with the organization’s strategic goals.
118
The operational side of the HR budget includes resources that are directly related to staffing and expenses required to provide HR services to internal customers. This budget ordinarily includes resources related to:
Talent acquisition.
Training and development.
Compensation and benefits.
Employee and labor relations.
Health, safety, and security.
Information technology.
Planning.
Philanthropy.
119
The first thing HR leaders must do in the process of allocating resources to strategic activities is...
To compare previous/current activities and budget allocations with what will be needed to support the proposed organizational strategy.
Remember that the resource allocation process should also be taking place throughout all of the functions of the organization, not only within HR.
Resources to support one-time strategic initiatives are requested separately, through project budgets.
120
Five elements needed for effective implementation of strategy, all linking directly to communication:
- Communication outward to the entire team
- Communication inward to leaders
- Leadership support of decisions made by subordinates
- Free flow of information across organizational boundaries
- Enough information to allow team members to connect their work to the strategy
121
In traditional project management, most initiatives have three stages:
Planning, executing, and closing.
If projects have phases, the stages repeat for each phase.
122
Planning - During the planning stage, the project manager:
Works with stakeholders to define strategically aligned project objectives. These objectives are used to create metrics that will be used to evaluate the project’s results. This activity is critical. It is possible for a project to meet its objectives but not have strategic merit. The project’s purpose should be clearly related to the organization’s strategy.
Creates the project charter. The project objectives are contained in the project charter, an essential document (or collection of documents) for all projects. In addition to the objectives, a charter contains information related to the reason for the project, a general overview, its expected outcomes, stakeholder information, a communications plan, and a risk management plan. The project charter should be approved by stakeholders and/or leadership before the project begins.
Defines the project’s deliverables. These deliverables may be broken down further into units that represent the essential work to be done to accomplish the deliverables—the work breakdown structure. The work breakdown structure will provide input into determining the required resources (such as time, number of team members, special skills and tools, additional expenses such as travel or training). These will in turn be used to create the project budget.
Creates a project schedule. The project schedule often represents the best balance of competing and interdependent interests: time, resources, and quality. If time and quality are critical, then resources must be added. If quality and resources are limited, then more time will be required.
Assembles a team with the requisite skills and communicates to them the project’s connection with the organization’s strategy, its specific objectives, and their specific roles and responsibilities. A matrix chart showing the responsibilities of each team member for each task (for example, responsible, contributing, consulting) can be used to clarify roles and minimize misunderstandings.
123
Various tools have been developed to assist in project scheduling:
Critical path analysis uses information about start or mandatory end dates, the logical relationship of tasks (for example, whether task C must be completed before task F can begin), and the length of each task to find the earliest completion date (or latest start date).
Gantt charts represent the scheduling of tasks visually, showing the length and timing of specific activities. They can help identify problematic conflicts in activities or gaps that can be exploited to condense the schedule. They are also a primary way to communicate expectations to the team and coordinate activities.
124
Executing the project plan:
The responsibility of the project leader is to make sure that the project meets its objectives in terms of schedule, budget, and quality. This requires establishing processes that support work and monitoring progress and use of resources. The project manager:
Establishes and maintains channels of communication within the team and between the project team and the project’s stakeholders.
Provides leadership by communicating the value of contributions, keeping the group focused on goals, and modeling organizational values.
Clears away obstacles to progress. This requires quickly identifying performance issues (such as conflicts, performance gaps, inadequate supervision, inadequate resources, morale problems) and taking steps to correct them and navigate the team back onto the right course and into smoother waters.
Manages internal and external stakeholders. This involves making sure that expectations are understood, realistic, and agreed upon and checking in periodically to make sure that stakeholders are satisfied or if their needs have changed. Project managers may have to guard against incremental increases or changes in the project’s scope.
Monitors and controls progress. Measurement cannot wait until the end of the initiative. Milestones can be set to judge progress toward goals. Use of resources is measured regularly and projected to detect problematic trends. Variance analysis is used to compare actual against planned use of resources (such as staff hours, expenses) and time line. Data can be projected forward to detect problematic trends.
125
Closing the project
Projects should be assessed at their completion to evaluate whether the project investment yielded the desired results. Has the project achieved the desired outcome as defined in its objectives? Was the project managed efficiently in terms of use of time and resources? Project close should also include team debriefing sessions to document what worked and what didn’t and what unexpected problems arose. The team can work to identify ways in which the process could have been improved. An orderly closing process is part of an organization’s continuous learning. It should be implemented even when projects have been canceled before reaching their objectives.
126
Lean project management focuses on eliminating waste by:
Maintaining a tight focus on the intended value of the project.
Empowering the team to make decisions.
Analyzing and solving problems rather than working around them.
Emphasizing continuous learning.
127
Six Sigma project management
Derives from quality principles. “Six Sigma” refers to a level of quality so high that very few errors occur. It emphasizes focusing on projects with a quantifiable return of value, encouraging team commitment to quality and involvement in problem solving, measuring results in a manner that allows empirical analysis, and fact-based decision making.
128
Agile project management
Is used when the assumptions on which a project is based are unclear or may evolve as project work proceeds. The project focuses on iterations of the deliverables—completing one iteration and then using customer input to plan the next iteration.
