MGT 580
Mid Term Exam
Fall 2003
Physical and capital assets include all of the following except
a. plant
b. machinery
c. employees
d. technology
Which of the following is characteristic of behavior-based approaches to performance appraisal?
a. behavior-based approaches are not very useful because they do not
indicate what an employee should do differently
b.
behavior-based
approaches are appropriate for focusing on how a
job is done
c. trait-based approaches are generally more valid than behavior-
based approaches
d. behavior-based approaches are appropriate for measuring the results of
work behavior
Technology includes all of the following except
a.
machinery
b. raw materials
c. employee knowledge and skills
d.
work procedures
Aggregate_level human resource planning focuses on
a. planning for every single position in the organization
b. figuring out the total future size of the industry as a whole
c. executive succession
d. planning for the number of people needed in a job or job family
The skills required for most jobs are becoming
a. less manual and more cerebral and knowledge-based
b. more manual and less cerebral and knowledge-based
c. less manual and more service-based
d. more manual and less service-based
Which of the following is not an approach to measuring performance?
a. trait-based approach
b. behavior-based approach
c. task-based approach
d. results-based approach
Technology has affected organizations by facilitating
a. elimination of many lower-level positions
b. less need to upgrade employee skills
c. ease of employment for workers with little or no training
d. all of the above
Objectives of human resource planning include all of the following except
a. allowing a reactive response to environment charge
b. ensuring that the right employees with the right skills are in the right places at the right times
c. preventing employee surpluses and shortages
d. providing direction and coherence to HR activities
Assets that are not easily cloned by competitors are
a. products, but not services
b. services, but not products
c.
technologies
d. employees
A benefit of results-based performance measures is
a. such measures are always under employee control
b. the ease of obtaining such information for all jobs
c. their meaningfulness to the organization
d. their focus on the "means" (process) rather than the "ends" (outcome)
Advanced technologies have allowed organizations to
a. increase the levels in their hierarchies
b. minimize the need for teamwork
c. relocate work from the office to the home
d. adopt more rigid management practices
The single most critical piece of information used to forecast demand for employees is
a. the transition probability matrix
b. macroeconomic trends
c. demand for the company's product
d. the company's turnover rate
Technology is becoming more invested in an organization’s
a. capital
b. people
c. new product development
d. market strategy
Which of the following is not a subjective measure of performance appraisal?
a. time taken to complete a task
b. ranking against coworkers
c. critical incident logs
d. self-evaluation
The graying of the workforce has resulted in all of the following except
a. fewer advancement opportunities for younger workers
b. mandatory retirement policies
c. resistance to change
d. increased health care costs
Unit forecasting is synonymous with
a.
the
b.
c. top_down planning
d. bottom_up planning
Which of the following is not a factor that influences how investment-oriented
an organization is?
a. management values
b. needed employee skills
c. the product produced or service provided
d. attitudes toward risk
Absolute standards of measuring performance include all of the following except
a. behaviorally anchored rating scales
b. weighted checklists
c. graphic rating scales
d. forced distribution rankings
Employees today
a. have less loyalty to their employers than their predecessors
b. demand a more balanced life than their predecessors
c. seek more non-traditional work arrangements than their predecessors
d. all of the above
Efficiency, rather than responsiveness, is more provided by which aggregate planning technique?
a. unit forecasting
b. succession planning
c .bottom-up forecasting
d. top-down forecasting
Sources of employee value include all of the following except
a. the ability to learn and grow
b. decision making capabilities
c. self-loyalty
d. technical knowledge
The most widely used evaluation technique is
a. behaviorally anchored rating scales
b. weighted checklists
c. graphic rating scales
d. forced distribution rankings
23. Which of the following is not a strategic HR issue in the consideration of adopting a new technology?
a. retention of equipment
b. hiring costs
c. impact on workgroup dynamics
d. all of the above are considerations
An organization can plan for employee surpluses by all of the following except
a. downsizing
b. transfer or reassignment of employees
c. providing incentives for postponing retirement
d. cross-training during slack periods
25. Which of the following tends to be true?
a.
subordinates
overestimate situational causes of behavior for
poor performance
b. supervisors overestimate situational causes of behavior for poor performance
c. subordinates underestimate situational causes of behavior for poor performance
d. supervisors underestimate personal causes of behavior for poor performance
. 26. “Plateauing” is a current major concern for the management of
a. baby boomers
b. baby busters
c. Generation X
d. retirees
27. Which of the following is not a concern relative to managing changing demographics?
a. domestic partner benefits
b. decreased employee loyalty
c. deciding which groups to include in diversity initiatives
d. discouraging nontraditional employment arrangements
Which of the following is not a guideline for improving the effectiveness of
the performance management system?
a. provide specific feedback
b. provide feedback from a credible trustworthy source
c. provide information from no more than one evaluation device
d. set clear goals for the future
Which of the following is not a form of graphic rating scale?
a. behaviorally-anchored rating scale
b. critical incident log
c. behavioral observation scale
d. all of the above are form of graphic rating scale
Which of the following best describes performance management systems?
a. They can significantly impact organizational performance and processes
b. There is no one optimal way to develop and design effective performance v management systems
c. Organizations face a number of strategic choices as to how they measure performance
d. All the above
1. Adopting An Investment Perspective
Physical and capital assets such as plant,
property, machinery, and technology are acquired and subsequently managed most
effectively by treating them as investments whereby the organization determines
the optimal mix of high-performance, high-return assets to guide the
organization's strategic objectives.
