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[Music] you this process of strategic analysis and building a coherent strategy is more critical today than it's ever been before this is because most worldwide industries today have far more competition and capacity than ever before making it more difficult to create the sustainable competitive advantage that we need in order to survive over the long term strategic planning is about planning for the long-term future and to be successful you need to plan using goals and measurable standards our internal and external environments largely determine how we as managers must act to provide the organization with the right combination of people to help us reach our strategic goals the external environment consists of a series of influences that originate outside the organization that the company cannot control each of these forces acts on the firm and requires it to change and adapt usually in the form of strategic responses to these environmental changes the nine major forces originating in the external environment are explained next customers have more power today than ever before as they have a major effect on the organization's performance through their purchase of products and services businesses must compete for customers and their performance is not simply a function of their own actions each firms performance must be understood relative to the actions of its competitors organizations buy resources from suppliers therefore partnerships with suppliers also affect firm performance the employees of in the talent pool available to in an organization have a direct effect on the organization's performance the owners of the corporation known as shareholders influence management most shareholders of large corporations are generally not involved in the day-to-day operation of the firm but they do vote for directors our society to a great extent determines what acceptable business practices are individuals and groups of stakeholders work in various ways to pressure businesses to make changes few organizations operate today as they did even a decade ago products not envisioned a few years ago are now being mass-produced no corporation has control over economic growth inflation interest rates foreign exchange rates and so on in general as measured by gross domestic product known as GDP businesses do better during times of economic growth rather than recessions national state and local governments all set laws and regulations that businesses must obey our analysis of these major external environmental factors is critical to effective human resource management research has shown that human resource management is an important strategic business function that influences the performance of both large and small organizations at its most basic level a strategy is a plan of action designed to achieve a particular set of objectives it looks at the external industry or macro environment in the internal organizational environment in order to create strategic advantage strategic advantage occurs when you analyze the environment better and react to it quicker than your competitors do while using all of your internal resources efficiently thus creating the sustainable competitive advantage in this section we'll look at the following three major strategic questions to analyze what kind of strategic plan we need first what is our present situation where are we at now second where do we want to go and third how do we plan to get there these questions are both very simple and really complex on the surface you'd think that answering question number one would be easy but you must answer many other questions before you can confidently answer the question where are we at now answering these questions creates a picture of your organization at a particular point in time and that picture has to be comprehensive so that you know what's happening good and bad within the organization in significant detail question number two is basically asking what we plan to look like as an organization at a particular point in the future meaning it's asking what our vision and mission are for the organization answering question three gives us the necessary information to create the plan that will allow us to reach the goals that we identify in our answer to question two so that we can become the organization that we envision a vision and mission are two of the most critical components of any successful corporate strategy a vision is what we expect to become as an organization at a particular point in time in the future so basically the vision answers the question what do we want to become as an organization in contrast the mission is where we start to become specific the mission statement is a statement of what the various organizational units will do and what they hope to accomplish in alignment with organizational vision the mission statement takes into account things like whom we serve in terms of customer groups types of products and services technologies we use and so on and how we serve them when you put the vision and mission together the people executives managers and staff in the organization get a more complete picture of the direction in which they're expected to go everything else in strategic planning comes from the vision and the mission we will try to keep this as simple as possible right now because for our purposes we need to only know major categories of strategy so we'll break down the types of strategy into three categories cost leadership differentiation and focus or niche strategies cost leaders do everything they can do to lower organizational costs required to produce their products or services this strategy attempts to create an impression of difference for the company's product or service in the mind of the customer with this strategy the company focuses on a specific portion of a larger market for instance the company may focus on a regional market a particular product line or a buyer group human resource strategy must be aligned with business strategy let's take a look at a few of the significant differences between generic strategies if our organization is following a generic cost leadership strategy we're going to be most interested in minimizing all internal costs including employee costs in a differentiator organization will most likely have a much broader job classification as well as a broader work planning process individuals will be hired and paid based on individual knowledge and skill sets not specifically based on skills related to the job they fill upon entering the organization so you can see very quickly that human resource management will need to do its job in a significantly different way based on the type of generic strategy that the company decides to follow the next steps in the design process includes setting objectives creating a strategic plan implementing that plan and monitoring and evaluating its success let's take a brief look at each of these steps setting objectives successful strategic management requires a commitment on the part of managers to define a set of objectives successful managers have a goal orientation which means they set and achieve objectives objectives after developing our vision and mission and completing a situation analysis the next step is to set objectives that flow from the mission to address strategic issues and problems identified through situation analysis objectives state what's to be accomplished in a specific singular and measurable term with a targeted date here's a model adapted from Max Weber to help you write effective objectives - plus an action verb plus a singular specific measurable result plus a targeted date create a strategy once we've identified our set of objectives the next step is to weave them into a cohesive organizational plan this is the point at which we determine what we're going to do to achieve the objectives that we've set the last items in the strategic planning process are implementing and then monitoring and evaluating the plans success the goal here is to ensure that the mission and objectives is the organization are achieved successful implementation of strategies requires effective and efficient support systems throughout the organization as strategies are implemented they must also be monitored and evaluated controlling is the process of establishing and implementing mechanisms to ensure that objectives are achieved an important part of controlling is measuring progress towards the achievement of the objective and taking corrective action when needed quality management is one example of where the controlling process allows the company to adjust its internal processes to reach a predetermined level of quality control so as part of strategy execution we always need to watch quality through the controlling process there must be a sound organizational structure if strategy is to be successfully implemented why do you see firms that seem to be equal in size and capability execute at different levels of efficiency the answer lies in how their resources are differently structured and managed in human resource management managers need to have an understanding of organizational structure to do their jobs correctly organizations