HR Strategy - Formulation Flashcards
Strategy Formulation
Gather and analyze internal and external information to determine the organization’s current position and capabilities, opportunities, and constraints.
- Concept of systems thinking (related parts, input-process-output) and components of an organizational system (e.g. interdependence, the necessity of feedback, differentiation of units)
- Mission, vision, and values and relation to strategic management
- Strategic planning analysis frameworks (PESTLE analysis, SWOT analysis, Industry analysis, Scenario planning, Growth-share matrix)
- Systems theory and input-process-output model
Systems Theory
Because the system of an organization is dynamic, changes in one part can affect the other parts. (Internally or externally)
Systems Thinking
Organizations are composed of interacting and sometimes interdependent parts that together create a dynamic internal environment.
Internal environments are created by the varying ways that all of these interdependent units (areas of the business) interplay.
Systems Theory
What are the parts of an organization as a system?
- External environment
- (e.g. Government, society, culture, economics)
- Internal environment
- Leadership
- Operations
- Finance and administration
- Facilities and information systems
- Sales and customer relations
- Human Resources
IPO
Input-Process-Output
Those who plan and implement strategies use this.
Environmental Analysis Tools
- PESTLE
- SWOT
- Growth-Share Matrix
- Scenario Analysis
Environmental Scanning
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.
Acronym: PESTLE Analysis
A strategic business tool used by organizations to discover, evaluate, organize, and track macro-economic factors which can impact on their business now and in the future.
Goes well with SWOT because it identifies opportunities and threats
These are all macro-economic factors that cannot be controlled by a business
- Political
- Economic
- Social
- Technological
- Legal
- Environmental
PESTLE
(Examples of Political)
Influences of government policies, laws, and regulations
- Regulatory environment and actions
- Taxation policies
- Treaties and tariff structures
- Immigration policies
- Governance legislation
- Government stability
- Levels of corruption
PESTLE
Examples of Economic Influences
- 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
PESTLE Analysis
Examples of Social Influences
- 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
PESTLE Analysis
Examples of Technology Influences
- New centers of technological training and expertise
- Innovative technology and applications of technology
- Unequal access to technology
- New or changing technical standards
- Technological vulnerability
PESTLE Analysis
Examples of Legal Influences
- 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
PESTLE Analysis
Examples of Environmental Influences
Essentially corporate social responsibility
- 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
Demographics
Shifts in age, ethnic background
SWOT analysis
What are external?
Opportunities and Threats
SWOT Analysis
What are internal?
Strengths and Weaknesses
Growth Share Matrix
Question Mark
High growth, low market share
May be a winner or a loser with an unclear future. As this business line is showing growth in a new market, it would be a question mark. There is an uncertain future in the new market.
SWOT Analysis
What can be leveraged?
Strengths and Opportunities can be leveraged
SWOT Analysis
Which are the problems?
Weaknesses and threats are problems
Growth-Share Matrix
AKA - BCG Matrix
Used by larger organizations to find where the greatest value in their organization lies.
Growth-Share Matrix
What does a growth trend indicate?
Greater value
Growth-Share Matrix
What does a larger market share indicate?
A stronger competitive position
Growth-Share Matrix
Dogs
Growth: Small
Market Share: Small
Consuming resources without offering strong value or future growth.
Growth-Share Matrix
Cash Cow
Growth: Static or low
Market Share: Large
Creates value reliably but shows little opportunity for growth
Growth-Share Matrix
Star
Growth: Large
Market Share: Large
Ex: Business line that is growing and has a dominate share of the market
Growth-Share Matrix
Question Marks
Growth: High
Market Share: Small
Could be winners or losers, their future is unclear
Scenario Analysis
Process of analyzing possible future events by considering alternative possible outcomes
For example, a large law firm might analyze the effect of changes in the pool of newly graduated lawyers on the firm’s operations.
What would be the effects if the firm received 25% to 50% fewer applications?
How would this affect recruitment costs, salaries, or unfilled positions?
Mission
How the organization defines its purpose
Vision
Future we hope to see
Values
Principles that guide behavior
What we believe
Value driver
A value driver is an activity or capability that adds worth to a product, service or brand. More specifically, a value driver refers to those activities or capabilities that add profitability, reduce risk, and promote growth in accordance with strategic goals.
Key Performance Indicators (KPI)
Quantifiable measures used to evaluate the success of an organization, employee, etc.
Example: Financial KPI’s
Growth in revenue
Net profit
EBITDA
Balanced Scorecard
Used to identify Key Performance Indicators and make sure objectives used to measure performance are strategically aligned to the various sources of value to the organization and are balanced.
Helps companies set strategic goals, define action plans to deliver strategic goals, and develop KPI (and metrics) to monitor the delivery of their strategic goals.
Finance
Customers
Internal business processes
Learning and growth
Leading Indicator
Predictive in that action in this area can change future performance and help achieve success
Activity and results
Short-term and long-term
Strategic and tactical
Lagging Indicator
Effects that have already occurred and cannot be changed
Turnover rate
Financial results
Balanced Score Card
Achieve balance in three key areas
- Between financial and nonfinancial indicators of success
- Between internal and external components in the organization
- Between lagging and leading indicators of performance
Balanced Score Card
The most effective strategy focuses on….
Leading indicators
If the organization continues to improve its leading indicators, however, it will eventually turn its lagging indicators around.
SMARTER Goals
- Specific
- Measurable
- Attainable
- Relevant
- Time-Bound
- Evaluated
- Revised
Benchmark
A standard or point of reference against which things may be compared or assessed.
Benchmarking
The practice of comparing business processes* and *performance metrics (i.e. KPI) to industry bests and best practices from other companies.