Viewing human resources from an investment
perspective, much as physical assets are viewed, rather than as variable costs
of production, allows an organization to strategize how to best invest in its
people.
Other physical assets such as facilities,
products and services, technologies, markets, etc. can be readily cloned or
imitated by competitors.
An investment perspective is increasing in
importance as the skills required for most jobs become less manual and more
cerebral or knowledge-based in nature.
Rapid and ongoing advances in technology have influenced this shift.
Technology is becoming more invested in people
rather than capital. Thought and
decision-making processes as well as skills in analyzing complex data are not
“owned” by an organization but by individual employees.
One organization that has consistently been
cited as a model for investment in its people and has produced virtually
unmatched results and performance is Southwest Airlines. The reading “Southwest Airlines: A Case Study
Linking Employee Needs Satisfaction and Organizational Capabilities to
Competitive Advantage” presents an extensive case study as to how Southwest has
established and maintained its competitive advantage.
Strategic HR does not always mean that an
organization will adopt a “human relations” approach to HR. United Parcel Service (UPS) is a prime
example of this, as illustrated in the text.
Managing an organization's employees as
investments mandates an integrated approach to managing various human resource
functions.
As an example, consider an organization whose
primary strategic objective involves innovation. It is critical as part of the
organization's overall strategy that the organization devise strategies to
retain its employees and their knowledge bases until the "new
knowledge" becomes "owned" by the organization itself (through
diffusion throughout the organization) rather than by the employee.
However, a dilemma exists involving investment
in human assets. An organization that
doesn't invest in its employees may be less attractive to prospective employees
and may have a more difficult time retaining current employees, resulting in
inefficiency and a weakening of the organization's competitive position. However, an organization that does invest in
its people needs to insure that these investments are not lost. Well-trained employees, for example, become
more attractive in the marketplace, particularly to competitors. While an organization's physical assets can't
"walk," its human assets can, making the latter a much more risky
investment.
Organizations need to develop strategies that
encourage employees to stay on long enough for the organization to realize an
acceptable return on its investment.
This return is relative to the employees’ acquired skills and knowledge,
particularly when the organization has subsidized the acquisition. This calls for the organization to determine
the actual "value" of each employee.
Valuation of human assets has implications for compensation, advancement
opportunities, and retention strategies as well as how much should be invested
in each area for each employee.
Factors Influencing How Investment-Oriented An
Organization Is
Five major factors affect how
investment-oriented a company is in its management of human resources, as
indicated in Exhibit 1-2. The first of
these is management values. The extent
to which an organization can be characterized as investment-oriented may be
revealed through answers to the following questions:
•
Does
the organization see its people as being central to its mission / strategy?
•
Do
the company's mission statement and strategic objectives, both company-wide and
within individual business units, espouse the value of or even mention human
assets and their role in achieving goals?
•
More
importantly, does the management philosophy of the organization encourage the
development of any strategy to prevent the depreciation of its human assets or
are they considered replicable and amortizable, like physical assets?
The second factor is
attitudes toward risk. A tradeoff exists
between risk and return. Both personal
and institutional investment strategies can be highly conservative or risk averse
or, pursue unlimited returns with reckless abandon. Investments in human assets are generally far
more risky for an organization than investments in physical assets due to the
fact that, unlike physical assets, human assets are not owned by the
organization. An organization with
risk-averse management philosophies is far less likely to make significant
investments in people.
The third factor is the
nature of the skills needed by employees.
Certain organizations require employees to develop and utilize very specialized
skills that might not be applicable in another organization, while another
employer might have employees utilize and develop skills that are highly
marketable. For example, if an employer
has a custom-made information system to handle administrative HR functions, the
skills required would be less transferable than those associated with a more
generic information system.
The fourth factor
affecting the investment orientation is the "utilitarian" mentality
of the organization. Organizations that
take a utilitarian or “bottom line” perspective evaluate investments utilizing
utility analysis, also known as cost-benefit analysis. Here, the costs of any investment are
weighted against its benefits to determine whether the prospective investment
either is profitable or, more commonly, achieves the target rate of return the
organization has set for its investments.