129
Critical chain project management
Is used when resources cannot be increased to meet deadlines. For example, an HR department may be able to allocate no more than 10 hours per week of staff time to do project work. Project activities are scheduled accordingly. Buffers are built into the schedule both to account for dependencies (i.e., having to wait for another task to be completed) and to allow some room for variance for the estimated task requirement. Once the buffers are set, however, they are strictly enforced.
130
Kaizen
A systematic approach for business improvement, requiring that all people and processes in an organization work to continuously improve. It is based on five principles:
Know your customer. Without knowing the desires of the recipient of a product or service, it is difficult to create value.
Let it flow. Continuously attempt to reduce waste to zero, which helps create value.
Go to Gemba. Understand what is happening at all levels at an organization, and focus on the places that actions are actually taken that produce value.
Empower people. Teams and people must have attainable goals and the systems and tools necessary to achieve those goals.
Be transparent. Track goals using tangible data to show progress over time.
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Design thinking
Places the customer at the center of the project by understanding the in-depth requirements of the project’s intended end user or beneficiary.
It focuses on empathy in order to ensure that the intended stakeholder receives value from the project. The first step in the iterative process involves understanding the needs, followed by gaining an understanding of the problem that is being addressed. Solutions are then designed and tested. Refinements are made based on the results of the testing process, and this is followed by eventual launch of the solution. More feedback is gathered and the solution is adjusted, a process that may include returning to step one to better understand the customer and using that improved understanding to continue to refine the solution.
132
A critical part of strategic management—and an increasingly important part of the job of HR leaders—is...
Measuring performance. Measuring performance helps organizations determine whether strategic initiatives have been implemented as planned, whether the initiative is having the intended effect, and whether the investment in the initiative is returning benefits to the organization. Performance objectives therefore combine activity measurement (what is being done) and results measurement (what are the effects of the activity).
133
Performance data is gathered and compared to performance objectives. These objectives should measure:
Effectiveness - Is the initiative accomplishing the objective?
Efficiency - Is the initiative producing results that exceed the investment in it? This requires finding the most time- and cost-effective processes to achieve the objectives.
Impact - Is the initiative helping to move the organization toward its strategic goals? Is it making a difference? An initiative can be effective (meet its objectives) without producing an impact.
134
Key performance indicators (KPIs) help organizations make...
The right measurements. KPIs are quantifiable measures of performance used to gauge progress toward strategic objectives or agreed standards of performance.
135
The process of measuring performance can be time-consuming and must itself be...
Effective, efficient, and impactful.
136
Recommendations for Measuring Performance:
Don't measure everything. Focus instead on performance that supports strategic goals.
Blend awareness of past, present, and future performance in creating objectives.
Be mindful of all stakeholders.
Reexamine what you're measuring regularly.
137
Evaluation of strategic results is essential for several reasons:
Measuring the outcomes of activities is sound strategic management, since an organization’s limited resources must be directed to those activities that deliver the most strategic impact.
Measurement is also a matter of good governance, of demonstrating to stakeholders that managers are doing a good job in using resources.
Analyzing results allows organizations to improve their strategies and continually increase their institutional knowledge and skills.
138
During strategy formulation, goals and strategically aligned objectives are...
Set, specific key performance indicators are identified, and appropriate metrics are selected.
139
During strategy implementation, data is gathered and then analyzed...
Tools and processes are created to collect data related to the key performance objectives.
Measurement tools may include performance scorecards, score sheets for quantifiable metrics, spreadsheets comparing planned to actual outcomes, observation guides, and narratives. HR team members must be coached to perform their data-gathering responsibilities faithfully and accurately. They should understand not only how to use the measurement tools and processes but also why they are being used—the benefits that evaluation creates.
Data is analyzed in an ongoing manner.
The immediate purpose is to make sure that data is being collected as planned and is usable. The more strategic purpose of these interim analyses is to determine whether the strategy is being implemented, whether it is being implemented correctly, and whether it is having the anticipated results. Positive results motivate the HR team and engage continued management support. Discrepancies between what was planned and what is unfolding during implementation can trigger analysis of the assumptions behind the strategy, identification of possible causes for the strategy’s poor performance, and corrections or abandonment of the strategy.
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The key challenge, as with any communication, is to use information...
Efficiently and effectively to make a point.
141
A better strategy is to approach the task of communicating the results of analyzing data as a...
Narrative that will be supported by data. The data does not drive the report.
SHRM
flashcards
Decks in class (22)
# Cards
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Leadership & Navigation Competencies77
-
Ethical Practice Competencies43
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Inclusion and Diversity Competency85
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Relationship Management Competencies59
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Communication Competency55
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Global Mindset Competency102
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Consultation Competecny44
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Business Acumen Competency126
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Analytical Aptitude Competency98
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Structure of the HR Function (Organization)127
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Organizational Effectiveness and Development98
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Workforce Management163
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Employee & Labor Relations + Technology Management221
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HR Strategy141
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Total Rewards320
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Learning and Development247
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Talent Acquisition267
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Corporate Social Responsibility91
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Managing a Global Workforce150
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Employee Engagement and Retention203
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Risk and Risk Management137
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US Employment Law & Regulation301