structure their resources to transform inputs into outputs one way to look at organizational structure is to identify a series of fundamental components each of these components identifies a way in which we divide the organization up and group its resources to make them more efficient and effective let's discuss complexity formalization and centralization as structural components complexity the first major component of organizational structure is the degree to which three types of differentiation exist within the organization these three types of differentiation are vertical horizontal and spatial differentiation vertical differentiation deals with how we break the organization up vertically meaning how many layers there are in the organization from the top to the bottom horizontal differentiation identifies how we break the organization up horizontally we usual do this by breaking up the organization into departments spatial differentiation deals with the physical separation of different parts of the organization so complexity involves the way in which we divide the organization into different segments both physically and within artificial boundaries such as departments formalization is the degree to which jobs are standardized within the organization meaning the degree to which we've created policies procedures and rules that program the jobs of employees centralization is the degree to which decision-making is concentrated within the organization the best structure is one that fits the firm's current competitive situation as well as its internal capabilities and that enables it to implement its strategy successfully five forces analysis is brought to us by Michael Porter who identified competition within an industry as being a composite of five competitive forces that should be considered in analyzing competitive situations rivalry among competitors Porter calls this scrambling and jockeying for position businesses do this in different ways including competing for customers on the basis of price quality or speed of delivery companies in other industries may try to take a company's customers away that's the threat of substitute products and services potential new entrants in many industries today all it takes to enter is the ability to create and host a website power of suppliers if the business has only one major supplier of a critical component with no alternatives available then the supplier has greater bargaining power over the business power of buyers if one buyer or a few large buyers purchase most of what we provide then the buyer has significant bargaining power over our company companies use the Five Forces analysis and other industry and competitive situation analysis tools primarily at the corporate level to make decisions organizational culture consists of the values beliefs and assumptions about appropriate behavior that members of an organization share culture describes how employees do what they do and why they do what they do every organization has a culture and success depends on the health and strength of its culture therefore leaders should spend a lot of time building the organization's culture organizational culture is primarily learned through observing people and events in the organization there are five artifacts of organizational culture that help employees learn culture they include heroes stories slogans symbols and ceremonies the three levels of culture include behavior values beliefs and assumptions behavior includes the observable things that people do or say or the actions employees take values and beliefs provide the operating principles that guide decision-making and shape the behaviors and result in a level one culture assumptions are the values and beliefs that are so deeply ingrained that they are considered unquestionably true because organizational culture is based on at least partly assumptions values and beliefs it's very powerful in terms of its force in controlling how people act within its boundaries you may not believe that culture has the ability to cause you to change the way you act but it does data analytics is the process of assessing large amounts of data in order to analyze those data and gain insight into significant trends or patterns within organizations or industries computing power has obviously been increasing at remarkable rates over the past 25 years and has the ability to both create and store large amounts of data and information big data involves the collection of extremely large data sets so large in fact that data analytics on these data sets would have been impossible until recently since we just didn't have the computing power or programs available to do so because of big data we can now analyze thousands or even millions of instances when interaction between people and in between organizations and look for patterns on those interactions data analytics has a place in human resource management just as it does in other areas of management analytics tools and other HR technology can be used for many HR functions such as talent acquisition and management training and development work and job analysis productivity analysis motivation retention and engagement the convergence of HRM and Big Data is sometimes called workforce science in addition to analytics HR has begun using other technologies to reach and inform workers to a much greater extent than in the past a recent boston consulting group known as BGC study found that companies that are highly skilled in core HR practices experience up to 3.5 times the revenue growth and as much as 2.1 times the profit margins of less capable company's successful discovery and utilization of data in HR metrics is one major point of difference between top companies and others as a result most organizations today use complex computer systems to manage and manipulate those data human resource management systems known as HRMS are one type of system used to manage and analyze data in organizations human resource management systems HRMS are interacting database systems that aim at generating and delivering HR information and allow us to automate some human resource management functions a slightly older term for such systems that you may hear is human resource information systems known as HR is some of the most common features of HR MS include modules for tracking attendance and leave job and pay history and for logging appraisal scores and review dates others include modules for benefits enrollment and tracking succession management training management and time logging there are additional modules available depending on the size and type of the organization systems include such key features as workforce management performance monitoring of the recruiting process email alert systems and predictive analytics you can also use the same databases when considering promotions transfers and many other daily activities that are required inside the organization some of the most common tools are economic value added known as evie a balanced scorecards including organizational scorecards and HR scorecards and return on investment known as ROI economic value added or evie a is designed as a method for calculating the creation of value for the organization shareholders economic value added is a measure of profits that remain after the cost of capital has been deducted from operating profits return on investment is a measure of the financial return we receive because of something that we do to invest in our organization or in its people the balanced scorecard measures financial customer service internal process and learning and growth or sustainability measures all four dimensions of the scorecard are equally important because the results in each area affect other areas of performance in addition to the organization's balanced scorecard an HR scorecard has been designed and is being used by many businesses in operation today the H our scorecard identifies HR deliverables and HR systems alignment compares HR alignment with strategy and measures organizational gains created by HR practices let's explain how each of these four dimensions of the HR scorecard might work first identify an HR deliverables what functions does HR perform and what services does HR deliver that provide value to the organization these functions may include many things that we'll introduce you to in this course like recruiting selection training employee development compensation and incentives and many more identify an HR system alignment through the use of high performance work systems is critically important high performance work systems are a set of HR practices including comprehensive employee recruitment and selection procedures compensation and performance management systems information sharing and extensive employee involvement and training aligning the system with company strategy is also critical as part of the balanced scorecard also identifying HR efficiency measures is an important process in the balanced scorecard approach this is the process of measuring the returns that the organization gets from its HR management policies through the use of items such as the EBA or ROI calculations that we talked about previously many businesses today use this type of HR scorecard [Music]