A highly utilitarian approach attempts to quantify all costs and
benefits.
The distinct problem
many utilitarian organizations run into regarding investments in people
involves the fact the many benefits of HR programs and policies are extremely
difficult to quantify. Even if they can be assessed quantitatively,
subjectivity as to the actual value of the benefit may make consensus on the overall
value difficult. Consider, as an
example, the customer service division of a local internet service
provider. Similarly, a government
organization or public utility that attempts to develop a program to enhance
efficiency may have a difficult time in finding the cost justifiable.
The final factor
impacting an organization's willingness to invest in its people is the
availability of cost-effective outsourcing.
An investment-oriented approach to managing an organization will attempt
to determine whether its investments produce a sustainable competitive
advantage over time. When specialists
exist outside of the organization who may perform certain functions much more
efficiently, any internal programs will be challenged and have to be evaluated
relative to such a standard.
The organization is
further likely to invest its resources where key decision makers perceive
they'll have the greatest potential return.
This may result in few investments in people at the expense of
investment in market and product development, physical expansion, or
acquisition of new technology. As an
example, employers in the fast food industry, such as McDonald’s, invest little
in their employees.
Conclusion
American organizations
are so infused with short-term measures of performance that investments in
human assets, which tend to be longer-term investments, are often ignored. Organizations performing well financially may
feel no need to change their investment strategies. Those not doing well usually need a
"quick fix" to turn things around and hence ignore longer-term
investments in people.
However, while
investments in HR are longer-term, once an organization gains a competitive
advantage through its employees, the outcomes associated with the strategy are likely to be enduring
and difficult to duplicate by competitors as such programs and values become
more firmly entrenched in the organization's culture. The reading "Producing Sustainable
Competitive Advantage Through the Effective Management of People"
illustrates how financially successful companies employ and implement an
investment perspective of HR to gain such an advantage.
2. Impact of Technology
Technology is the process by which inputs from
an organization’s environment are transformed into outputs. Technology includes tools, machinery,
equipment, work procedures and employee knowledge and skills. All organizations employ some form of
technology.
With constant advances in technology and work
processes, organizations are under increased competitive pressure to implement,
if not develop, more efficient means of operations. However, the financial considerations of
whether or not to adopt a new technology must be balanced with a number of
strategic issues and more specifically a number of specific strategic HR
issues, as illustrated in Exhibit 2-1.
Six specific challenges which technology presents for human resource
management are illustrated in Exhibit 2-2.
As newer technologies are developed and
implemented, the skills and work habits required of employees change as
well. There is a much greater need to
continue to upgrade existing employee skills today than there has ever been at
any time in the past.
At the same time that technological change is
creating demand for workers with more sophisticated training and skills, a
significant number of new workforce entrants have limited technical skills and,
in some cases, have little or no training beyond basic literacy.
Service sector employees need different skills
than those utilized in manufacturing. Customers
of service organization need much more “customized” or individualized output.
The implementation of advanced technologies has
also resulted in many organizations eliminating lower-level positions held by
employees who performed tasks that can now be accomplished through automation.
Organizations have been able to reduce and, in
some cases, eliminate layers of management and move toward "flatter"
organization structures with fewer levels in the hierarchy. At the same time, because these technical
workers have advanced training, the power bases in many organizations have been
rearranged from management to technical workers.
Technological change has resulted in
hierarchical distinctions being blurred and more collaborative teamwork where
managers, technicians and analysts work together on projects.
Similarly, technology has facilitated more
flexible, dynamic organization structures to facilitate change and adaptation
to changes in the organization's environment.
Technology has also facilitated the relocation
of work from the office to the home.
Telecommuting programs offer attractive and significant benefits for
both employers and employees. However,
despite the fact that many organizations have successfully implemented
telecommuting on a large-scale basis, telecommuting programs, if not developed
and managed appropriately, can create a number of problems. The reading "Telecommuting As Part of A
Strategic Human Resource Management Program" outlines some of the issues
and management challenges inherent with telecommuting and provides
recommendations on how to develop an effective telecommuting program.
The Internet is being increasingly utilized for
managing employees and the employment process. The uses of information
technology and the Internet by employees has raised concerns regarding the
privacy of employee work activities as well as concerns relative to personal
privacy.
Workforce Demographic
Changes and Diversity
Advances in health care are allowing us, as a
society, to live longer, remain healthier longer and remain in the workplace
longer. This is often referred to as the
"graying of the workforce."
Older workers are often perceived to be more resistant to change,
particularly in implementing radically new programs and utilizing new technology
that break from long-established ways of doing things. They may also have increased health care
costs relative to their younger counterparts.
As older workers remain in the workplace longer, fewer advancement
opportunities are made available for younger workers and in many instances,
older workers command higher salaries despite the fact that they may have
skills and training that are less current than those of younger workers,
particularly relative to technology.
At the same time, it is important to remember
that older workers can be as productive, if not more productive than younger
employees. The
Organizations are creating incentive programs
for early retirement and then, in many cases, hiring retirees back on a
part-time basis or as consultants to take advantage of their knowledge and
experience.
Baby boomers
Further up the management hierarchy there are
fewer and fewer positions available and the competition for senior management
positions among boomers has become intense.
Many of these individuals will never progress beyond middle management. Consequently, this creates a new HR challenge
in managing these "plateaued" workers. Slower and alternative career paths have
become the norm for many of these workers.
An increasing number are choosing to go out and start their own
businesses.
Baby busters
Boomers have created "bottlenecks" in
management hierarchies for busters. Baby
busters often receive higher wages than some of the baby boomers due to the
forces of supply and demand. There are
far fewer individuals in this lower age bracket and in many industries,
particularly rapidly growing industries like multimedia and the Internet, these
workers have skills and training that the previous generation lacks and are
commanding significant incomes in their early career years.
“Generation X”
These individuals are now entering the
workforce. They have been utilizing
computers and other advanced technologies all of their lives and have been
exposed to near-constant change in the everyday lives. They have attitudes and perceptions toward
work that significantly differ from those of their predecessor generations.
Managing Professionals
One of the most notable consequences of these
new workplace dynamics is that there is now an increased emphasis on the
management of professionals. These
technical workers need and want more autonomy in their responsibilities and
seek greater input and participation in their work activities. In response to this, some organizations have
established two separate career tracks; technical / professional and managerial
/ administrative.
Project teams
With project teams, technical employees often
report to a technical supervisor and yet are assigned to a project team,
overseen by a project or engagement manager.
This often involves technical workers being responsible to both the
technical and project managers which can provide enhanced opportunities for
employee skill and career development.
This dual reporting relationship can be stressful.
Employee values and
attitudes
Today’s employees display values and attitudes
that stress less loyalty to the company and more loyalty to oneself and one's
career than those exhibited by employees in the past. This is not surprising in light of the waves
of corporate downsizing and layoffs and the manner in which they have eroded
employee loyalty and commitment.
Employees today have higher levels
of training, education and skills demand more meaningful work and more
involvement in organizational decisions that affect them.
Personal and family life
dynamics
Demographics are changing with a significant
increase in single-parent families and dual-career couples. Employees have concerns around child and
elder care, relocation and "parental stigma."
Nontraditional family arrangements place
increased pressure on organizations to offer domestic partner benefits to
employees equal to those that the organization provides to employees with legal
spouses.
An increasing number of employees are opting for
nontraditional work relationships, often in the form of part-time work,
independent consulting, or contingent or temporary employment. Workers opting for such arrangements often
seek to enjoy more flexibility in their lives as well as the opportunity to
have time to pursue other endeavors.
These employees generally receive few or no benefits and obviously have
little job security and tend to be less loyal.
The trend toward outsourcing or contracting certain functions or
activities outside of the organization creates numerous entrepreneurial
opportunities for individuals. Many
plateaued baby boomers have, in fact,
left their organizations and then taken their former employers on as
clients.
Managing diversity
Organizations are experiencing increasing proportions of various ethnic and
minority groups in the American consumer population and in the labor
force. This makes it imperative that
organizations understand the needs and wants of these groups if they hope to
effectively market goods and services to them and attract them to work for the
organization.
Diversity Initiatives At Intel
The demand for trained professionals in the
industry greatly exceeds supply. Intel
has developed a creative program for recruiting and developing minority
employees. Included in this program is
an undergraduate minority scholarship fund, a college internship program and a
formal mentoring program.
There is probably no better way to understand
and market to diverse groups than to have them represented as employees at all
levels of the organization. In addition
to this, diversity initiatives help to insure that personal differences which
have nothing to do with job performance are less likely to impact hiring,
promotion and retention decisions.
However, many diversity initiatives are
ill-conceived, not integrated with the organization's mission and objectives
and can create additional challenges above those in which they were designed to
respond. The reading "The Strategic
Management of Workplace Diversity Initiatives" outlines some of these
issues and challenges.
Conclusion
The larger environments in which organizations
operate can be in a state of constant change.
Nowhere is this more evident than in the areas of technology, workforce
composition and globalization. Constant,
if not continuous, changes in who organizations employ and what these employees
do requires HR practices and systems that are well conceived and effectively
implemented to insure high performance and continued success. More importantly, HR practices must
constantly be reviewed and evaluated.
3. Human Resource Planning
The human resource strategies can begin to be
developed once the overall corporate and business-unit strategies have been
established. The HR strategy involves
taking the organization's strategic goals and objectives and translating them
into a consistent, integrated, complimentary set of programs and policies for
managing employees.
This does not imply, however, that strategic HR
is reactive in nature. HR strategy is
carried out in a proactive manner with
HR staff attempting to design and develop appropriate systems to meet the
anticipated conditions in which the organization will be operating.
The first component of human resource management
strategy is human resource planning.
(The second component, the design of work systems, will be covered in
Chapter 6). All other functional HR
activities, such as staffing, training, performance management, compensation,
labor relations and employee separation, are derived and should flow from the
human resource planning process. When
undertaking human resource planning, the organization considers the
implications of its future plans on the nature and types of individuals it will
need to employ and the necessary skills and training they'll need and also
assesses its current stock of employees as well as those available for
employment externally. The key facet of
human resource planning is that it is a proactive process. Rather than
react to changes in the industry, marketplace, economy, society and
technological world, human resource planning assures that the organization will
be able to adapt in tandem with these changes and maintain the fit between the
organization and its environment. HR
planning is particularly important during periods of organizational turbulence,
such as during a merger or acquisition, or when labor market conditions are
tight, with low unemployment.
Because human resource planning involves making
assumptions about the future, it is critical that all human resource planning
initiatives be flexible. Changes to any planning initiatives should not be
viewed as a weakness in the planning process.
Rather, they should be a positive sign that the organization is
carefully monitoring its external environment and responding appropriately to
any changes taking place.
In order to facilitate this flexibility, it is
critical that key decision makers in the organization clarify and write down
all assumptions they make about the external environment and the organization
when developing the human resource plan. There is a very good chance that the
plans were developed based on inaccurate assumptions about what might happen in
the future or assumptions that failed to materialize.
Clarifying and writing down these assumptions
makes subsequent intervention and corrective action much easier. However, as
previously noted, much of the assessment of the external environment involves
assumptions that various conditions of the economy, technology, marketplace,
competition and regulatory environment will remain the same or change. These assumptions are often understood by key
decision makers and not verbalized.
Objectives of Human
Resource Planning
There are five major objectives of HR planning,
as outlined in Exhibit 5-1. The first is
preventing over and understaffing. If an
organization employs too many individuals, it experiences a loss of efficiency
in operations due to excess payroll costs and/or surplus production that can't
be marketed and must be inventoried.
Having too few employees results in lost sales revenue since the
organization is unable to satisfy existing demand of customers. This can also result in the future loss of
customers who turn to competitors. Human
resource planning helps to insure that operations are not only efficient but
timely in response to customer demand.
The second objective is to make sure that the
organization has the right employees with the right skills at the appropriate
times and places. Organizations need to
anticipate the kinds of employees they need in terms of skills, work habits and
personal characteristics and time their recruiting efforts so that the best
employees have been hired, fully trained and prepared to deliver peak
performance exactly when the organization needs them.
The third objective is to make sure that the
organization is responsive to changes in its environment. The human resource planning process requires
decision makers to consider a variety of scenarios relative to what could
happen in numerous domains in the environment.
Human resource planning forces the organization to speculate and assess
the state of its eternal environment.
The fourth objective is to provide direction and
coherence to all human resource activities and systems. Human resource planning sets the direction
for all other HR functions, such as staffing, training and development,
performance measurement and compensation, to follow. There must be an appreciation of the
interrelatedness of the collection of HR programs and systems and how changes
in one area may impact what is done in another area. A coherent human resource plan will assure,
for example, that the areas in which employees are being trained are being
incorporated into their performance measurements and that these factors are
additionally considered in compensation decisions.
The fifth objective is uniting the perspectives
of line and staff managers. Effective
planning requires the input and cooperation of all managers within an
organization. Communication between HR
staff and line managers is essential for the success of any HR planning
initiatives. Corporate HR staff need to
assist line managers in the planning process but simultaneously acknowledge the
expertise of and responsibility assigned to individual line managers in
considering their input to the planning process.
Types of Planning
Planning is generally done on two different
levels. Aggregate planning
anticipates needs for groups of employees in specific, usually lower-level jobs
and the general skills employees need to ensure sustained high
performance. Succession planning
focuses on key individual management positions that the organization needs to
make sure remain filled and the types of individuals who might provide the best
“fit” in these critical positions.
Aggregate Planning
The first step in aggregate planning is
forecasting the future demand for employees.
It needs to consider its strategic plan and any kinds and rates of
growth or retrenchment that may be planned.
The reason for this is that the single greatest indicator of the demand
for employees is demand for the organization's product or service. It is imperative when forecasting the demand
for employees to clarify and write down any assumptions that may be made that
might affect utilization of employees (new technology that might be developed
or acquired, competition for retention of existing employers, changes in the
production of a product or provision of a service, new quality or customer
service initiatives, redesign of work systems, etc.) to allow more accurate
forecasts.
While there are a number of mathematical
methods, such as multiple regression and linear programming, to assist in
forecasting demand for employees, most organizations rely more on the
judgements of experienced and knowledgeable managers to assist in determining
employee requirements. This may be done
through unit forecasting (sometimes called bottom-up planning) or top-down planning
or some combination of both.
In unit forecasting, each individual unit,
department, or branch of the organization estimates its future needs for
employees. This technique has the
advantage of potentially being the most responsive to the needs of the
marketplace because it places responsibility for estimating employee needs at
the "point of contact" in service provision or product
production. However, unless there is
some mechanism for control and accountability for allocating resources, such a
technique can easily lead managers into overestimating their own unit needs.
Top-down forecasting involves senior managers
allocating a budgeted set amount for employee payroll expenditures and then
dividing the "pool" at subsequent levels down the hierarchy. Each unit is "assigned" a budgeted
amount and then required to make decision on deploying those resources in the
manner most consistent with business objectives. While this technique may be efficient, as
senior management allocates HR costs within a strict organization-wide budget,
there is no guarantee that it will be responsive to the needs of the
marketplace.
Unit forecasting promotes responsiveness to
customers and the marketplace while top-down forecasting promotes
organizational efficiency in resource allocation. Consequently an organization can choose a
planning technique that is consistent with its overall strategy. An organization whose key strategic
objectives involve cost minimization can opt for top-down forecasting. An organization more concerned with change
and adaptability can opt for unit or bottom-up forecasting.
In addition to the demand for the actual
headcount of employees, the organization also needs to consider the demand for
specific skills that it will require of its employees as part of the HR
planning process. Consideration should
be paid to impact that technology is having on the skills required of
employees. Employers also need to find
the kinds of workers who will best “fit” with the organization in the future
relative to personal characteristics, work habits and specific skills.
Once demand for employees has been forecast the
organization then has to plan to ensure that there is an adequate supply of
employees to meet this demand. This
process involves estimating not only the actual number of employees but also
determining the skills that these employees have and whether their backgrounds,
training and career plans will provide a sufficient fit for the organization's
future plans.
Skill inventories are usually computerized
databases that are part of the organizations' overall human resource
information system. Each employee
provides information on his or her experience, education, abilities, job
preferences, career aspirations and other relevant personal information that
allows an organization to gain a collective sense of who their employees are
and what capabilities they have. It is
critical that skill inventories be constantly updated to be of any value to an
organization.
Estimates of the existing supply of human
resources relative to quantity is not a static measure. Employees change positions and job levels
constantly as well as leave the organization.
Consequently, any attempt to assess the supply of employees that can be
expected at any point in the future relative to quantity, needs to assess
mobility within the organization as well as turnover rates. This can be done through a mathematical
technique known as
Once reliable estimates have been made for both
supply and demand of employees, programs can be implemented that attempt to
address any anticipated surplus or shortage of employees in a particular job
category. In planning for anticipated
shortages, the organization first needs to consider whether the shortage is
expected to be temporary or indefinite.
Another important consideration is whether the individuals will need the
latest up-to-date skills or whether the organization requires more hands-on
practical experience.
If a surplus of employees is anticipated, a
critical strategic issue that must be addressed is whether this surplus is
expected to be temporary or permanent.
The most extreme action to reduce a surplus is to layoff employees. Surpluses can also be addressed through early
retirement programs, transfer and retraining of existing employees, and/or an
across-the-board reduction in salaries or working hours. Exhibit 5-3 summarizes some strategies
for managing employee shortages and surpluses.
Succession Planning
Succession planning involves identifying key
management positions of critical importance that the organization cannot afford
to have vacant. These are usually senior
management positions and/or positions that the organization has traditionally
had a very difficult time filling.
Succession planning serves two purposes.
First, it facilitates transition in these key positions when an employee
leaves. Second, succession planning
identifies the development needs of high-potential employees and assists with
their career planning. As part of this
planning, the organization can attempt to develop key necessary skills in these
individuals that might be needed in their subsequent assignments.
Succession planning is relatively easy to
understand in concept and organizations seem to appreciate its importance. Nonetheless, many fail to implement the
process effectively. The reading “Heirs Unapparent” discusses practical difficulties
in succession planning, particularly in light of some of the demographic
changes taking place in the workforce.
Traditional succession planning utilizes a
relatively simple planning tool called a replacement chart. The chart identifies key positions and
possible successors for each of these positions as well as whether each potential successor currently
has the background to assume the job responsibilities, or the expected
additional amount of time it will take until the potential successor is ready. It can represent a close-up of the
organization chart by narrowing in on one key position and the subordinates who
report to the individual holding that position.
A sample replacement chart is presented in Exhibit 5-4. Some organizations, however, are much more
systematic about their succession planning.
Their replacement charts may contain specific skills, competencies and
experiences rather than subjective estimates of “time readiness.”
Many organizations are beginning to embrace the
development of succession planning strategies that are based more on
organization-needed competencies and flexibility rather than focusing on
subjective assessment of “readiness.”
Such a system is outlined in the reading “Designing Succession
Systems for New Competitive Realities.”
Here, a complex system was designed to fit with the organization’s
strategic goals.
Succession planning programs can also come at a
significant cost to an organization.
While it is prudent for an employer to ensure that for every critical
position, there is at least one individual able to assume that position if
something were to prevent the incumbent from continuing in it, it is critical
to remember that the more prepared an individual is for a promotion that he or
she does not receive, the greater the possibility that he or she might seek
such a position elsewhere. This is
particularly true for succession planning programs built around defined
management competencies. Hence,
succession planning initiatives aimed at key managers need to be coupled with a
specific retention strategy designed for potential successors.
Conclusion
It is particularly critical for the success of
smaller, rapidly growing companies to see that their growth is properly managed
and focused. Human resource planning
allows the HR function to contribute to an organization’s effectiveness by
laying a foundation for proactive management that is strategically
focused. The reading “If HR Were
Strategically Proactive” outlines how strategically proactive thinking is critical
to an organization’s competitive advantage.
More specifically, human
resource planning facilitates a number of key processes within an
organization. First, it facilitates
leadership continuity through succession planning. Second, it facilitates strategic planning by
examining the future availability of employees and their skill sets. Third, it
facilitates an understanding of shifts and trends in the labor market through
an examination of job requirements and employee capabilities. Fourth, it facilitates employee development
by determining the skills that will be needed to achieve strategic objectives
as well Human Resource Planning
The human resource strategies can begin to be
developed once the overall corporate and business-unit strategies have been
established. The HR strategy involves
taking the organization's strategic goals and objectives and translating them
into a consistent, integrated, complimentary set of programs and policies for
managing employees.
This does not imply, however, that strategic HR
is reactive in nature. HR strategy is
carried out in a proactive manner with
HR staff attempting to design and develop appropriate systems to meet the
anticipated conditions in which the organization will be operating.
The first component of human resource management
strategy is human resource planning.
(The second component, the design of work systems, will be covered in
Chapter 6). All other functional HR
activities, such as staffing, training, performance management, compensation,
labor relations and employee separation, are derived and should flow from the
human resource planning process. When
undertaking human resource planning, the organization considers the
implications of its future plans on the nature and types of individuals it will
need to employ and the necessary skills and training they'll need and also
assesses its current stock of employees as well as those available for
employment externally. The key facet of
human resource planning is that it is a proactive process. Rather than
react to changes in the industry, marketplace, economy, society and
technological world, human resource planning assures that the organization will
be able to adapt in tandem with these changes and maintain the fit between the
organization and its environment. HR
planning is particularly important during periods of organizational turbulence,
such as during a merger or acquisition, or when labor market conditions are
tight, with low unemployment.
Because human resource planning involves making
assumptions about the future, it is critical that all human resource planning
initiatives be flexible. Changes to any planning initiatives should not be
viewed as a weakness in the planning process.
Rather, they should be a positive sign that the organization is
carefully monitoring its external environment and responding appropriately to
any changes taking place.
In order to facilitate this flexibility, it is
critical that key decision makers in the organization clarify and write down
all assumptions they make about the external environment and the organization
when developing the human resource plan. There is a very good chance that the
plans were developed based on inaccurate assumptions about what might happen in
the future or assumptions that failed to materialize.
Clarifying and writing down these assumptions
makes subsequent intervention and corrective action much easier. However, as
previously noted, much of the assessment of the external environment involves
assumptions that various conditions of the economy, technology, marketplace,
competition and regulatory environment will remain the same or change. These assumptions are often understood by key
decision makers and not verbalized.
Objectives of Human
Resource Planning
There are five major objectives of HR planning,
as outlined in Exhibit 5-1. The first is
preventing over and understaffing. If an
organization employs too many individuals, it experiences a loss of efficiency
in operations due to excess payroll costs and/or surplus production that can't
be marketed and must be inventoried.
Having too few employees results in lost sales revenue since the
organization is unable to satisfy existing demand of customers. This can also result in the future loss of
customers who turn to competitors. Human
resource planning helps to insure that operations are not only efficient but
timely in response to customer demand.
The second objective is to make sure that the
organization has the right employees with the right skills at the appropriate
times and places. Organizations need to
anticipate the kinds of employees they need in terms of skills, work habits and
personal characteristics and time their recruiting efforts so that the best
employees have been hired, fully trained and prepared to deliver peak
performance exactly when the organization needs them.
The third objective is to make sure that the
organization is responsive to changes in its environment. The human resource planning process requires
decision makers to consider a variety of scenarios relative to what could
happen in numerous domains in the environment.
Human resource planning forces the organization to speculate and assess
the state of its eternal environment.
The fourth objective is to provide direction and
coherence to all human resource activities and systems. Human resource planning sets the direction
for all other HR functions, such as staffing, training and development,
performance measurement and compensation, to follow. There must be an appreciation of the
interrelatedness of the collection of HR programs and systems and how changes
in one area may impact what is done in another area. A coherent human resource plan will assure,
for example, that the areas in which employees are being trained are being
incorporated into their performance measurements and that these factors are
additionally considered in compensation decisions.
The fifth objective is uniting the perspectives
of line and staff managers. Effective
planning requires the input and cooperation of all managers within an
organization. Communication between HR
staff and line managers is essential for the success of any HR planning
initiatives. Corporate HR staff need to
assist line managers in the planning process but simultaneously acknowledge the
expertise of and responsibility assigned to individual line managers in
considering their input to the planning process.
Types of Planning
Planning is generally done on two different
levels. Aggregate planning
anticipates needs for groups of employees in specific, usually lower-level jobs
and the general skills employees need to ensure sustained high
performance. Succession planning
focuses on key individual management positions that the organization needs to
make sure remain filled and the types of individuals who might provide the best
“fit” in these critical positions.
Aggregate Planning
The first step in aggregate planning is
forecasting the future demand for employees.
It needs to consider its strategic plan and any kinds and rates of
growth or retrenchment that may be planned.
The reason for this is that the single greatest indicator of the demand
for employees is demand for the organization's product or service. It is imperative when forecasting the demand
for employees to clarify and write down any assumptions that may be made that
might affect utilization of employees (new technology that might be developed
or acquired, competition for retention of existing employers, changes in the
production of a product or provision of a service, new quality or customer service
initiatives, redesign of work systems, etc.) to allow more accurate forecasts.
While there are a number of mathematical
methods, such as multiple regression and linear programming, to assist in
forecasting demand for employees, most organizations rely more on the
judgements of experienced and knowledgeable managers to assist in determining
employee requirements. This may be done
through unit forecasting (sometimes called bottom-up planning) or top-down
planning or some combination of both.
In unit forecasting, each individual unit,
department, or branch of the organization estimates its future needs for
employees. This technique has the
advantage of potentially being the most responsive to the needs of the marketplace
because it places responsibility for estimating employee needs at the
"point of contact" in service provision or product production. However, unless there is some mechanism for
control and accountability for allocating resources, such a technique can
easily lead managers into overestimating their own unit needs.
Top-down forecasting involves senior managers
allocating a budgeted set amount for employee payroll expenditures and then
dividing the "pool" at subsequent levels down the hierarchy. Each unit is "assigned" a budgeted
amount and then required to make decision on deploying those resources in the
manner most consistent with business objectives. While this technique may be efficient, as
senior management allocates HR costs within a strict organization-wide budget,
there is no guarantee that it will be responsive to the needs of the
marketplace.
Unit forecasting promotes responsiveness to
customers and the marketplace while top-down forecasting promotes
organizational efficiency in resource allocation. Consequently an organization can choose a
planning technique that is consistent with its overall strategy. An organization whose key strategic
objectives involve cost minimization can opt for top-down forecasting. An organization more concerned with change
and adaptability can opt for unit or bottom-up forecasting.
In addition to the demand for the actual
headcount of employees, the organization also needs to consider the demand for
specific skills that it will require of its employees as part of the HR
planning process. Consideration should
be paid to impact that technology is having on the skills required of
employees. Employers also need to find
the kinds of workers who will best “fit” with the organization in the future
relative to personal characteristics, work habits and specific skills.
Once demand for employees has been forecast the
organization then has to plan to ensure that there is an adequate supply of
employees to meet this demand. This
process involves estimating not only the actual number of employees but also
determining the skills that these employees have and whether their backgrounds,
training and career plans will provide a sufficient fit for the organization's
future plans.
Skill inventories are usually computerized
databases that are part of the organizations' overall human resource
information system. Each employee
provides information on his or her experience, education, abilities, job
preferences, career aspirations and other relevant personal information that
allows an organization to gain a collective sense of who their employees are
and what capabilities they have. It is
critical that skill inventories be constantly updated to be of any value to an
organization.
Estimates of the existing supply of human
resources relative to quantity is not a static measure. Employees change positions and job levels
constantly as well as leave the organization.
Consequently, any attempt to assess the supply of employees that can be
expected at any point in the future relative to quantity, needs to assess mobility
within the organization as well as turnover rates. This can be done through a mathematical
technique known as
Once reliable estimates have been made for both supply and demand of employees, programs can be implemented that attempt to address any anticipated surplus or shortage of employees in a particular job category. In planning for anticipated shortages, the organization first needs to consider whether the shortage is expected to be temporar